How foreigners can do business in Belarus

 

There are three ways for foreigners (or non-residents) for doing business in Belarus:

1. to establish a company in Belarus;

2. to establish a representative office in Belarus (a «rep office»);

3. to do business in Belarus via a dependent agent.

1. Establishing a company in Belarus

Establishing a company in Belarus by a foreign citizen or company has some nuances.

First of all non-resident can establish in Belarus both national company or company with foreign investments. The second variant — a company with foreign investments — has a special status and that’s why some differences from a national company.

The main differences between them are the following:

— for national companies there is no limit for a minimum capital fund (excluding joint-stock companies); for a company with foreign investments — the minimum contribution of non-resident (-s) should be non less then 20 000 USD;

— the capital fund of a national company should be formed before the state registration; for a company with foreign investments (excluding open joint-stock companies) — during 2 years from the date of the state registration;

— companies with foreign investments every year should have obligatory audit of the book-keeping.

The second nuance applies to the set of the documents which a non-resident should present for a state registration. The main rule here is that the official documents from abroad should be legalized. This rule does not apply to the states which are the parties of the Hague Convention (1961). The documents issued in such states should only have an apostil.

For the documents issued in the states with which Belarus has agreements on legal assistance is sufficient to have a stamp of the official state body or to be notarized.

Documents on foreign language (or their parts) should be officially translated into the Russian language on the territory of Belarus. The signature of the translator should be notarized.

The third nuance applies to the forming of the capital fund.

Foreign companies that are going to establish a national company in Belarus shall have certain difficulties. As it was written above the capital fund of a national company should be formed before the state registration of a company. A founder of a company can form its capital fund by money or by the goods.

To form the capital fund by money a foreign company should be registered in Belarusian tax organs (this procedure takes time and requires certain set of documents).

To form the capital fund by goods a foreign company should have such goods on the territory of Belarus. But it is unreal due to Belarusian customs regulations.

2. Establishing a representative office in Belarus.

A representative office of the foreign company is its subdivision on the territory of Belarus which defends and represents the interests of the foreign company and effects other functions due to the Belarusian legislation.

Legal status of a representative office of the foreign company has two nuances:

— a representative office of the foreign company is a non-resident of Belarus;

— a representative office of the foreign company is not a judicial person.

The second nuance of above restricts the possibility of foreign company to do business in Belarus via a representative office. Doing business in Belarus in this case is possible only on behalf of the foreign company but not by the representative office by itself.

If the certain activity in Belarus requires a license a foreign company can obtain such a license only after establishing a representative office in Belarus. (About 50 types of economic activity require a license in Belarus — among them are: peddling, transportation, building, telecommunications, etc.).

A foreign company can establish a representative office in Belarus for the term which it defines by itself. Earlier the maximum term for opening a representative office in Belarus was restricted by three years. Now there is no such restrictions.

State due for opening a representative office in Belarus is about 800 USD per year (for representative offices of commercial organizations) and about 250 USD (for representative offices of non-commercial organizations).

3. Doing business in Belarus via a dependent agent.

According to Belarusian legislation a «dependent agent» means «an organization or a physical person which performs the activity on behalf of the foreign company and (or) in its interests and (or) has and uses the rights of the foreign company to make deals or to conclude the substantial conditions of the deals».

Such a dependent agent makes a permanent establishment of the foreign company in the territory of the Republic of Belarus for the tax purposes. A dependent agent pays in Belarusian budget all the taxes for the activity of the foreign company in Belarus.

In the case when an agent acts on behalf of the foreign company within its usual activity it does not make a permanent establishment of the foreign company in the territory of the Republic of Belarus. In this case an agent acts as independent agent and does not pay any taxes for the foreign company.

What form of doing business in Belarus should choose a foreign company?

One should understand that there is no universal answer for this question. In every situation the answer depends on the certain circumstances.

But there are some general issues.

Firstly, we can divide the choice of the form of doing business in Belarus into two parts:

1. the choice between working with an agent and establishing an own structure in Belarus;

2. the choice between establishing a company in Belarus and establishing a representative office in Belarus.

For the first of the choices above we can say the following. Working with an agent (a Belarusian company or a physical person) requires less participation and investments from a foreign company. Withal a foreign company has less control of an agent.

As for the choice between establishing a company or a representative office it depends on the aims of establishing a structure in Belarus.

A representative office can not do business in Belarus by itself.

The expenses for establishing and maintenance of the representative office are higher than in the case of establishing a company.

A representative office should report twice a year on its activity to the Ministry of foreign affairs of the Republic of Belarus. A company does not have such an obligation.

There is a limitation for number of the foreign citizens that can work in the representative office. Usually the Ministry of foreign affairs of the Republic of Belarus allow representative offices to employ not more than three foreign citizens.

Also representative offices have definite difficulties with customs clearance of importing goods that makes wholesale and trading impossible for them.

There are following conclusions from the above:

— for wholesale and trading in Belarus a foreign company should establish a company here;

— for providing of the services in Belarus a foreign company can establish both a company or a representative office here (taxation is the same, cost of establishing and maintenance of the representative office is higher);

— for non-commercial activity in Belarus a foreign company can establish a representative office here.

The only case when a representative office is more beneficial than a company in Belarus is the following. A foreign company establishes a structure in Belarus for providing services to itself. For example — foreign software company establishes a representative office in Belarus, hire Belarusian programmers who will work on the orders from the «mother-company».

In this case foreign company transfers financing to its representative office and in Belarus there is no taxation for this financing.