VAT, GST and Sales Tax in Belarus

Summary

Name of the tax Value-added tax (VAT)
Local name Nalog na dobavlennuyu stoimost (NDS)
Date introduced 19-Dec-91
Trading bloc membership Eurasian Economic Community member
Administered by Ministry of Taxes and Duties of the Republic of Belarus (http://www.nalog.gov.by)
VAT rates
Standard 20%
Reduced 10%
Increased 25%
Other Zero-rated and exempt
VAT number format Tax identification number (TIN) with 9 digits
VAT return periods Quarterly or monthly (at the choice of the taxpayer)
Thresholds
Registration No separate registration exists for VAT purposes; taxpayers register for all corporate taxes at the same time, but a VAT exemption is available for smaller businesses
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • Sales of goods (works and services) and property rights in Belarus (including exchanges of goods, gratuitous assignments, leases, transfer of goods under loan agreements)
  • Importation of goods into Belarus

Goods are deemed to be sold in Belarus if either of the following circumstances exists:

  • The goods are situated in Belarus and are not shipped or trans­ported abroad.
  • The goods are situated in Belarus at the time of the commence­ment of shipment or transportation.

Services (works) are deemed to be provided in Belarus if the activities of a private entrepreneur or organization that performs the works (renders services) are carried out in Belarus.

Under specific rules, services (works) are deemed to be provided in Belarus in the following circumstances:

  • The services (works) are directly connected with immovable property situated in Belarus.
  • The services (works) are connected with movable property situ­ated in Belarus (except the rent and lease of movable property).
  • The services (works) are rendered in Belarus in the areas of culture, art, education (except distance education), physical education, tourism, leisure or sport.
  • The purchaser of the services (works) carries out activities in Belarus such as the following:
    • The transfer of property rights on intellectual property
    • The provision of audit, consulting, legal, accounting, adver­tising, marketing, engineering and information processing services
    • The provision of secondment services (if the staff works in Belarus)
    • The rent of movable property (except for transportation vehicles)
    • The provision of services related to the development of computer programs and databases (computer software and information products) as well as the adaptation and modifi­cation of these products

The place of supply of supplementary services is the same as for the main services.

Who is liable

In general, a taxpayer is any individual entrepreneur or legal entity (including a foreign legal entity) that performs taxable supplies of goods (works and services) and property rights in Belarus in the course of its business activities or that imports goods across the customs border of Belarus.

Exemption from VAT payment obligations. Private entrepreneurs and legal entities that are applying the simplified taxation system without payment of VAT (if thresholds of revenue and number of employees are not exceeded) or carrying out activities subject to unified tax on imputed income are exempt from VAT payment obligations, except for payment of VAT at customs.

Group registration. Tax group registration is not allowed under Belarusian law. Legal entities that are closely connected must register for tax purposes separately.

Non-established businesses (foreign legal entities). A “non-estab­lished business” is a foreign company that does not have a per­manent establishment in Belarus. Foreign legal entities that do not have a permanent establishment in Belarus are not subject to VAT when they sell goods (perform works, render services) in Belarus. In such cases, the Belarusian legal entities and individ­ual entrepreneurs who purchase these goods (works, services) must calculate and pay VAT. A foreign legal entity or non-estab­lished business may be required to register for tax purposes in Belarus if it meets any of the following conditions:

  • It plans to conduct business that leads to income generation.
  • It owns immovable property in Belarus.
  • It operates entertainment facilities such as merry-go-rounds and Ferris wheels that are usually located in amusement parks.
  • It puts on wild animal attractions.

The tax registration procedure for non-established businesses is generally the same as the procedure for Belarusian legal entities. A foreign legal entity should submit a standard application form for tax registration to the Belarusian tax authorities together with supporting information and documentation about the entity.

Registration procedures. There is no separate VAT registration in Belarus. Tax registration is carried out automatically five work­ing days after the company’s incorporation and covers all taxes paid by a company. Foreign companies shall apply for tax regis­tration before carrying out activities in the territory of Belarus. The administrative procedure for tax registration of foreign com­panies takes two working days. Documents required for tax reg­istration may be submitted by a duly authorized company official or the company’s tax representative.

Late-registration penalties. Belarusian administrative law pro­vides for several types of fines in the following amounts for tax registration violations:

  • Delay in tax registration: penalty of not more than five basic units (one basic unit = BYN23).
  • Non-registration: penalty of not more than 20 basic units. The amount of the penalty depends on the duration of the delay in tax registration. For legal entities, the penalty equals 20% of the amount of income generated during the period of unregistered business activity.

Tax representatives. Taxpayers may authorize any individual or legal entity to act as a legal representative of the taxpayer in transactions regulated by tax law. The tax representative acts on the basis of power of attorney.

Reverse charge. Belarus has a tax mechanism similar to the com­monly understood reverse-charge mechanism. Foreign legal enti­ties that do not have a permanent establishment in Belarus are not subject to VAT when they provide a supply, i.e., sell goods, per­form works or render services, transfer property rights in Belarus. In such cases, the Belarusian legal entities and individ­ual entrepreneurs who purchase these supplies must calculate and pay VAT. Subsequently, VAT paid by Belarusian taxpayers may be credited in full against the output VAT or refunded from the budget.

Digital economy. Generally, indirect tax issues related to digital products are regulated by the common provisions of the Belarusian Tax Code. High-tech companies registered with certain organizations, e.g., the High-Tech Park, the Infopark Science and Technology Association or free economic zones, may apply to receive additional indirect tax benefits and exemptions.

New tax rules with respect to electronic services are expected to come in force 1 January 2018. Foreign companies will be required to register with tax authorities in Belarus and pay VAT at the rate of 20% if they provide electronic services to individu­als residing in Belarus. Electronic services means services that are rendered via the internet using information technologies. The electronic services may include, but not limited to:

  • Granting rights to use software, computer games, databases, e-books, informational materials, graphics and music, includ­ing streaming via the internet
  • Advertising services on the internet
  • Services rendered automatically via the internet upon data input by the purchaser of services
  • Providing trade platform operating on the internet in a real-time mode
  • Web hosting services
  • Providing access to search systems on the internet
  • Some other services

Individuals/purchasers will be considered as residing in Belarus if their place of residence is Belarus, or an account that was used for a payment is opened in Belarus, or a network address used for purchase of services is registered in Belarus, or an international country code used for a payment/purchase is assigned for Belarus.

Dereltistration. There is no separate VAT deregistration in Belarus. Generally, tax authorities deregister taxpayers in cases of liquidation, reorganization or closure of a permanent establish­ment in Belarus. Tax deregistration applies for all taxes paid by an entity simultaneously, and deregistration of foreign organiza­tions has complications specified in the Belarusian Tax Code.

VAT rates

The term “taxable supplies” refers to supplies of goods (works and services) and property rights that are liable to a rate of VAT, including the zero rate.

In Belarus, the following VAT rates are applied:

  • Standard rate: 20%
  • Reduced rate: 10%
  • Increased rate: 25%
  • Zero rate: 0%

VAT is levied at a general rate of 20% on taxable supplies, which include the majority of domestic sales of goods and services.

Examples of supplies taxable at 10%

  • Sales of crops (except flowers and ornamental plants)
  • Sales of store cattle, i.e., sales of any products of animal origin such as pork, beef, animal fat, etc. The reduced rate applies to the sale of live animals in that industry as well but does not apply to the sale of animals to be farmed for fur, such as sheep, raccoon, sable, etc.
  • Sales of fish and hive products produced in Belarus
  • Sales and/or imports into Belarus of goods for children and food products as per the list established by the Belarusian President

Examples of supplies taxable at 25%

  • Sales of telecommunications services

Examples of goods and services taxable at 0%

  • Exports of goods, some works and services related to exports
  • Exports of transport services, including transit carriage
  • Exports of works on production of goods from raw materials supplied by customers under tolling agreements
  • Repairs of aircraft and their engines, units of railway technics for foreign companies and individuals

The term “exempt supplies” refers to supplies of goods (works and services) and property rights not liable to tax.

Examples of exempt supplies of goods and services

  • Provision of financial, insurance, educational, cultural, housing or medical services
  • Provision of certain medical equipment, prosthetics and devices for disabled persons

Option to tax for exempt supplies. Taxpayer is entitled to apply or refuse to apply tax exemptions and other benefits provided by the Belarusian Tax Code. If the taxpayer refuses to apply any VAT exemption, it must submit an application on refusal to apply respective tax exemption to the tax authorities.

Time of supply

“Time of supply” is the moment when VAT becomes due.

Under Belarusian law, the time of supply is called the “date of actual realization.”

The date of actual realization of goods, works and services, and property rights is determined as the date of dispatch of goods (performance of works or rendering services) or transfer of prop­erty rights disregarding the day of payment.

The date of dispatch of goods or services is the date of the fol­lowing:

  • For goods, the first day of shipment by the seller to the cus­tomer or to the company that carries out the transportation (if the seller does not provide the transportation of the goods or does not bear the costs of the transportation)
  • For goods, the date is determined according to the accounting policy of the taxpayer but no later than the day when transporta­tion of the goods began (in the other cases)
  • For services, the day when the services are considered to be provided in accordance with executed documents, such as act of acceptance
  • For transfer of property rights, the date when the customer’s right to receive payment under the contract arises

Exemptions from this rule have been introduced, including but not limited to the following:

  • The date of actual realization of goods, works and services, and property rights performed by foreign legal entities not regis­tered with the Belarusian tax authorities is the day of payment, including advance payments (or other way of obligation fulfill­ment).
  • The date of actual realization of goods, works, services and property rights performed by foreign legal entities not regis­tered with the Belarusian tax authorities under commission, trust and other similar agreements concluded with legal entities and individual entrepreneurs registered with Belarusian tax authorities is the date of dispatch of goods (performance of works or rendering services) or transfer of property rights dis­regarding the day of payment.

Imported goods. Imported goods are subject to import VAT in Belarus.

For goods imported from countries that are not members of the Eurasian Economic Union, VAT is collected by the customs authorities. For goods imported from countries that are members of the Eurasian Economic Union, VAT is collected by the tax authorities. VAT on imports is payable on the customs value of goods, including import duty and excise duty (if applicable).

Recovery of VAT by taxable persons

A taxpayer may recover input VAT, which is VAT charged on goods (works and services) and property rights supplied for car­rying out activities within the scope of VAT. A taxpayer generally recovers input VAT by deducting it from output VAT, which is VAT charged on supplies made.

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • VAT paid on purchases of goods, works and services, and prop­erty rights from resident legal entities
  • VAT paid on imported goods
  • VAT paid on goods, works and services, and property rights purchased from foreign legal entities that do not have a perma­nent establishment in Belarus

Input VAT paid on goods imported through 31 December 2016 may not be deducted during the first 90 days following the date of import if the goods are imported from countries that are not members of the Eurasian Economic Union. This rule applies only in the case of goods that will be sold in Belarus in unchanged condition. Packaging (bottling) in cans, bottles, flacons, sacks, boxes as well as grinding (cutting) for packaging and other sim­ple operations aimed at packaging and repackaging that do not change the properties of goods are not regarded as a change of condition of the goods.

Nondeductible input tax. Input VAT cannot be recovered on expenses in the following circumstances:

  • Where it was deducted as expenses for corporate profits tax purposes
  • Where it was allocated to the value of goods, works and ser­vices and property rights (including fixed and intangible assets)
  • Or in certain other cases

Partial exemption. If a taxpayer engages in both exempt and tax­able activities, it may account for input VAT related to each activ­ity separately. In this case, input VAT directly related to taxable activities is recoverable in accordance with the sequence of VAT deductions, and input VAT directly related to exempt activities is not recoverable and must be expensed for corporate profits tax purposes. If the taxpayer does not keep separate accounts of input VAT attributable to taxable and exempt activities, it must be apportioned. The statutory method of apportionment is a pro rata calculation, based on the revenue from taxable activities com­pared with the total turnover of the business. Percentages are calculated separately for activities subject to each VAT rate and for exempt activities. The amount of input VAT related to each kind of activity is determined by multiplying the total amount of input VAT and the relevant percentage.

The amount of input VAT is deducted in the following sequence:

  • The amount of input VAT related to sales of goods, works and services, and property rights, except fixed assets and intangible assets (subject to VAT at 20% rate). The amount of input VAT is deductible up to the amount of output VAT calculated on the sales of goods, works and services, and property rights.
  • The amount of input VAT on fixed and intangible assets. The amount of input VAT that may be deducted may not exceed the amount of output VAT calculated on sales of goods, works and services, and property rights and the amount of VAT deducted in accordance with the rules stated in the first item above.
  • The amount of input VAT related to activities that are subject to VAT at 10%. In this case, the amount of deduction is not lim­ited by the amount of output VAT calculated on sales of goods, works and services, and property rights.
  • The amount of input VAT related to activities that are subject to VAT at 0%. In this case, the amount of deduction is not limited by the amount of output VAT calculated on sales of goods, works and services, and property rights.
  • The amount of input VAT related to sales of goods that are produced by a Belarusian tax resident and sold to another Belarusian tax resident for the transfer of the goods in interna­tional leasing with redemption right outside Belarus. In this case, the amount of deduction is not limited by the amount of output VAT calculated on sales of goods, works and services, and property rights and expensed for corporate profit tax pur­poses. Sales of goods described in the preceding sentence are exempt from VAT.
  • Amounts of VAT paid from purchased fixed assets and intan­gible assets that were not deducted in the last fiscal period and that the taxpayer decided to deduct in equal shares in each reporting period of the current fiscal year. In this case, the amount of deduction is not limited by the amount of output VAT calculated on sales of goods, works and services, and property rights (see Capital goods).
  • Amounts of VAT related to sales of goods to foreign companies and/or individuals from the territory of foreign states (certain criteria should be met). In this case, the amount of deduction is not limited by the amount of output VAT calculated on sales of goods, works and services, and property rights.

Capital goods. A taxpayer may deduct input VAT paid on pur­chased fixed assets and intangible assets in accordance with the usual VAT deduction rules, or capitalize input VAT by increasing the value of a fixed or intangible asset by the amount of VAT.

For VAT deductions of the preceding fiscal period for fixed assets and intangible assets, a taxpayer may deduct them in equal shares in each reporting period of the current fiscal period (1/12 of the amount for a reporting period of a month or 1/4 of the amount for a reporting period of a quarter).

Refunds. If the amount of VAT deductions (input VAT) in a VAT return exceeds the amount of output VAT payable, the taxpayer need not pay VAT, and the difference between the amount of VAT deductions and total VAT calculated on sales of goods (works and services) and property rights may be deducted on a priority basis from the total amount of VAT in the following fiscal period or, in certain cases, refunded to the taxpayer.

The decision about reimbursement of VAT must be issued by the tax authorities not later than two working days from the date on which the taxpayer submitted the VAT return and application for refund. The tax authorities may examine the reasonableness of the refund.

Refund of VAT from the budget is carried out by the tax authori­ties in the following order:

  • Reimbursable VAT must be offset during one month against the following:
    • Current payments for taxes, duties and other mandatory payments to the budget
    • Debt repayments and fines with respect to taxes, duties and other mandatory payments to the budget
    • Debt repayments of penalties imposed by the tax authorities
  • The remaining amount of reimbursable VAT is refunded to a taxpayer not later than five working days from the closing date for offset.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

Only registered legal entities that engage in taxable activities in Belarus may obtain recovery of VAT.

If a foreign legal entity is registered with the Belarusian tax authorities as a permanent establishment, VAT incurred on pur­chases of goods (works and services), including imported goods, and property rights is generally recoverable in accordance with the usual rules (see Section F).

Refund application. The VAT refund application must be sent to the appropriate tax office. The application must be completed in Russian. The refund is made in Belarusian rubles (BYN) to a bank account held in Belarus. The Ministry of Taxes and Duties of the Republic of Belarus has approved a model form of refund application.

Interest on refunds. Refunds of differences between the amount of VAT deductions and total VAT with respect to sales of goods (works and services) and property rights are made without the payment of interest.

Tax-free system. When foreign individuals purchase a product in Belarus that costs more than BYN80 from a vendor that is a party to the tax refund services agreement, and then the individuals export the product to a destination outside the territory of the Eurasian Economic Union, they can receive a refund of the VAT they paid if they apply for the refund within three months of the date of purchase.

Invoicing

VAT invoices and credit notes. Since 1 July 2016, VAT payers are required to use electronic VAT-invoices for each VAT-taxable transaction. Electronic invoices are grounds for settlements with respect to VAT between sellers and buyers of goods, works, ser­vices and property rights, as well as grounds for credit of input VAT.

In general, the seller of the goods, works, services and property rights should issue an electronic VAT-invoice no earlier than the date of actual realization, but no later than the 10th of the month following the month of actual realization.

Electronic VAT-invoice flow is organized through the Portal of VAT-invoices – information resource of the Ministry of Taxes and Duties of the Republic of Belarus.

Proof of exports. Goods exported from Belarus, as well as some types of works and services related to exports, are subject to VAT at a rate of 0% in Belarus. To confirm the applicability of the 0% rate, the supplier must collect and provide to the tax authorities the supporting documents.

Foreign-currency invoices. If money liabilities in a contract are fixed in BYN as an equivalent to an amount in foreign currency, the VAT base is determined in BYN, using the foreign-currency rate published by the National Bank of the Republic of Belarus on the date of actual realization.

VAT returns and payment

VAT returns. Taxpayers must file VAT returns quarterly or month­ly (at the choice of the taxpayer) with cumulative effect in the calendar year by the 20th day of the month following the report­ing period. Payments must be made by the 22nd day of the month following the reporting period. VAT returns shall be filed in the form of electronic document.

Special schemes. Import VAT related to the goods imported from the Eurasian Economic Union must be declared in the tax return by the 22nd day of the month following the date of acceptance of these goods in accounting.

VAT returns in respect of turnovers related to a property trust must be submitted to the tax authorities separately from VAT returns related to other activities of the trust manager.

Electronic filing and archiving. VAT returns must be filed in the form of an electronic document signed by taxpayer’s digital sig­nature.

Annual returns. Instead of submitting annual tax returns, VAT taxpayers submit monthly VAT returns (for VAT on import from the Eurasian Economic Union and in cases when taxpayer chooses calendar month as a reporting period for VAT) or quar­terly VAT returns (in cases when taxpayer chooses calendar quarter as a reporting period for VAT), both with cumulative effect in the calendar year.

Penalties

The Belarussian administrative law provides for the following fines with respect to the filing of VAT returns and nonpayment or partial payment of the amount of tax:

  • Delay in tax return submission (delay of not more than three working days): penalty on legal entity of 1 to 10 basic units
  • Delay in tax return submission (delay of more than three work­ing days): penalty on responsible official of two basic units plus 0.5 basic unit for each full month of delay but not more than 10 basic units; penalty on legal entity of 10% of the payable tax but not less than 10 basic units
  • Nonpayment or partial payment of tax: penalty on legal entity of 20% of the underpaid tax but not less than 10 basic units
  • Nonpayment or partial payment of tax resulting from the negli­gence of company’s officials: penalty on responsible official of 2 to 20 basic units
  • Willful nonpayment or partial payment of tax: penalty on responsible official of 20 to 60 basic units