Transactions with non-residents: detecting tax risks and spotting the ways to eliminate them

On 22 February PwC Belarus held a practical seminar for Belarusian companies dedicated to tax risk detection methodology, as well as VAT and WHT peculiarities Belarusian companies should tackle in cross-border transactions.

Check out the main takeaways here:

1.        Tax analysis is better than tax penalties: do always analyse the transaction for tax risks. Time spent to describe the process milestones, setting up responsible employees and ideally arranging a checklist for each tax risk will pay off in the long run.

2.       Business purpose concept is becoming more common for Belarus realities: tax authorities are assessing economic sense of the transaction and where there is no economic rationale - cutting off the tax benefits.

3.       Shifting tax liabilities by parties’ agreement (e.g. “the Seller is solely responsible for payment of all taxes stemming from the transaction as may be required by applicable law”) will not work in Belarus. Such provisions are better omitted, otherwise they are seen as void.

4.       Fix the exact VAT amount payable in the agreement so as not to end up with parties and tax authorities questioning VAT amounts due and those in fact paid to the budget.

5.       When purchasing foreign platform services WHT cannot be physically withheld from the amounts payable to the platform, but is still due to the budget. In this case treated as an exemption from the general rule Belarusian company-tax agent is entitled to pay WHT from its own funds.

6.       Since February 13, 2018 tax authorities are open to graphic images of electronic residence certificates if those are either issued as electronic document signed with a digital signature, have a code of verification or are placed at the foreign company’s website.

Overall recommendation was to supplement the agreement terms with tax collaboration provisions, according to which the parties undertake their commitments to collaborate in tax matters on both sides (e.g. to provide certain documents for obtaining O% export VAT rate, supply residence certificates on time).

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PwC Belarus

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Tel: +375 17 335 40 00

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