Improvement of conditions for investment activities in Belarus
Evgeniia Goriounova
Borovtsov & Salei
Minsk
Evgeniia Goriounova (Bio)
Situated at the crossroads of Europe, Belarus obviously represents an attractive destination for international capital. Recently the Government has made significant efforts to improve investment climate and promote new investment projects in the country. Thus the legal base for investment activities has suffered considerable reforms. The changes already introduced have led to the Belarus being ranked quite highly by the IFC in the 'Doing Business 2011' guide compared to previous years.
Nevertheless the Government has taken further steps in order to improve the conditions for investment activities even more.
Investment agreement
The legal basis for investment activities in Belarus is the Decree of the President of the Republic of Belarus as of August 6 2009 (No 10) On Creating Additional Conditions for Investment Activities in the Republic of Belarus. This act is dedicated to the issue of investment agreements. On June 6 2011, Decree No 4 amending the above was adopted. It introduced a number of significant changes to the process of signing an investment agreement, its content, as well as the list of investors' benefits granted based on the investment agreement.
First of all, the list of state bodies that decide on entering into an investment agreement has been specified. As of today it includes two options. The investment agreement can be signed based on the decision of a republican state administrative body in case the agreement does not provide for any additional benefits other than that stipulated by the Decree itself. Otherwise the investment agreement should be signed only based on the decision of the Council of Ministers of the Republic of Belarus as agreed by the President.
Other major changes concern mandatory conditions of the investment agreement. From now on the agreement should include terms for implementation of an investment project and confidentiality provision. In case one of the parties to the investment agreement is a foreign entity, the agreement can be executed in a foreign language as well.
National Investment and Privatisation Agency
Another significant amendment concerns creating a National Investment and Privatisation Agency in the Republic of Belarus. This special public organisation should establish direct cooperation between the government and private capital without any intermediate parties, providing practical assistance to the investors.
Tax benefits
Decree No 4 has amended and extended the list of rights and benefits for the investors that have entered into an investment agreement with the Republic of Belarus. Namely, investors have obtained the right to use foreign project documentation adapted to the rules and regulations of the Republic of Belarus. They have also obtained the right to deduct the full amount of VAT (except for amounts of tax that are not deductible under the law) paid upon acquisition or import into the territory of the Republic of Belarus of goods, works, services, property rights used for the design, construction (reconstruction), equipment of facilities provided by the investment project, regardless of the amount of VAT calculated upon the sale of goods, works, services and property rights. Another major right granted is the right to determine a general project organisation and a general contracting organisation without tender.
The Government has further exempted the investors from the tax on state land plots provided for construction of investment objects for the period up to December 31 of the year following the year when the construction is finished, as well as from contributions to innovation funds for the term of the investment agreement.
Free economic zones
Another area of interest for investors in Belarus is free economic zones (FEZ). Such zones provide for various benefits and exemptions for the investors. At first FEZ were fixed to a particular place. Namely the six of them were established in each regional centre of Belarus, as well as in Minsk. Nevertheless, recently the President of the Republic of Belarus has proposed to give investors the right to use all these benefits and exemptions in any locality within the republic, not only in the ones where FEZ are registered. This proposal is likely to soon take form of a special legal act.
Thus we can see that despite facing certain economic problems, the Government is promoting and developing investments in the Republic of Belarus. Taking into consideration the above, Belarus will surely attract even more investors by its favorable conditions for investment activities.