On the Procedure of Creation and Activity of the Representation Offices of Foreign Companies and Organizations on the Territory of the Republic of Belarus
Updated June 2011
1. The Procedure of Creation
The principle legal acts regulating the procedure of opening and functioning of Representation Offices of foreign organizations, their branches and subsidiaries (hereinafter "Representation Offices or RO") on the territory of the Republic of Belarus are Article 51-1 of the Civil Code of the Republic of Belarus (entered into force by the Law No. 7-3 dated 03.05.2001) and the Provision "On the Procedure of Opening and Functioning of Representation Offices of Foreign Organizations on the Territory of the Republic of Belarus ", approved by the Resolution of the Council of Ministers of the Republic of Belarus No. 929 dated 22.07.1997 with further changes and amendments, hereinafter referred to as the "Provision".
Representation Offices of legal entities and other organizations registered under the applicable procedure in a foreign country, administrative-territorial units of foreign countries (hereinafter – organizations) can be opened and carry out activity on the territory of the Republic of Belarus upon receiving permission of the Ministry of Foreign Affairs.
In accordance with the Provision Representation Offices of organizations may be established for the purposes of conducting activities for and on behalf of the organization it represents, the name of which is indicated in the Permit for opening of the Representation Office. Purposes, for which Representation Office may be established, differs depending on whether the organization which opens its Representation Office is a commercial or non-commercial one.
Representation Offices of commercial organizations may be established for achieving the following aims:
- effective promotion of implementation of international treaties of the Republic of Belarus concerning cooperation in the sphere of trade, economics, finance, science and technology, transportation; search for opportunities of further development of such treaties, improvement of forms of such cooperation, determination and increase of economic, commercial, scientific and technical information;
- The Republic of Belarus’ commodity markets research;
- research of opportunities for the investment activity in the Republic of Belarus;
- incorporation of foreign companies and joint ventures;
- promotion of development of trade and economic relations between countries;
- representation and protection of interests of commercial organization;
- sale of tickets and reservations of aviation, railway, automobile and sea transportation companies;
- activities in order to reach other goals, including socially useful ones, not prohibited by the legislation of the Republic of Belarus for such Representation Offices.
Representation Offices of non-commercial organizations may be established for achieving the following aims:
- social support and protection of citizens, including improving welfare standards of poor people, social rehabilitation of the unemployed, invalids and other persons, who due to the physical or intellectual peculiarities or due to other circumstances can not independently exercise their rights and legal interests;
- training population to overcome consequences of spontaneous disasters, ecological, industrial and other catastrophes as well as any other accidents;
- providing for relief action to the victims of spontaneous disasters, ecological, industrial and other catastrophes, social, ethnic, religious conflicts, repressive measures, refugees, forced migrants;
- promoting strengthening of peace, friendship and a mutual consent of the nations, as well as preventing social, ethnic and religious conflicts;
- promoting strengthening of prestige of the family values in the society;
- promoting protection of childhood, motherhood and fatherhood;
- promoting activities in the sphere of education, science, culture, art, enlightenment, intellectual development of the personality;
- promoting activities in the sphere of preventing and protecting the citizens’ health, as well as promoting healthy life-style, improving of morally-psychological state of the citizens;
- promoting activities in the sphere of physical culture and mass sport;
- protection of the environment and animals;
- protection and proper maintenance of buildings, other objects and territories presenting historical, cultural, spiritual or environmental value, and storage sites;
- other socially useful purposes.
Approval for opening a Representation Office conducting other socially useful purposes is granted by the Ministry of Foreign Affairs upon receiving concordance of the concerned state agencies.
Representation Offices of foreign educational organizations may be opened in the Republic of Belarus as well for purposes of advertising and informational activities, study of the experience of the Belarusian educational organizations, promotion of conclusion of the agreements on cooperation between educational organizations, and exchange of experience and information in the sphere of education and science.
Representation Offices of organizations are established for a certain period of time specified in the application of the organization for opening the RO. This period may be extended by the Ministry of Foreign Affairs of the Republic of Belarus (hereinafter – MFA) upon the organization's application (to prolong the term, the organization should apply for the permission not later than ten days before the expiry of the previous permission).
Organization interested in opening its Representation Office in the Republic of Belarus submits to the Ministry of Foreign Affairs a written application stating the purposes of the opening of Representation Office and other data relating to the creation and activity of the organization.
The following documents must be attached to the application:
- Copies of constituent documents of the organization, legalized in the established order
- Copy of the document, verifying state registration of the organization in the authorized agency of the applicant's country (extract from the trade register, registration certificate, etc), legalized in the established order
- Power of Attorney on the head of the Representation Office, legalized in the established order;
- Power of Attorney on the person, empowered to take actions connected with establishment of Representative Office, legalized in the proper manner;
- Provision of Representative Office;
- Original of the document, verifying payment of state duty for Permit for opening of the Representation Office;
The practice shows that in order to open the Representation office of the organization it is necessary to present to the Ministry of Foreign Affairs a guarantee letter, issued in the Republic of Belarus, concerning obtaining office premises.
The specified documents should be submitted in one of the state languages of the Republic of Belarus - Russian or Belarusian. The translation of the documents shall be certified in the established order by notary or by diplomatic or consular departments of the Republic of Belarus abroad.
The following state duties are established for issuing permits for opening RO and permits for continuing activities of RO:
for Representation Offices of commercial organizations
| 65 basic values for each year of validity of the permit
|
for Representation Offices of non-commercial organizations and Representation Offices of organizations, practicing charitable activities only | 20 basic values for each year of validity of the permit
|
** 1 (one) basic value equals to approximately 7 US dollars or approximately 5 euro |
|
Representation Office is considered to be established and may exist on the territory of the Republic of Belarus from the date the permission for its opening was issued.
Activity of organizations on the territory of the Republic of Belarus without opening Representation Offices is forbidden, apart from:
- carrying out activity through an organization or a natural person, acknowledged as a permanent Representation Office of a foreign organization in accordance with the tax legislation of the Republic of Belarus
- holding concert performances on the territory of the Republic of Belarus including concerts, amusement rides, menageries, circus programs.
Representation Office shall present documents necessary for registration as a tax-payer to the relevant local inspection of the Ministry of Taxes and Dues of the Republic of Belarus and shall present documents for registration as a payer of compulsory insurance payments to the local department of Social Safety Fund within 10 days from the date the Permit was issued. Representation Office shall also present documents to the relevant division of Belarusian State Insurance Agency for registration as the insured on compulsory insurance against accidents at work and occupational diseases. Representation Office shall open accounts in the Belarusian bank.
The Permit for opening the Representation Office becomes invalid in the event the organization has not exercised its right to set up a Representation Office within 6 months from the date the Permit was issued.
The activities of Representation Office shall be terminated in the following cases:
a) in the case of liquidation of the organization
b) in case of termination of the international agreement by virtue of which the Representation Office was set up, provided this is stipulated by such an agreement;
c) in accordance with the decision of the organization which opened Representation Office
d) in accordance with the judgment of the court in cases of violating laws of the Republic of Belarus;
e) in the case of the termination of the permission for opening the RO or prolongation of activity of the Representation Office.
2. Legal Status
Representation Office is not a legal entity. Representation Office is a separate division of an organization, located on the territory of the Republic of Belarus which performs dependence and representation of interests of the organization as well as other functions that are not contradicting to the legislation of the Republic of Belarus. , Representation Office may perform legal acts in the name and on behalf of the organization that it represents, including entering into agreements, acquiring property and personal non-property rights and fulfilling obligations, being plaintiff and defendant in court. As a rule Representation Office concludes contracts in order to ensure material, technical and informational provision of the activities of Representation Office in the territory of the Republic of Belarus. The scope of authority of Representation Office is not determined by the Belarusian legislation and is established by the organization that opened it.
In accordance with the current legislation, Representation Offices of organizations shall be entitled to carry out entrepreneurial activity on the territory of the Republic of Belarus only for and on behalf of the organization that opened its Representation Office. Types of activities, exercising of which requires receiving of a special permit (license), can be carried out by RO only on the grounds of the license received by the organization in order stipulated by the legislation.
Activity of the Representation Offices in the generally useful purposes must be carried out on the basis of programs and projects that correspond to the priority orientation of activity of the organization, approved by this organization. Issuing of grants (financial, material and other resources, granted on the competition basis) by the Representation Offices outside the scope of the realized programs and projects is prohibited. According to the Para. 4 clause 5.1. of the Presidential Decree No. 24 dated 28.11.2003 "On receipt and use of foreign donations" (as amended) granting gratis aid by Representation Offices of organizations for the purposes prohibited by the legislation (including publishing and distribution of agitation materials, conducting of seminars and other forms of mass agitation work among population) can cause termination of the activities of the Representation Office mentioned above.
Representation Office fulfills its activities in compliance with the legislation of the Republic of Belarus and in the frames of authority granted to it by the organization.
In order to organize the activity of the Representation Office, organization may provide it with property as well as with monetary funds, at company’s discretion. Property, imported for ensuring functioning of the Representation Office, may be placed under customs procedure of issuance for internal consumption or customs procedure of temporary import with subsequent placement of this property under customs procedure of reexport. The property is placed under customs procedure of temporary import with full nominal or partial nominal exemption from payment of customs duties and taxes. There is a list of goods, being imported with full nominal exemption from payment of customs duties and taxes. Three per cent of import customs duties, taxes, that could be paid if goods were placed under customs procedure of issuance for internal consumption, shall be paid for usage of the property, placed under customs procedure of temporary import with partial nominal exemption from payment of customs duties and taxes for each full and not full month of location of the property on the territory of the Republic of Belarus.
Moreover, property as well as monetary funds can be acquired by the Representation Office in the Republic of Belarus. Irrespective of the source of acquisition, all property and monetary funds of the Representation office is the ownership of the organization that opened the Representation Office.
Representation Office is entitled to open dollar and ruble accounts in the banks of the Republic of Belarus. Opening of the accounts takes place after rendering to the bank a number of documents the concrete list of which is defined by local normative act of the bank.
Legal regime of dollar and ruble accounts of the Representation Office is established in accordance with the "Regulations on currency transactions" adopted by the Resolution of the Board of the National Bank of the Republic of Belarus No. 72 dated 30.04.2004 as amended.
Under these Regulations Representation offices are able to open in the resident banks the following kinds of foreign currency accounts:
- current (settlement) account;
- card accounts;
- supplementary (deposit) accounts;
- other accounts stipulated by the legislation of the Republic of Belarus.
Transactions on the current (settlement) foreign currency account are carried out by the Representation Office without limitations in relation to the types of transactions (including currency exchange operations connected with purchase and sale of foreign currency under the procedure established by the National Bank).
Representation Offices carry out transactions over their accounts in cashless order. Representation Office is able to use foreign cash currency with the following views:
- for paying salaries for the employees of the Representation office, for paying expenses connected with the business trips of employees abroad;
- for making currency transactions in the sum no more than 50000 USD in the equivalent during the legal year (for the determination of the equivalent the official rate of exchange of the Belarusian ruble against corresponding foreign currency, which is established by the National Bank on the date of drawing foreign cash currency).
Means from the currency accounts may be freely transferred by Representation Office abroad or sold for rubles through the representative bank of the Republic of Belarus on OJSC "Belarusian currency-stock exchange" or off-board exchange market.
The ruble accounts, opened by the Representation Office, depending on the way of coming of monetary founds and the possibility of further use of this founds are divided into the following types:
- current (settlement) account of T-type;
- C-type account;
- supplementary (deposit) account;
- other accounts prescribed by the legislation of the Republic of Belarus.
Transactions on the current (settlement) account of T-type are carried out without any limitations in relation to the types of the transactions (including currency exchange operations connected with purchase and sale of foreign currency under the procedure established by the National Bank) and, under a general rule are carried out in the cashless form.
Organization carries out management of the Representation office through the Head of Representation Office appointed by the organization and who acts under the Power of Attorney issued by the organization.
In order to carry out its activities Representation Office is entitled to hire Belarusian and foreign citizens. The number of foreign citizens (employees of Representation Office) must correspond to the quantity specified in the Permit for opening the Representation Office.
Legislation of the Republic of Belarus might be applied to the labour agreement (contract), concluded with a foreign citizen – an employee of the Representation Office, in case the labour agreement (contract) with this foreign citizen is concluded on the territory of Republic of Belarus.
Representation office is entitled to enter into labour agreements (contracts) with Belarusian citizens-employees of the Representation Office. Labour relationships between the Representative Office and its staff among the list of Belarusian citizens are regulated by the labour legislation of the Republic of Belarus.
For one-time work Representation Office may conclude civil-law contracts with Belarusian citizens, including contracts of work and labour.
3. Taxation
Taxation of Representation Offices is carried out in accordance with the tax legislation of the Republic of Belarus. If the other rules are established by international compacts, than this rules are applied.
In accordance with the Tax Code of the Republic of Belarus (General Part) from 19.12.2002 with further changes and amendments, Representation Office of a foreign company is not considered to be an independent taxpayer, but it merely performs the taxation duties of the foreign company, which created the Representation Office in accordance with objects of taxation and in the amounts that fall on the activity of the Representation Office.
A foreign organization is not a tax resident of the Republic of Belarus and bares a duty to pay taxes only for the activity performed in Belarus, for the proceeds from the sources in the Republic of Belarus and for the property, located on the territory of the Republic of Belarus.
Taxation of Representation Office depends on whether Representation Office on the territory of the Republic of Belarus engages in entrepreneurial activity which is aimed at deriving income (revenue) or only performs preparatory and auxiliary functions not gaining any income as a result of them. We would like to indicate that Representation Offices are mostly liable to the same taxes and dues as Belarusian legal entities are.
In case Representation Office is not engaged in entrepreneurial activity on the territory of the Republic of Belarus, it pays only the compulsory duties charged to the staff wage fund and real estate tax, their rates are indicated below.
** compulsory payments charged to the staff wage fund
a) compulsary insurance payments paid to the Social Safety Fund - 34%
** real estate tax
The basic law governing the payment of this tax is the Tax Code of the Republic of Belarus (Special Part) from 23.12.2009. The object of taxation is the cost of buildings and constructions, including non-complete constructions that are in the property of the Representative Offices.
The rate of this tax is 1% per year, but for some objects, which are above norm constructions, which are in process is 2% per year.
Representation Offices of organizations engaged in entrepreneurial activity on the territory of the Republic of Belarus, are considered for the purposes of taxation as the permanent Representation Office of a foreign organization and apart from the above listed payments to the budget shall pay the following kinds of taxes, stipulated by the Tax Code of the Republic of Belarus (Special Part) from 23.12.2009:
** value-added tax (VAT)
The object of taxation are the overturns of realization of goods (jobs, services), proprietary rights on objects of intellectual property in the territory of the Republic of Belarus and goods imported in the customs territory of the Republic of Belarus.
The rate of the tax is 20%, in some cases – 0%, 0,5%, 10%
** profits tax
The object of taxation is the gross profit – the sum of profit of a foreign organization gained through permanent Representation Office on the territory of the Republic of Belarus from the realization of goods (works, services), property rights and non-operational income reduced to the sum of non-operational expenses.
The rate of the tax is 24 %.
** excise-duty
The given tax is paid by Representation Offices producing excisable products or importing such products into the customs territory of the Republic of Belarus and/or the Representation Offices which sell the imported into the customs territory of the Republic of Belarus excisable goods.
There is a uniform list of excisable goods and a uniform rates of excise payments for import and export of such goods. The excises are levied on spirits (ethyl rectifying technical spirit)
We would like to draw attention to the fact that the Republic of Belarus has concluded and ratified Agreements on the Avoidance of Double Taxation with a number of countries.
Agreements on the Avoidance of Double Taxation concern only the direct taxes, such as tax on profits, tax on income and tax on the real estate. At the present time Agreements on the Avoidance of Double Taxation are ratified by the Republic of Belarus with the following countries: Austria, Azerbaijan, Armenia, Bahrain, Bulgaria, Bolivia, Belgium, Hungary, Vietnam, Egypt, Israel, India, Iran, Italy, Cyprus, China, Kazakhstan, Quatar, Korea, Kuwait, Kyrgyzstan, Lebanon, Lithuania, Latvia, Libya, Macedonia, Moldova, Mongolia, Netherlands, the United Arab Emirates, Poland, Russia, Romania, Saudi Arabia, Syria, Slovakia, Sultanate Oman, Tajikistan, Thailand, Turkmenistan, Turkey, Ukraine, Uzbekistan, Finland, Federal Republic of Germany, Croatia, Czech Republic, Switzerland, Sweden, Estonia, South African Republic, Yugoslavia, Venezuela, DPRK, Ireland.
Besides, similar agreements with the United Kingdom, Denmark, Spain, Malaysia, the USA, France and Japan were concluded by the former USSR and remain valid until the new ones will be concluded. Agreements with Georgia, Indonesia, Luxemburg, Portugal, Slovenia, Philippines and other countries are either at the stage of signing or have been signed but not yet ratified.
It is also significant that the Representation Office is responsible for proper calculation and withholding of the income tax from the employees of Representation Office.
** Starting from February 1, 2007 one basic units is 35 000 BYR (as of June, 2011 it is equal approximately to 7 $ or 5 € at exchange rate of the National Bank of the Republic of Belarus).
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