General information
The culture of Belarus, located in the heart of Europe at the crossroads of trade routes from the West to the East, has absorbed traditions of different people inhabiting Europe. It borders on Baltic States to the north, Ukraine to the south, Russia to the east and Poland to the west.
Belarus covers 207,600 square kilometers, stretching 560 kilometers (350 miles) from north to south and 650 kilometers (460 miles) from west to east. Minsk, the capital, is located on the same latitude as Hamburg and Dublin and is two time zones ahead of London. From Minsk, it takes about two hours to get to Berlin, Paris or Vienna, and less than three hours to London by airplane.
Belarusians generally share the same values of Western culture and think, perform and do business in a way quite similar to that of European business practices.
Belarus as an IT country
With a population of approximately 9.6 million, Belarus has high scientific potential. In early 2000s, the government declared its IT sector to be the one of the top-priority market sectors to be developed, creating great opportunities for foreign investment. In 2005, the virtual Hi-Tech Park (HTP) in Minsk, also known as the Belarus Silicon Valley” was established. There are about 144 companies registered as HTP residents in Belarus, including EPAM, Apalon, IAC, IBA, Itransition, SoftClub, Coherent Solution, Artezio, Intetics and many more. And 10 HTP residents were recently named in the “Software 500” ranking of Software Magazine. Half of Belarus’ HTP resident-companies are 100 percent or partially owned by foreign companies, and software and IT services produced in Belarus are sold to clients from more than 50 countries.
Any Belarusian company engaged in IT and related industries (such as micro-, opto- and nanoelectronics, telecommunications, radio navigation and wireless communication), information protection and setting up data processing centers can apply for residency within the HTP and benefit from tax incentives and other advantages.
The HTP concept is based on an ex-territorial principle, meaning that no physical premise is required to be within the HTP borders. Rather, any company, regardless of its location within Belarus, can be registered as an HTP resident. To benefit from HTP incentives, a foreign investor should first set up a local company within Belarus, then apply for HTP residency status.
Tax incentives in the HTP
HTP residents are exempt from all corporate taxes, including VAT and profit tax, as well as customs duties for certain types of goods. Individual income received by developers from these companies is taxed at 9 percent as personal income tax. Other benefits include 5 percent withholding tax on dividends, interest and royalties sourced from Belarus, and there is no offshore tax on dividends distributed to the parent company. The only tax chargeable on revenue of HTP residents is a 1 percent duty paid quarterly to the HTP administration.
SCHNEIDER GROUP can help
SCHNEIDER GROUP, within its IT-nearshoring strategy, is a reliable partner for foreign companies considering expansion into the Belarusian IT outsourcing market. We can provide assistance based on the needs of the client: (i) IT contracting-searching for the right partners and conducting project controlling functions, or (ii) IT outstaffing – searching for and employing the right IT experts; the entire operational function is managed by the client, whereas controlling functions remain with us, and (iii) entering the market and back office services.
SCHNEIDER GROUP will register a local legal entity for the client, search for a team of experienced IT experts, prepare all paperwork and apply to Hi-Tech Park for residency status, provide legal/business address services, and perform outsourced accounting services, and legal and tax advisory services as needed.
SCHNEIDER GROUP is capable of providing a full scope of services for market entry to a foreign investor considering Belarus as its next destination for further business expansion.
Natalia Shulzhenko is a member of the management Team. Reach her atShulzhenkoNA@schneider-group.com.
Thomas Titsch is director ERP. Reach him at TitschT@schneider-group.com.