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09.10.2007

A US-based IT company would like to open an in-house software development centre in Minsk. It will not render any services to outside parties. All services will be paid for by the US company. Will the company have to go through the procedure for the registration of a representative office applicable to other economic entities? Will the company have to establish a foreign-invested company or is there a possibility to register a different legal entity taking into account the services to be performed?

An in-house software development center will still function in Belarus.

Representative offices of foreign legal entities accredited by the Belarusian Foreign Ministry are not empowered to get involved in commercial activities but should only represent a foreign entity in Belarus. 

Having analyzed the provisions of the applicable legislation and your objectives, we would recommend you to set up a commercial entity. This entity might not assume the status of a foreign-invested entity. It means that foreign nationals or legal entities can act as founders of legal entities without contributing a minimum of 20,000 dollars to their charter capitals.

Presently, the status of a foreign-invested company is little different from that of a local entity except for the obligation assumed by a foreign investor to make a stipulated contribution to the charter capital and some other insignificant features.

Whether or not an entity set up by a foreign firm is treated as a representative office depends on a multitude of factors  (locations at which the services are rendered and sold).

Many of these factors are not defined in law and tax authorities enjoy a great deal of discretion in their assessment.

To determine whether or not this entity will be deemed a representative office for taxation purposes, we should study the business plan in more detail.

We believe that there is no need to establish a foreign-invested company, but some issues dealing with the profit tax imposed on foreign legal entities should be further investigated.

We are prepared to analyze your business scheme and possible tax costs in more detail provided you furnish us with additional information.

Argument Legal Firm  
Tel/fax: (+375 17) 227 66 52
(+375 29) 389 89 89
(www.argument.by)
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