Free economic zones in Belarus
A free economic zone (FEZ) is a clearly defined area of in the territory of Belarus, which has a special legal regime for investing and enterprise activity, consisting in the availability of more favorable conditions for the residents of the FEZ than the generally established ones, including the protection of investments and income of investors. The FEZs have been operating in Belarus for more than 20 years, the first FEZ “Brest” was established in 1996, nowadays there are six FEZs operating in Belarus.
A special legal regime in the territory of the FEZ includes tax and customs preferences and privileges, as well as the preferences related to land legal relations.
Tax preferences are: exemption of the FEZ residents from paying a real estate tax; exemption from income tax during the first ten years from the date of the announcement of profit (after the ten-year period – 50% of the tax rate should be paid (9% instead of 18%).
The main customs privilege is the exemption of the FEZ residents from paying the value added tax levied by the customs authorities in terms of imported goods that are part of the manufactured products, if they are placed under the customs procedure of a free customs zone. The custom’s procedure of the free customs zone is introduced within the Eurasian Economic Community and means that goods which are placed and used within the territory of the FEZs or their part without paying customs duties, taxes, special duties, anti-dumping, countervailing duties, subject to the conditions of placing the goods under this customs procedure and use in accordance with it. In case of placing the goods under this procedure in the various FEZs, different benefits might be applied.
Preferences in land relations are exemption from the land tax until December 31, 2021 and in respect of the land plots provided for the construction of facilities – until the end of construction, but no more than five years; exemption from payment for the right to conclude a land lease agreement; exemption from the rent for land; exemption from compensation payments of value of plant world objects.
Thus, the presence of a special legal regime allows the investor to reduce the overall financial burden of the company by one third compared with other business entities in Belarus.
To take advantage of the above mentioned benefits and preferences, you should invest in an enterprise already operating in the FEZ, or create a new legal entity (LE) or register as an individual entrepreneur (IE) located within the boundaries of a specific FEZ. In this case, such an enterprise, legal entity or individual entrepreneur must be registered as a resident of the FEZ, and to produce and sell goods (perform work, provide services) of their own production in the territory of this FEZ. The sale of goods, works and services of own production outside Belarus (when goods are located in the territory of Belarus), as well as outside Belarus (goods outside Belarus) under contracts with foreign legal entities and individuals, is also subject to a special legal regime.
To obtain a status of the FEZ resident, it is necessary to conclude an agreement on the conditions of activity in the FEZ and invest in the implementation of an investment project an amount equivalent to at least 1 million euros (or at least 500 thousand euros over three years).
As of December 12, 2018, the total number of residents of the FEZ in Belarus is 415. There are 77 residents from 20 countries registered in the territory of the FEZ “Brest”; the FEZ ”Minsk” – 117 residents; the FEZ “Gomel-Raton” – 67 residents (including 32 companies with foreign investments); the FEZ “Vitebsk” – 43 residents (including 23 companies with foreign investments); the FEZ “Mogilev” – 42 residents (including 21 companies with foreign investments); the FEZ “Grodno-invest” – 69 residents. Among foreign investors there are representatives of such countries as Austria, Great Britain, Virgin Islands, Germany, Denmark, Israel, Italy, Cyprus, China, Lithuania, Liechtenstein, the Netherlands, Poland, Russia, the USA, Turkey, Ukraine, France, the Czech Republic, Estonia.
The advantages of investing in the FEZ in Belarus are geographically located at the intersection of European and eastern transport flows and developed communications, while the economy of a country that is not a member of the European Union does not depend on European crises. Unlike other countries, in Belarus there are many free areas of the market for goods and services and relatively cheap labor, while at the same time highly qualified employees of enterprises.
The conditions of doing business in Belarus are favorable for foreign investors who want to ensure the competitiveness of their products (work performed, services rendered) in both foreign and domestic markets aimed at creating a sustainable infrastructure for international activities, and at the same time to have guarantees of their rights and investment protection.