December 22, 2017 was a very special day for the Belarusian IT industry. President Lukashenko, often characterized by the press as a not-so-progressive leader of a predominantly rural ex-USSR republic, put his signature under the decree “On the Development of Digital Economy” that was momentarily proclaimed one of the most progressive pieces of IT-related legislature in the world.
The decree was neither an accomplishment, nor an initiative of a single man. The signing was preceded by months of collective efforts involving the leaders of the national IT industry, lawyers, independent consultants, senior managers of the Belarusian High-Tech Park, government officials and many other individuals and groups. They worked together to further the success of the legal base underlying the HTP and to make the country one of the most attractive destinations for investors, startups and IT companies seeking to expand their global presence.
The decree addresses a number of business areas that are vital for the Belarusian IT industry and aims to put the country with its generally stagnating economy onto the path towards priority development and claiming the title of the key technology hub in the region. It is also the first ever comprehensive legal act offering full blockchain technology regulation on the state level, including such complex aspects as the legalization of cryptocurrencies, ICO procedures, development and implementation of smart contracts and DApps, and many more.
Cutting the red tape
Although the decree is mostly mentioned in the press in connection with cryptocurrency regulations, the effect that it produced has far-reaching consequences for the industry as a whole. The new regulations aim to foster the creation of favorable conditions for major international companies to enter the Belarusian market and open their R&D centers, lay the foundation for long-term educational initiatives, and modernize the financial sector by aligning it with the realities of today’s digital market.
Prior to the signing of the decree, becoming an HTP member was quite a challenge. Candidates had to comply with a number of requirements and pass a rigorous selection process with no admission guarantees. From now on, the list of officially acknowledged business operations is 38 items longer and includes such activities as cryptocurrency mining, creation of tokens and cryptocurrency exchanges, biotechnology research, development of autonomous vehicles, creation and training of neural networks, advertising and even e-sports. The HTP reserves the right to revise and update the list as needed.
The new law dramatically simplifies the work of current and prospective HTP members. First and foremost, it changes the entire model of relationships between the state and the HTP from permission-based to notification-based, particularly in the financial area. Operations that formerly had to be approved by regulatory agencies or conducted in accordance with strict procedures are now manifold easier. Extremely stringent currency control regulations that are applied to all foreign trade operations in Belarus are no longer applicable to HTP residents. The amount of paperwork required for international agreements has been radically reduced.
Tax Benefits Expanded and Continued
Since its very foundation in 2005, the Belarusian High-Tech Park has been enjoying preferential tax treatment. Member companies are exempt from certain corporate taxes, while their employees pay the income tax at a considerably lower rate. This enables companies to invest more into R&D activities, sponsoring local events, opening labs and new classes at universities, and to generally contribute to the development of a thriving national IT environment. The new decree expands the list of exemptions and focuses on non-residents willing to do business in Belarus. In addition, the new law extends the preferential tax regime until 2049.
New tax benefits are meant to provide an additional incentive to IT businesses that had so far been considering HTP membership, but were not sure if the “light” tax regime would be extended beyond the initial 15 years. They can now join the 190+ companies that are already part of this growing economic zone and enjoy the benefits of hassle-free business with customers from all around the globe.
As the cherry on the cake, the decree waives the subsidiary liability of owners or founders for the bankruptcy of an HTP member company, which used to be a major deterrent for startups operating on a high-risk market.
English Law on the Belarusian Soil
For the first time in the history of the modern Belarus, elements of the English law can be applied to international contracts being signed with HTP residents. This novelty was introduced as part of an experiment, but the boldness of this move is nonetheless inspiring, especially in the light of the generally very conservative approach to law-making adopted in the country.
These tools are meant to accelerate the development of the venture community, give investors the legal tools they are familiar with and ensure that investments are made in a low-risk environment.
Everybody is Welcome
The decree also addresses the needs of IT companies for frequent business trips and on-site work of foreign colleagues and partners in Belarus. Before the signing of the document, every traveler to Belarus had to go through a rather complex visa application process to stay longer than 5 consecutive days, while long-term employment was an even harder case. From now on, HTP residents can take advantage of the following stipulations of the new law:
HTP residents need no permission to hire foreigners
- Foreign citizens with an active contract with an HTP resident are allowed to work without a permit
- Visa-free entry for up to 180 days per year is granted to foreign IT experts employed by HTP residents (including the founders of HTP resident companies)
This deregulation of work migration laws will have an immediate and very positive effect on every HTP resident. In addition, it will serve as an additional stimulus for foreign companies to open offices in Belarus.
Looking at the scale of innovations introduced by the December 2017 presidential decree, we can see that this is arguably one of the best things that have ever happened to the Belarusian IT industry. Deregulation of a number of business-critical areas, extension and expansion of the preferential tax regime, dramatic reduction of bureaucratic routines, loosening of control over financial operations and contracts – all these measures will have an immediate and tangibly positive effect on all HTP members and the HTP itself. There is no doubt that the High-Tech Park will see many more membership applications in 2018 and beyond, and Belarus will draw a lot more attention on the international market from companies doing business in such advanced areas as AI, machine learning, VR/AR, blockchain development, robotics and such.
Cortlex shares the enthusiasm of the local IT community and encourages foreign businesses to work with Belarusian companies. If you have a project in mind and are looking for a long-term development partner, please do not hesitate to contact us for a free proposal and an insightful conversation.