The High Technology Park (HTP) is a special economic zone with special legal conditions for the development of IT-business in Belarus. The High-Tech Park has an extraterritorial principle, within which it is possible to carry out activities within the framework of a special legal regime in any part of Belarus: both in the capital or in regions. In accordance with statistics published on the official website of the HTP:
- 53% of HTP residents are established by Belarusian investors;
- 47% of HTP residents are established with the participation of foreign capital;
- 20% of HTP residents are joint ventures;
- 27% of HTP residents are companies established by foreign companies.
BENEFITS PROVIDED FOR HTP RESIDENTS
There is a significant list of benefits for the HTP residents that will significantly facilitate the IT companies’ life. These benefits are regulated by Presidential Decree No. 8 dated December 21, 2017 “On the Development of the Digital Economy” (hereinafter — Decree No. 8). Consider the most significant of them.
TAX BENEFITS
HTP residents are exempted from the following taxes:
- income tax;
- value-added tax for turnovers related to realization of goods (works, services), property rights in the territory of the Republic of Belarus;
- offshore tax on payments for advertising, marketing, intermediary services, upon payment of dividends;
- land tax (for the period of construction, on these plots by HTP residents, of capital constructions (buildings, structures) intended for realization of their activities, but not more than for three years);
- tax on immovable property (objects situated in the territory of the HTP and whose payers are HTP residents, are exempted from this tax, with the exception of such objects given by them in lease).
A reduced tax rate is provided for:
- profit tax (9% instead of 18%) for the
- profit from the sale of shares in the HTP resident’s authorised capital;
- profit from the sale of the company as a property complex;
- profit from the sale (redemption) of securities;
- income in the form of interest for the provision of funds for use.
- income tax (9% instead of 13%) for individuals working under an employment agreement (employment contract) with the HTP residents, as well as for individual entrepreneurs — HTP residents who are income tax payers. The reduced income tax rate is also provided for income received in the form of dividends from the HTP resident.
- tax on income of foreign companies that do not operate in the Republic of Belarus (5% instead of 12%) in respect of dividends, if the source of payment of such income is a resident of the High Technology Park.
CONTRIBUTIONS TO THE SOCIAL PROTECTION FUND ARE ESTIMATED FROM THE AMOUNT OF THE NATIONAL AVERAGE SALARY.
For HTP residents contributions to the Social Protection Fund (34% of the employee’s salary paid by the employer and 1% of the employee’s salary withheld from the employee’s salary) are calculated not from the employee’s total salary, but from the national average salary (about 1000 BYN).
Example:
The software engineer’s salary is 4,000 BYN.
| % | Without benefits | With benefits |
| 34% | 1360 | 340 |
| 1% | 40 | 10 |
| Total: | 1400 | 350 |
This benefit allows companies to reduce their salary costs and allocate money to other company needs.
MIGRATION BENEFITS
- HTP residents shouldn’t obtain special work permits for foreigner employees. This benefit get an opportunity for companies to complete their team with high level specialist from all over the world without legal problems.
- Also Decree No. 8 provides visa-free regime into the Republic of Belarus for foreigners who are hired by a resident of HTP to work under an employment agreement (employment contract), as well as for shareholders of the HTP residents. Also, a foreign citizen, who has concluded an employment contract (employment agreement) with a HTP resident, is automatically provided with a temporary residence permit.
FOREIGN ECONOMIC TRANSACTIONS IN THE HTP
A number of benefits are provided for the residents of the HTP within the framework of foreign economic activity, in particular:
- exemption from restrictions imposed on foreign economic transactions;
- absence of time limits for completion of foreign economic transactions (for all companies they are 90 or 180 days, depending on the nature of the transaction);
- absence of obligation to sell the currency;
- free purchase of foreign currency in the domestic exchange market without any restrictions on its use;
- the right to carry out foreign exchange operations without the permission of the National Bank.
The benefits above provide full freedom for companies to conclude contracts with foreign companies, as well as the opportunity for free investment in foreign markets.
TRANSACTION AND ACCOUNTING BENEFITS IN THE HTP
The HTP residents have the opportunity to conclude a transaction in any of the generally accepted ways in the world. It can be acceptance of the offer on the website or directly in the application, conclusion of an agreement by e-mail, conclusion of a smart contract. Also, residents have the following additional rights when keeping accounting records:
- the right to prepare a primary accounting document on the basis of which the business transaction is reflected in the accounts;
- the right to execute two or more similar business transactions made in one calendar month with one primary accounting document, including a single one;
- the right to use as a primary accounting document an electronic document, issued by a foreign company and drawn up in a foreign language. This benefit will allow to avoid exchange of paper documents between companies and drafting bilingual documents.
NEW LEGAL INSTITUTIONS AND MECHANISMS AVAILABLE TO HTP RESIDENTS
Decree No. 8 also provides several experimental legal institutions that have immigrated from English law to the Belarusian legislation.
Convertible loan agreement
Convertible loan agreement is an agreement between the company and an investor, the subject of which is the transfer of cash that is converted to a share of the company’s authorised capital upon occurrence of terms agreed upon by the parties. Conversion is carried out through two alternative methods: increase of the authorised capital by the amount of the loan granted or transfer to the investor of the part of the share which is on the balance sheet of the company. This mechanism allows to protect the interests of the investor so as not to lose the investments made in case the company is unprofitable.
Execution of transactions through a smart contract
Smart contract is a program code designed to function in the register of transaction blocks (blockchain) or other distributed information systems for the purpose of automated execution of transactions or other legally significant actions.
Agreement on compensation for property losses
The agreement will legally oblige one party to compensate property losses suffered by the other party that have arisen during the performance of the contract, but are not related to its performance, providing a kind of internal insurance against losses under the transaction. The agreement on compensation for property losses is essentially an analogue of an indemnity institution (a contract protecting a company from losses as a result of actions taken at the request of the other party).
Non-Compete Agreement (NCA)
This is an agreement concluded with the employee on a voluntary basis prohibiting the employee the following actions:
- to conclude employment and civil contracts with company’s competitors;
- to carry out any competitive activity independently (with formation of a legal entity / without formation of a legal entity / exercise the rights of a participant in the previously established legal entity).
Unrestricted penalty amount
The HTP residents have the right to stipulate in the contracts between themselves and (or) with third parties any amount of penalty both in a larger and smaller amount than established by legislation. At the same time, the amount of penalty agreed upon by the parties may not be reduced by the court, which allows to claim the full recovery of penalties from the negligent party in case of a court dispute.
ACTIVITIES ALLOWED IN THE HTP
HTP residents are entitled to carry out only those types of activities, which are provided by Decree No. 8. These activities correlate with the main activities of the High Technology Park, in particular:
- export of information and communication technologies and other new and high technologies, exclusive rights to the results of intellectual activity in the field of such technologies;
- development and introduction of information and communication and other new and high technologies in the Republic of Belarus;
- other directions.
WHO CAN BECOME A RESIDENT OF THE HTP?
HTP resident can become a legal entity or individual entrepreneur registered in accordance with the legislation of the Republic of Belarus, carrying out a special type of activity provided by the Decree No. 8, prepared the following package of documents for registration as a resident of the HTP: application, copies of statutory documents, business plan.
FIRST STEPS ON THE WAY TO THE HTP
Before making a decision, it is necessary to conduct a legal due diligence of current activities and answer the following questions.
- Do the company’s current operations comply with the requirements of Decree No. 8?
- What projects does the company have and what projects are planned?
- What kind of business model does the company have: product, outsourcing, R&D or mixed?
- Are the company’s projects high-tech and promising for the HTP?
- Is the company able to provide an adequate level of salary for employees in the future (the average salary of employees in the HTP is about €2,000)?
- Is the company sufficiently equipped with material and technical support for its employees?
Special attention should be paid to the development of a business project, which reflects the specifics of current and future business processes. The standard form of the business project is approved by the Resolution of the Council of Ministers of the Republic of Belarus No. 403 dated March 27, 2006 «On some issues of implementation of the Decree of the President of the Republic of Belarus No. 12 dated September 22, 2005».
STRUCTURE OF THE BUSINESS PROJECT FOR REGISTRATION AS A RESIDENT OF THE HTP.
Business project consists of the following sections:
- Abstract.
- Description of the company and the strategy of its development.
- History of establishment of the company.
- Description of the production and economic activity, its peculiarities.
- Description of available fixed assets and technologies.
- The main indicators of financial and economic activities of the Company for the previous period.
- Description of goods (works, services, intellectual property rights) which the company is going to develop (produce) within the framework of implementation of business project.
- Market analysis.
- The current and planned production volumes in physical and monetary terms.
- Investment plan. Investments.
- Passport of the company.