The investment legislation of Belarus

In order to provide transparency and more appropriate access to investment legislation and to simplify the procedures of starting investment activity in Belarus the Investment code of Belarus was adopted last year and came into effect on October 9, 2001.

According to the Investment code, foreign businessmen have the right to form on territory of Belarus an enterprise whether completely belonging to them, or created with individual share of the Belarusian enterprises or citizens, which acquire the status of the legal person of Belarus after registration.

Stability of the legislation is guaranteed for commercial organisations with foreign investments. During five years from the moment of their registration moratorium on application of the legislative norms worsening conditions of business is stipulated.

All joint ventures and fully controlled foreign enterprises (FE) have the right of free formation of the prices for own production and use of the accelerated norm of depreciation of any size. Besides, if the share of the foreign partner in their authorised capital constitutes more than 30 percents they are released of payment of the profit tax within three years. They are cleared of customs duties and the value-added tax on imported equipment for authorised capital formation.

The foreign currency received from export of own production of the enterprises with foreign investments remain in their disposition except for the sums of tax payments. After tax payment total JV or FE incomes are guaranteed to be repatriated abroad.

One of most significant innovations of new Code is introduction in practice of state engaging and stimulation of investments of the new tool - the investment agreement which can be concluded with the purposes of rendering a state support at realisation of the separate investment projects having the important significance for national economy. The parties of such agreement could be: on the one hand - the state on behalf of Government or the republican state body authorised by it, and on the other hand - national and (or) foreign investors.

Distinctive features of the agreement are additional legal warranties of Belarus regarding tax and customs treatment, ecological norms, the obligation on issue to the investor of the licensing documents necessary for realisation of the investment project, mutual obligations of the parties on development of an industrial and social infrastructure of region, the obligation of the foreign investor on hiring and training of workers from among citizens of Belarus etc.

It is provided also possibility of investment activity in the form of concession which means conclusion of special concession agreement between Belarus and private national and (or) foreign investors and national investors in which state property share constitutes no more than 25 percents. Thus, the complete concession agreement, the sharing production concession agreement and the concession agreement on granting services are differentiated. According to the Belarusian Land Code enterprises with foreign investments there is a possibility of the long lease of land spots up to 99 years and the purchase of land spots in case of realisation of the large investment project.

According to the Decree of the President of Belarus from 08.07.2000 № 244 in case of implementation by the foreign investor during realisation of investment project of new and high technologies the following taxes, customs and other privileges can be granted:

• - clearing for the period of 5 years of production and the services made with application of new and high technologies, from taxes and customs duties, and also the profit of the enterprises from levy from the moment of its(her) announcement (for the hi-tech enterprises);

• - reduction of rates of profit taxes and on the added value;

• - clearing of production made with application of new and high technologies, of taxation by excises or decrease(reductions) of their rates;

• - clearing of own production on a payback period of investments from taxation by export customs duties or reduction of their rates;

• - clearing imported on customs territory of Belarus raw materials, semifinished items and the equipment, necessary for output of own production from taxation by customs duties or reduction of their rates;

• - granting of tax privileges to banks and other financial organisations providing loans, insurance and reinsurance services for the enterprises implementing new and high technologies or producing on their basis competitive goods.

In order to organise permanent dialogue with foreign investors Government set up Consultant Council on Foreign Investment. It consists of representatives of different administrative bodies, international organisations (UNDP, IFC) and foreign investors working on Belarusian market (Coca-Cola, McDonald's, Maersk Medical, Ernst & Young etc.). Foreign members participate in working groups to make suggestions to the government on the most urgent issues of business environment in Belarus.

In May 2002 the Belarusian government approved National Program on Investment Attraction to prepare a set of measures to improve investment climate. Thus, government plans to decrease the number of licensed businesses, introduce application-based order of registration, improve system of privatisation, develop stock exchange market, higher responsibility of officials for decisions harmful for foreign investment.