The infamous edict aimed at preventing illegal tax minimization has been repealed as of 1 January 2019
Edict No. 488 adopted against fictitious entrepreneurship had been in force since January 2013.
The edict laid down a procedure for a Register of commercial organizations and individual entrepreneurs with a high risk of committing offences in the economic sphere (‘the Register’). Grounds for adding names to the Register included, e.g., receipt of funds over 5 000 basic values (approx. 54 000 Euro) to the account within a one-month period, acting as an unauthorized person on behalf of a business entity, absence from the location specified in the company’s constituent documents, and others. The Belarusian Ministry of Taxation was responsible for including business entities on the Register.
At the same time, having transactions with a business entity that was on the Register resulted in bona fide counterparties facing the risk of additional tax re-assessment on transactions in the case of invalidity of primary accounting documents enabling those transactions. Moreover, bona fide counterparties bore the risk of administrative liability in the form of a fine for non-payment or partial payment of additional taxes.
New provisions aimed at preventing illegal tax minimization were added to the restated version of the Belarusian Tax Code in force since 1 January 2019.
From now on, the grounds for adjusting the tax base and taxes charged are the following:
- misrepresenting records on the facts of transactions;
- misrepresenting records on the subject of taxation and (or) information required for calculation and payment of taxes;
- the main purpose of the business transaction is non-payment (partial payment) and (or) offset, refund of taxes;
- lack of economic substance to the transaction.
At the same time, the burden of proving the existence of these grounds lies on the tax authorities.
If the Financial Investigation Department of the State Control Committee suspects that any of these circumstances may be present, it sends a report on detection of grounds for adjusting the tax base and taxes charged (‘report’) to the business entity in relation to which the report has been made. An unscheduled inspection of this entity can be arranged. Additionally, information containing a suggestion for self-adjustment of the tax base and taxes charged on business transactions with that business entity is sent to the counterparties involved (‘information’).
The Register has now been abandoned, so that now only a specific transaction can become a ground for issuing a report.
The procedure for drawing and filing reports and information remains to be further determined by the Financial Investigation Department.
Saurce: National legal internet portal of the Republic of Belarus (NLIP) 19.04.2019, 1/18308