Savvy companies who are looking to exploit blockchain technologies or start-ups interested in funding their plans with an initial coin offering (ICO) do well to consider their base of operation. After all, the tax difference between an office in one country and an office in another may run into the double figures.
This Eastern-European country gained its independence in 1991 when the Soviet Union fell apart, but it still has some way to go when it comes to adjusting to the values of the Western world – something which the neighbouring Baltic states, and notably Estonia, have done a better job at.
Without a doubt, the Decree on the Development of the Digital Economy, signed by President Alexander Lukashenko on 21 December 2017, will help to modernise Belarus. From an entrepreneur’s standpoint, it puts Belarus firmly on the crypto worldmap. But what does this dense, 34-page, legal document actually say?
Your crypto business is legal here
Said decree, which comes into effect on 28 March 2018, legalises cryptocurrencies, initial coin offerings (ICO) and smart contracts. In other words, companies can perform operations with tokens, under one condition: that they are residents of the High Technologies Park (HTP). Others can use tokens in Belarus through residents of the HTP.
The HTP is a special economic zone on the beltway that circles the capital of Minsk. Its reduced tax rates and a favourable legal framework have created fertile grounds for IT businesses, which has made the HTP the Eastern-European analogy of Silicon Valley. In 2017, companies in the HTP totalled an export turnover of over US$1 billion. Among its success stories are Viber and World of Tanks.
Operating on the basis of extraterritoriality, the HTP allows companies to register in it while having their Belorussian office elsewhere here in the country. In order to incorporate in the Belorussian HTP, an investment of US$ 500,000 is required. Please note that this is not purely an offshore destination, as not all applications are granted.
Zero tax and no restrictions until 2023
Activities such as mining, acquisition, alienation of tokens, carried out by individuals, are not considered entrepreneurial activities, and tokens are not subject to declaration in Belarus. At the same time, until 2023, HTP-registered businesses who perform mining, the creation, acquisition and alienation of tokens are not taxed.
It does not imply any restrictions and special requirements for the operations of creation, placement, storage, alienation, exchange of tokens, or for the activities of crypto exchanges and crypto platforms. Basically, you can create, mine, buy, sell, and store as many cryptocurrencies or tokens as you like, without having to ask anyone for permission.
Incorporating in the Belarus HTP may even prevent some start-ups from depending on venture capital and giving away a share in the business.
34 pages of legal talk
As with many legal documents, this particular decree spends many of its pages defining what exactly smart contracts, tokens, and cryptocurrencies are. More concretely, the decree doesn’t distinguish between tokens and cryptocurrencies. This broad approach offers companies a high degree of flexibility in the way they use cryptos or tokens.
Belarus is the first place that recognizes smart contracts at the country level. And since smart contracts are considered legally binding documents in Belarus, blockchain businesses and their users can take full advantage of these digital if-then agreements.