Investors and owners of companies-residents of the Hi-Tech Park enjoy more preferential conditions for receiving dividends than owners of companies that do not belong to the residents of the Hi-Tech Park. The article discusses the taxation regimes of dividends that resident companies of the Hi-Tech Park pay to individuals and companies, residents and non-residents.
What are dividends?
The term “dividends” is used in relation to a part of the profits of companies that are distributed among owners, shareholders. Such a part of the profit before distribution among the owners should remain with the company after:
- Payment of taxes.
- Covering losses of current periods.
- Contributions to the funds of a limited liability company or with additional liability.
Taxation of dividends accrued by a resident of the Hi-Tech Park to individual owners
Taxation of dividends accrued to a non-resident individual in Belarus
Dividends paid by companies in Belarus to individuals are subject to income tax. Dividends received from a Belarusian company relate to income received in Belarus, even when the owner of a High-Tech Park resident company is a non-resident of Belarus.
The owner of a non-resident company will be an income tax payer in Belarus.
When dividends are paid to a non-resident individual by a resident company of the Hi-Tech Park, the company withholds and pays income tax to the budget at the rate of 9% from the amount of dividends. This is a general rule. To calculate the amount of tax, an amount equal to 9% of the amount of dividends is deducted from the total amount of dividends.
There are exceptions to the general rule: when an international agreement between Belarus and the state of residence of the recipient of dividends establishes a lower tax rate, the norms of an international agreement are applied to calculate the tax on dividends.
When an international agreement prescribes a lower tax rate than 9%, a non-resident can confirm his tax residency in the state with which Belarus has concluded an international agreement. To do this, you need to:
Take a confirmation of tax residency from the tax or other state body of your state. The confirmation can be in the form of an electronic document.
Deliver it to the company that accrues dividends or to the tax office.
Our experienced lawyers will advise you on international agreements, calculate the tax rate on dividends, and provide support at all stages of confirming tax residency.
Taxation of dividends accrued to an individual resident of Belarus
As a general rule, the income tax rate on dividends is 9%. In certain cases, a resident of the Hi-Tech Park applies reduced income tax rates on dividends:
- When the resident company of the Hi-Tech Park did not distribute profits among the tax residents of Belarus for the previous three years in a row, the tax rate was 6%.
- When the resident company of the Hi-Tech Park did not distribute profits among the tax residents of Belarus for the previous five years in a row, the tax rate was 0%, that is, income tax should not be deducted from the amount of dividends and paid to the budget of Belarus.
When income is paid to an individual by a non—resident of the Hi-Tech Park, income tax is 13% of the accrued amount of income.
Income tax is transferred to the budget no later than the day on which the dividends are transferred to the bank account of an individual.
Taxation of dividends accrued by a resident of the Hi-Tech Park to company owners
Tax on dividends of Belarusian resident companies
Income tax is withheld from dividends accrued to Belarusian companies-owners of a resident of the Hi-Tech Park. The resident of the Hi-Tech Park calculates, deducts this tax from the amount of dividends and transfers it to the budget. The tax rate is 12% as a general rule.
Exceptions to the general rule when reduced rates can be applied:
- When for the previous three consecutive years the company did not distribute profits among the participants, the tax rate was 6%.
- When for the previous five consecutive years the company did not distribute profits among the participants, the tax does not need to be paid, its rate is 0%.
It is necessary to pay the tax, when it is accrued, no later than the 22nd of the month following the month in which the dividends were accrued. And the income tax return must be submitted to the tax inspectorate no later than the 20th of this month.
Tax on dividends of non-resident companies of Belarus
When a foreign company does not have a permanent representative office in Belarus, the resident company of the Hi-Tech Park calculates the tax on income of foreign organizations from dividends and transfers it to the budget of Belarus.
The owners of foreign companies are paid dividends after withholding income tax of 5%. The generally accepted tax rate on income of foreign organizations in Belarus is 15%.
A lower tax rate may be provided for by an international agreement concluded between Belarus and the state in which the company-owner of the High-Tech Park resident is registered. In order to apply a lower tax rate, it is necessary to submit to the tax inspectorate a confirmation that the foreign owner of the company is permanently located in the state with which Belarus has an international agreement. Such confirmation can be submitted to the tax inspectorate in the form of an electronic document before or after income tax is paid. Such confirmation is valid during the calendar year in which it was issued.
Confirmation does not need to be provided when dividends are paid to foreign companies, information about the permanent location of which is, in particular, in the international catalog “BIC Directory” and some other international catalogs and reference books. Our lawyers will identify the necessary documents and fully provide support for the receipt of these documents and negotiations with the tax inspectorate.
A resident company of the Hi-Tech Park pays income tax no later than the 22nd of the month following the last quarter, and a declaration for this tax must be submitted no later than the 20th of the same month.
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