On 1 March 2010, to fulfill one of Belarus’ commitments under the loan agreement with the IMF, the President issued an order on the sale of five state-owned enterprises by public auction in Minsk. On 28 April 2010, the State Property Committee publicly announced the details of the sale of the following state-owned enterprises:

• Bobruisk Machine Building Plant (Mogilev region) - 50%+1 shares, production of hydraulic presses, iron and steel castings, pumps and compressors, 1,187 employees;
• WolMet (Grodno region) - 48.9% shares, the largest producer of locks in Belarus, 478 employees;
• Lida Founding and Machine Plant (Grodno region) - 99.5% shares, casting of iron, light and other non-ferrous metals, 400 employees;
• Barkhim (Brest region) - 99.4% shares, soap, cleaners and other organic chemical agents, 256 employees;
• Rechitsa Textile Fabrics (Gomel region) - 97.6% shares, manufacturing and wholesale trade in textile goods, 660 employees.

The public auctions of the Bobruisk Machine Building Plant, WolMet and Lida Founding and Machine Plant are scheduled for 18 August 2010; and auctions of Barkhim and Rechitsa Textile Fabrics for 23 September 2010.
Applicants shall submit to the State Property Committee the documents certifying their incorporation and financial solvency, the consent of the Belarusian antimonopoly authority if required by Belarusian legislation, and a deposit constituting one tenth of the starting sale price of shares of the target company. The application documents shall be submitted by 2 August for the auction of 18 August and by 7 September 2010 for the auction of 23 September.
Bid prices and investment projects shall be submitted in sealed envelopes on the day of the auction. The highest bid price will determine the winner of the competition. If bidding prices are equal, a bidder who offers more beneficial conditions will win. An agreement on sale and purchase of shares will be concluded with the winner not later than within 20 days following the date of signing the protocol of final results of the competition.
Information on privatization conditions is available at the official site of the State Property Committee. You may visit the website (only in Russian) here >> 
Please note that privatization conditions of four from five companies require inter alia retaining the current number of employees for the next 2-5 years. More detailed information on the to-be-privatised companies may be obtained at the State Property Committee.

 

Internet regulation becomes stricter
On 29 April 2010, the Council of Ministers adopted the Rulings No. 644, 646 and 649 implementing the President’s Ruling No. 60 of 1 February 2010. The President’s Ruling set stricter rules on the provision of telecommunication services, online retail services in the territory of Belarus and the use of Internet resources, systems and networks located in the territory of Belarus.

According to the Ruling No. 644 of 29 April 2010, the providers of Internet services must register all Internet resources, systems and networks located in the territory of Belarus before 1 July 2010. The information registered will comprise the state register of information networks, systems and resources of the national segment of Internet. The State Inspectorate on Telecommunications will perform the functions of the registrar. The registration process will take 15 days following the application date. The violation of the above requirements will lead to the termination of the provision of Internet services for up to one month. The Ruling came into force on 1 May 2010.

The Ruling No. 649 obliges all legal entities and individual entrepreneurs engaged in retail trade through online shops to apply to local authorities for the registration of Internet shops in the Trade Register of Belarus from 1 June to 30 June 2010. The registration fee is not charged. The registration process shall take one day following the application date.

According to the Ruling No. 646, telecommunication services in the places of collective use (e.g. computer clubs, internet-cafes, local area networks, and other places for collective access to Internet) should be provided subject to identification of users. In particular, an operator/provider of services must collect users’ names and numbers of their personal identification documents. Moreover, an operator/provider of services must identify devices used (MAC address, internal and external IP addresses) and collect data about the date, period, domain names and IP addresses of Internet resources used. All the data should be kept for 5 years. The new rules will come into force on 1 July 2010.

Medical services are VAT exempt
On 26 April 2010, the President signed the Ruling No. 198 exempting the majority of medical services (except for cosmetology services and services with no medical effect) from VAT (21%). Among evidently medical services, a list of VAT-exempt services includes all kinds of diagnostics, therapeutic physical training, massage and such non-tradition medical services like apitherapy, hirudotherapy, iridology, reflexology, manual therapy, homeopathy, herbal therapy as well as treatment and diagnostics using other natural remedies. The Ruling comes into force on 7 May 2010.

The medical services continue to be subject to pricing restrictions, i.e. the maximum norm of profitability at 20%. It shows the maximum amount of profit which may be included in the manufacturer’s price. Profitability is calculated as a ratio of profit and expenses.

 

Five Large State Enterprises to Be Publicly Privatised
According to the President’s Ruling No. 67 of 1 March 2010, the stock of 5 Belarusian state enterprises will be put up for open auction. These relatively large enterprises employ from 200 to 1300 employees. According to the State Property Committee responsible for the preparation of the enterprises for auction, all enterprises are profitable. They are:

   • Bobruisk Machine Building Plant (Mogilev region);
   • WolMet (the largest producer of locks, Volkovysk, Grodno region);
   • Lida Founding and Machine plant (Grodno region);
   • Barkhim (the largest producer of cleaners, Baranovichi, Brest region);
   • Rechitsa Textile Fabrics (Gomel Region).

The list of state enterprises for privatisation was prepared to fulfil one of Belarus’ commitments under the loan agreement with the IMF. No further details of auctions are known yet, except for a list of investment agents that may be involved by the Government to attract investors. The list includes 5 companies granted the status of an investment agent under the agreement with the Government (for details on the status of investment agents please see our publication of August 2009). The list includes Sberbank (Russia), Renaissance Capital, Rothschild, Ernst and Young, KPMG, and Investment Company “Uniter”.

Price Mark-ups for Good Restaurants in Belarus Abolished
On 1 March 2010, the President adopted the Ruling No. 127 thereby price mark-ups for catering objects (restaurants, cafés, etc.) of luxe, prime and first categories were abolished. The pricing regulations are still applicable to mark-ups for catering objects of the second and third category (e.g. school, university canteens). The earlier applicable maximum mark-ups determined by local municipalities amounted to 250%, 200% and 150% for restaurants and other catering objects of the luxe, prime and first category, respectively.

The categories of catering objects have been inherited from the Soviet times. According to relevant legislation, the main criteria of their differentiation are the number and quality of services. Restaurants and other catering objects of the luxe, prime and first category constitute 12.8% of the total number of catering objects in Belarus.

European Technical Standards Implemented in Belarus
As of 1 January 2010, the mandatory technical codes identical to a set of 58 European structural design codes for civil engineering (Eurocodes) are in force in Belarus. Also as of 1 January, 668 European standards referred to in Eurocodes in accordance with the Construction Products Directive 89/106/ЕЕС are in force as national standards in Belarus.
The Ministry of Architecture and Construction has announced that the national technical codes and standards will have a certain period of co-existence with the new technical codes until they are completely replaced.

According to the Ministry of Finance, as of 1 January 2010 the standard rate of the value added tax (VAT) will be raised up to 20% (against the current 18%). According to the Ministry, the increased rate is to compensate a decrease in some tax rates and abolishment of a number of state and local taxes as of 2010. The said changes in taxation are provided for in the Special Part of the Tax Code which is still under the Parliament’s consideration.

Though it is still unclear whether the Special Part of the Tax Code will be adopted before 1 January 2010, the increase of the VAT was announced by the Government as inevitable.

Detailed Rules on Investment Agents and Investment Treaties between Belarus and Investors
On 6 November 2009, the Government of Belarus adopted the Rulings No. 1448 and No. 1449 implementing the President’s Rulings on investment treaties with Belarus and investment agents. The Government’s Rulings introduced more detailed rules that identify the specific steps investors should undertake to start an investment project in Belarus or represent the Government in the relations with foreign investors. More information about the Rulings >>

To maintain consistency with the declaration of price liberalization reforms, Belarusian authorities are gradually amending the pricing regulations. An overview of already enacted amendments and general regulations on pricing may be found in our previous publications. The latest amendments introduced by the Ruling of the Ministry of Economy No. 141 of 19 August 2009 (coming into force on 28 October 2009) abolish the maximum mark-up limit for prices of imported goods (both wholesale and retail) and for retail prices (except for those of imported goods) and allow businesses to set their prices according to the situation on the market.

Exceptions. Earlier the maximum mark-up that retailers and importers (wholesalers or retailers) could use to calculate their prices was not to exceed 30%. However, such 30% limitation will still apply to importers’ prices on give-and-take raw materials, imported goods to be sold to individual entrepreneurs or legal entities for their internal use or manufacture, and to the prices of both importers and retailers on the goods included into the list of goods approved by the Ministry of Economy. The list covers socially important food products (e.g. meat (pork and beef), chicken, bread and bakery, certain dairy products, sugar, sealed fruit, berries and vegetables, fish and fish products, tinned fish, citrus plants, bananas, sunflower seed oil), goods for children, medicines and medical equipment.

Leasing Conditions Improved
According to the President’s Ruling No. 465 of 25 September 2009, the turnover of manufacturers who have concluded contracts for sale and purchase of goods with contractors transferring such goods out of Belarus under lease agreements with non-Belarusian companies (individuals) are exempt from value added tax (VAT).
Such exemption is subject to a number of requirements. A manufacturer and its contractor should be Belarus-based companies (individuals) for tax purposes. A manufacturer must fulfill certain reporting requirements before tax authorities.

In addition, a lessor shall procure transfer of lease payments by the lessee within 90 days after the due date specified in the agreement and return of the leased goods into the Belarusian territory within 90 days after the end of the leasing term. In case of the buy-out of leased goods, the lessor must procure transfer of payments for the leased goods within 90 days after conclusion of the buy-out agreement. The lessor’s failure to meet said terms involves a daily fine of up to 2% of ease payments due and owing, up to 2% of the cost of leased goods subject to buy-out, or up to 2% of the cost of goods subject to return.

Belarusian State Banks May Be Privatised with the Help of Polish Investment Consultants
In the end of June 2009, the Belarusian government confirmed its commitment before the IMF to privatise 4 largest state banks. In its letter to the IMF Managing Director Dominique Strauss-Kahn, the government announced that it is looking for a strategic investor to buy the majority shareholdings in two state banks (Belpromstroibank (3rd largest bank) and Belinvestbank (4th largest bank) and minority holdings in Belarusbank (1st largest Belarusian bank) and Belagroprombank (2nd largest bank).

The government also committed to ”engage a qualified, experienced and reputable consultant, on a competitive basis, to assist us in preparing state-owned banks for partial or full privatization” by the end of August 2009.

On 1 September 2009, the media announced that Belarusbank and AKJ Investments (investment and consulting company based in Poland http://en.akj.com.pl/) are intending to establish an investment consultant company to run the process of privatisation of Belarusian state banks and enterprises. Other details, i.e. functions of a future company, date of its establishment, etc, are not announced yet.

Belarus: New Incentives for Investors
On 6 August 2009, the President signed the Decree No. 10 on Creation of Additional Conditions for Investment Activity in Belarus. The Decree introduces the basic guarantees and benefits to be provided to every new investor coming to Belarus. Earlier, many benefits set forth in the Decree were usually granted to foreign investors by a special decision of the President; however, every other investor was not guaranteed he would receive them. The Decree was highly welcomed by businesses and business experts.

The Decree confirms the investment agreement as a basis for investment activity in Belarus. However, it amends material rules of the Investment Code in several respects.
First, the Decree sets forth a 3-level system of investment agreements. The criteria of their differentiation are significance for the Belarusian economy and necessity to provide a preferential regime for anticipated investments. If an investment agreement concerns local municipal matters, it may be concluded by decision of a local authority or state institution. If an investment agreement represents the interests for the whole economy but does not require granting the investor benefits in addition to those set by legislation, it may be concluded by decision of the Council of Ministers (the Government). If an investment agreement requires granting the investor benefits that are additional to those already existing, it may be concluded by decision of the Council of Ministers upon approval of the President.

Further, the Decree amends the rules of the Investment Code on material conditions of an investment agreement. In addition to the term of an investment agreement, the Decree provides for the term of starting actual investment activity. It also specifies responsibility questions, such as an investor’s right to claim damages for illegal actions (omissions) by government officials or institutions, and the right of the Republic of Belarus to unilaterally withdraw from an investment agreement if the investor fails to perform its contractual obligations or does not perform them in good faith. An investor, however, is not granted the right of withdrawal from the investment agreement.

The Decree sets forth the following list of benefits which may be exercised after an investment agreement is concluded:

The Decree will come into force on 7 November 2009. These 3 months are given to the Council of Ministers to implement the provisions of the Decree. It shall not apply to investment agreements concluded before its entry into force.

 

Amendment to the Rules on Acquisition of Shares Held by Natural Persons in Public Stock Companies Established during Privatization
On 26 June, the President signed the Decree No. 8 and thereby amended the Decree No. 3 on Denationalisation and Privatisation of State Property. According to the amendment, public stock companies established during privatization are granted the right of first refusal to buy its shares owned by natural persons.

An owner of shares shall notify of his/her intention to sell his/her shares in the company directly to the company or through tender within the trade system of the Belarusian Currency and Stock Exchange (BCSE). The company may exercise its right of first refusal within 5 business days as of receipt of notification or a tender offer within the BCSE. Upon expiration of the 5-day period, the natural person offering his/her shares for sale may choose the buyer himself/herself.

The right of first refusal may be exercised after the General Meeting of Shareholders adopts an appropriate decision and places information about the purchase of shares within the Informational Computer-Aided Listing System of BCSE. Information in this system is available to professional participants of the stock market. The Decree No. 8 entitles companies to delegate authority to the Board of Directors (Supervisory Council) to negotiate the price with the seller of shares.

 

IMF Increased Financial Support of Belarus on Condition of Further Economic Reforms
On 29 June, the IMF increased financial support to Belarus by USD 1.01 billion, up to USD 3.52 billion. According to the IMF, the revised arrangement will support the Government’s economic program. The economic programme is not available to the public. According to the IMF Deputy Managing Director, the Belarusian Government has revised the economic reforms programme, which now includes adoption of a privatisation law which complies with the best practices, establishment of a privatisation agency, certain legislative changes to increase the National Bank’s independence, reduction of price, and wage regulation.

Raidla Lejins & Norcous contributed a new Belarusian chapter to the Russia/Eurasia Executive Guide, published by World Trade Executive Inc. The publication provides coverage of a broad range of legal issues and topics, which are relevant for doing business and investing in Russia/CIS and Eurasia as well. Our firm’s managing partner Dr. Irmantas Norkus and associate Olga Mažitova delivered an overview of pricing regulations in Belarus - basics and recent amendments.

You may read the Publication here

 

The List of Goods Subject to Free Pricing is Extended
On 8 June 2009, the Government of Belarus (Council of Ministers) adopted amendments to the pricing rules (see the latest publication on pricing regulation in Belarus). As of 1 July 2009, business entities will be free to calculate prices on the services of laundries, dry-cleaner’s, barber’s, hairdresser’s, as well as passport and other document photo services.
Free pricing will also apply to cakes, buns, pies, doughnuts, dry biscuits, rusks, sterilized, baked and goat’s milk.

Construction Process Becomes Faster
On 28 May 2009, the President signed the Ruling No. 266 thereby construction may be carried out parallel with the development of design documentation. According to earlier rules parallel construction was forbidden, and exceptions were made for certain real estate development projects only by decision of the President.
The Ruling will come into force on 28 July.

 

 

On 7 May 2009 the Belarusian delegation took part in the constituent summit of the Eastern Partnership Programme. The Eastern Partnership Programme is a rather new EU initiative proposed by Poland and Lithuania in 2008 in order to create necessary conditions to “accelerate political association and further economic integration” between the EU and 6 former Soviet countries – Belarus, Ukraine, Armenia, Azerbaijan, Georgia, and Moldova (“Eastern Partners”). More information about the programme >>

Our Belarus Help Desk lawyers have prepared a publication on Doing Business in Belarus.

The handbook provides you with a comprehensive overview of Belarus law. The publication covers the latest legislative changes in areas closely related to business activities, such as investment, taxation, foreign trade, real estate, establishment of a company, employment and others. We hope that the handbook will be a good guide to those who have already vested their interests in Belarus and also act as an introduction to those who are still not aware of the vast potential this country has, as a venue for their business. 

 

 

 

You may read the publication here

You may order a hard copy here

 

Belarus: State Economic Liberalisation Plan 2009 in Action
Raidla Lejins & Norcous lawyers have produced an update on Belarus: State Economic Liberalisation Plan 2009. On 13 January 2009, the Belarusian Government together with the Administration of the President adopted the Plan on Top Priority Measures to Liberalize Conditions for Conducting Business Activity in 2009. The Belarusian Government has already started to implement the Plan. In particular, legislation was enhanced in the sphere of foreign trade, organisation of construction, wage regulation and fixed asset accounting.

You may read the entire news alert here

The Russia/Eurasia Executive Guide
Raidla Lejins & Norcous contributed Belarusian chapter to “The Russia/Eurasia Executive Guide”, published by World Trade Executive Inc. The publication provides coverage of a broad range of legal issues and topics, which are relevant for doing business and investing in Russia/CIS and Eurasia as well. Our firm’s managing partner Dr. Irmantas Norkus and associate Olga Mažitova delivered an overview of real estate and construction regulation in Belarus. Among other law firms, “The Russia/Eurasia Executive Guide” authors list includes Chadbourne & Park, White & Case and Lovells.

You may read the Publication here

Government and Presidential Administration Approved Economic Liberalization Plan 2009
On 13 January 2009, the Government together with the Administration of the President adopted the Plan on Top Priority Measures to Liberalize Conditions for Conducting Business Activity in 2009. The Plan consists of 52 tasks forming 12 chapters, each representing a particular sphere of business activity. The fulfilment of each task has its deadline.

According to the Plan, the number of administrative procedures in the sphere of the control of foreign trade, sanitary inspection, and certification will be reduced.

The intended measures in the sphere of construction are to simplify the process of real estate development. The implementation of some specific steps in this sphere would simplify the system of coordination and approval of design documentation and the process of selection of design firms, and allow completing certain stages of construction in parallel with the development of design documentation. The privatization legislation is planned to be supplemented with the simplified procedure of holding auctions.

Significant changes are planned in the sphere of tax regulation. In particular, turnover taxes (except for VAT) are planned to be abolished completely, as well as some local taxes. The list of deductible expenses is planned to be extended, e.g. by certain additional payments to employees which shall included into the cost of goods (services). The Tax Code is supplemented with the principle that any and all inconsistencies of tax legislation should be interpreted in favour of the taxpayer. No withholding taxes will be levied on the profits that foreign legal entities receive from Eurobonds and syndicated loans.

According to the Plan, wage regulations are also planned to be liberalized. In particular, it is planned to abolish the limit set on the share of profit to be distributed on bonuses to employees.

Among other specific steps are the establishing for small businesses of a fixed quota in public procurement, removing of restrictions on fish and marine products imports (except for processed marine products), shortening of the term of liquidation of legal entities including liquidation due to the bankruptcy, and drafting of a single document on the state control of business activity.

The Deputy Minister of Economy, Andrey Tur, assured that the results of the Liberalization Plan would be evident in the first quarter of this year.

PLC Which lawyer? Awards
Legal directory PLC Which lawyer? announced the results of PLC Which lawyer? Law Firm Awards’ 2009 wherein Raidla Lejins & Norcous is the runner-up in the category of Law Firm of the Year: Baltics. The results of the prestigious PLC Which lawyer? Awards are based on the clients’ votes. RoschierRaidla alliance is the runner-up in the category of Law Firm of the Year: Northern Europe.

Raidla Lejins & Norcous is a member of the alliance since the year 2004 and along with the largest law firm Roschier in Helsinki and Stockholm, RoschierRaidla renders assistance to the leading Nordic-Baltic and international entities.