Development of free economic zones

There are six free economic zones (FEZ) in the Republic of Belarus, one in each region. The oldest one is Brest FEZ which was created in 1996 in accordance with the President A. G. Lukashenko's Decree No. 114, which determined the government's view on new economic formations, their organizational and operating principles.

Belorussian FEZs vary in terms of the time of creation, geographic position and some other peculiarities, but they all share the most important characteristic: a favorable environment for profitable investment, which is guaranteed by the state laws. FEZ residents enjoy special tax regulations as well as customs and other business regulations.

Privileged tax regime includes the following additional privileges and advantages for FEZ residents:

• FEZ residents only pay a limited number of taxes and non-tax payments, i. e. profit and income tax, value-added tax, excise taxes, environmental tax, personal income tax, land tax (or rent), state and social insurance contributions, state duties and fees;

• profit tax rate is twice as low as the common republican rate (for FEZ Mogilev, Grodnoinvest - 12%, other FEZs - 15%).

• profits received by FEZ residents from the sale of own products (work, services) are exempted from profit tax for a term of five years after declaration of such profits;

• for five years following the reduced-rate period, FEZ Brest residents exporting at least 70% of their goods produced within FEZ Brest, pay income tax at a 50% rate (i.e. 7.5 %).

• Income of foreign legal entities with no permanent establishment in Belarus, received from residents of FEZ Vitebsk, Mogilev, Grodnoinvest and Brest for the use or the right to use industrial, commercial or scientific know-how, or in the from of dividends or interest, are subject to withholding tax at a reduced rate – 5%;

• dividends paid by FEZ Brest residents are exempted from taxation for a term of five years after the registration;

• residents of FEZ Mogilev and Grodnoinvest do not pay duties and fees to budgetary funds of local budgets and non-budgetary funds of local MP councils;

• tax on proceeds from the sale of securities by residents of FEZ Mogilev and Grodnoinvest is paid at a 50% rate (i.e. 20%. instead of the common rate, 40%)

FEZs are viewed as free customs zones. Customs regulation exemptions in FEZs are as follows:

• Belorussian and imported goods imported to FEZ are exempted from taxes and customs duties other than customs clearance fees;

• goods produced within FEZs and exported from FEZs outside the Republic of Belarus, are exempted from taxes and customs duties other than customs clearance fees. This privilege is not granted to goods exported from a FEZ to the Republic of Belarus;

• FEZ residents' own goods (works, services) are not subject to quotas and licensing when such goods (works, services) are exported to the customs territory of Belarus or outside such territory, except goods under international commitments of the Republic (except FEZ Grodnoinvest and Mogilev).

Attractive investment incentives stimulate the development of FEZ and boost the Republic's economic potential. FEZs have already proved efficient. FEZs create additional employment, implement modern technologies, increase production volumes, export and import, provide a favorable environment for investments and add to tax duties and payments to the budget.

Operation of FEZs is regulated by the following legal acts:

• Law No. 213-Z of December 7, 1998 "Concerning Free Economic Zones";

• Resolution No. 559 of the Council of Ministers of the Republic of Belarus of August 23, 1996 "Concerning Approval of the Statute on Brest Free Economic Zone";

• Resolution No. 749 of the Council of Ministers of the Republic of Belarus of May 15, 1998 "Concerning Approval of the Statute on Minsk Free Economic Zone";

• Resolution No. 773 of the Council of Ministers of the Republic of Belarus of May 15, 1998 "Concerning Approval of the Statute of Gomel-Raton Free Economic Zone";

• Resolution No. 1554 of the Council of Ministers of the Republic of Belarus of October 6, 1999 "Concerning Approval of the Statute on Vitebsk Free Economic Zone";

• Resolution No. 789 of the Council of Ministers of the Republic of Belarus of June 17, 2002 "Concerning Approval of the Statute on Grodnoinvest Free Economic Zone and its Administration";

• Resolution No. 445 of the Council of Ministers of the Republic of Belarus of April 8, 2002 "Concerning Approval of the Statute on Mogilev Free Economic Zone".