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Investment Guide Real Estate

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					           • Achieving aims • Profit from potential
           • Reducing risks • With the local experts: bnt




Zabolis Partners: Retail and Real Estate
in Central and Eastern Europe




Investment Guide
             Real Estate
Belarus: an Overview ....................................................................... 6
1.1       Geography .............................................................................. 6
1.2       Provinces and districts.......................................................... 8
1.3       Population .............................................................................10
1.4       Governmental Structure ......................................................11
1.5       The Economy........................................................................12
1.5.1 GDP / Inflation......................................................................13
1.5.2 Foreign Trade .......................................................................15
1.5.3 Currency/Fiscal policy ........................................................15
1.5.4 Privatisation and Investments ............................................16
1.5.5 Interest rates .........................................................................16
1.5.6 Measures to attract investment to Belarus......................18
1.5.7 Barriers to investment in Belarus ......................................21
1.5.8 Trends and Forecasts .........................................................25
2.        Overview of Investment Regulation
          in Belarus ..............................................................................25
2.1       Investment Code ..................................................................26
2.2       Other Legal Provisions........................................................27
3.        Real Estate -Legal environment ........................................29
3.1.      Introduction ...........................................................................29
3.2.      Real Property Rights ...........................................................29
3.3.      Real Property Register and other Registers ...................32
3.4.      Transactions ..........................................................................34
3.4.1. Transfer of Real Estate .......................................................34
3.4.2. Leases ...................................................................................35
3.4.3. Security for bank loans ......................................................38
3.5.      Expropriation.........................................................................40
3.6.      Construction..........................................................................41
3.7.      Taxation of real estate .........................................................41
3.7.1. Real Estate Tax ....................................................................42
3.7.2. Land tax.................................................................................42
3.7.3. Sale of real estate ...............................................................43
Appendix...........................................................................................45




                                                                                                  3
Yet, good reasons
     exist for taking a
deeper look at Belarus.
Belarus attained independence in 1991 after
seven decades as a constituent republic of the
USSR. Any traveller coming to Minsk, the Bela-
rusian capital, will be surprised by the massive
ongoing construction works, in particular housing
projects and business parks. Against this back-
ground, the real estate sector appears attractive
for certain investors. The increasing number of
shopping centres and hypermarkets evidence a
demand from Belarusian citizens for consumer
products similar to those available in EU Member
States.

Since the ordinary living standards of almost 10
million Belarusian citizens still fall way below the
European average, investments in creating an
infrastructure for distributing consumer products
seem attractive. In terms of number of inhabitants
alone, the Belarusian market dwarfs the market of
the three Baltic States combined. Like the real es-
tate sector, the energy sector appears to provide
lucrative investment opportunities.

While Belarus depends on Russian energy sup-
plies, it has taken advantage of highly favourable
conditions. However, the drawback of the supply
of cheap energy is that necessary modernization
to the energy infrastructure is lacking. The same
applies to investment in energy-saving measures.
Increasing energy prices are now prompting
Belarus to make up for this neglect. In general,
investors can draw advantage from a strongly
motivated young workforce. Additionally, unlike
other states from the former Warsaw Pact, most of
the skilled workforce have not as yet emigrated to
Western countries.

4
Recent decisions by the Belarusian Government
also give reason to put Belarus on the radar
screen of potential. The creation of Free Economic
Zones (FEZ) with various incentives is only one
example of measures taken to attract foreign
investment. On 3 June 2008, the Belarusian
Prime Minister announced that ca 15 billion USD
have been earmarked for a program to reform
the economy within the next three years and to
establish 680 modern enterprises in different
industry sectors. According to the announcement,
the majority of state-owned enterprises are to be
transformed into private companies by 2010. The
program also aims at reducing red tape and at
easing business in general, not least with an eye
to attracting foreign investment.

Zabolis Partners and bnt Attorneys offer substan-
tial experience in dealing with the commercial and
legal challenges arising in relation to real estate
investment in emerging markets. We have created
this guide with the aim of introducing Belarus to
potential real estate investors who will find not
only a general overview of the country but also a
more detailed introduction to the commercial and
legal framework for real estate investment,
describing both the potential as well as the risks.




                                                  5
1. Belarus:
    an Overview.




1.1 Geography

Belarus covers an overall area of 207,600 sq km,
650 km from west to east and 560 km from north
to south. It is landlocked, bordering on Latvia to
the north, Lithuania to the northwest, Poland to the
west, Russia to the north and east, and Ukraine
to the south. Final border demarcation documents
with Latvia and Lithuania were ratified in February
2007, but Belarus still has to ratify a 1997 treaty
establishing the Belarus-Ukraine border.

The country stands in the Eastern European
lowlands and accordingly is relatively flat. The
average elevation is 160 m (525 feet) above sea
level. According to a 1994 estimate by the United
Nations Food and Agricultural Organization, 34%
of the land is covered by forests, largely consist-
ing of marsh and moor. Belarus‘ natural resources
include peat deposits, small quantities of oil and


6
natural gas, granite, dolomite (limestone), marl,
chalk, sand, gravel, and clay. The highest and low-
est points are Dzyarzhynskaya Hara (Dzyarzhynsk
Hill) at 345 m (1,130 feet) and the Neman River at
90 m (300 feet).

Three major rivers run through the country: the
Neman, the Pripyat, and the Dnieper. The Neman
and the Pripyat flow eastward to the Dnieper, while
the Dnieper flows southward towards the Black
Sea. Besides, many streams and some 11,000
lakes (known as the ‘blue eyes’ of the country) of
which many lie in the north are found in Belarus.
Although vital for the transport of goods in the
past, the rivers nowadays have lost their rel-
evance. Due to lack of endeavour to preserve the
river paths, some parts currently can no longer be
used for shipping. Considerable effort would be
needed to re-activate the paths in order to use the
advantages of the nine river ports: Brest, Minsk,
Mikashekichi, Mozir, Gomel, Rechitsa, Bobruisk,
Mogilev, and Vitebsk. Most of these are well con-
nected to highway or railway routes. However,
Belarusian policy has not yet been inclined to
raise the necessary capital.

The climate fluctuates from continental to mari-
time. This brings Belarus moderate winters (aver-
age January temperatures at -6 °C / 21.2 °F) and
cool, moist summers with an average temperature
of 18 °C (64 °F). The country experiences an
average rainfall of 550 to 700 millimetres (21.7 to
27.5 inches).

Besides the cities of Brest, Gomel, and Vitebsk,
Belarus offers a number of further places of inter-
est to tourists. Most of the XII-XIV century castles
are derelict, though a small number are reasona-
bly well preserved, for example those in Mir, Nyas-
vizh, Zaslaue, Lida, and Kamianec. The national
parks provide good conditions for hunting, fishing,
bird-watching, and camping as well as a focus
for the country’s tourism development strategy.

                                                  7
Especially worth visiting are the Belavezhskaya
Berezinsky Biosphere Nature Reserve (130 km
north of Minsk), the Braslau Lakes National Park
(250 km northeast of Minsk), and Pushcha - the
National Park near Brest.

    Location:         Eastern Europe
    Population:       9.7 million
    Capital city:
    Minsk             (pop. 1 798 000)
    Largest cities:
    Gomel             (pop.   492   000)
    Mogilev           (pop.   369   000)
    Vitebsk           (pop.   353   000)
    Grodno            (pop.   322   000)
    Brest             (pop.   303   000)

    Territory:        207.6 thousand sq. km.

    650 km from west to east
    560 km from north to south

In neighbouring Ukraine, the Chernobyl nuclear
disaster occurred in 1986. About 70% of the
radiation entered Belarus. As of 2005, about a
fifth of Belarusian land (principally farmland and
forests in the south-eastern provinces) continues
to be affected by radiation fallout.

1.2 Provinces and districts

Belarus is divided into oblasts, or provinces.
These are named after the cities that serve as
their administrative centres. Each oblast is jointly
administered. The administration consists of a
provincial authority elected by oblast residents,
with a provincial executive authority, whose leader
is appointed by the president. Oblasts are further
subdivided into raions (commonly translated as
districts or regions). As with oblasts, each raion
has an executive authority (raion executive com-
mittee) appointed by higher executive powers.
As of 2008, Belarus contains six Oblasts (Brest,

8
Gomel, Grodno, Mogilev, Minsk, Vitebsk), 118
raions, and 102 towns. Minsk (1,798,000 inhabit-
ants) enjoys special status, since the city serves
as the national capital. Minsk City is run by an
executive committee.


                               7


                           1
                                       5
               4
                       6

                   2               3



1.   Minsk (capital)
2.   Brest Oblast
3.   Gomel Oblast
4.   Grodno Oblast
5.   Mogilev Oblast
6.   Minsk Oblast
7.   Vitebsk Oblast

Minsk Oblast forms the heart of the country, sur-
rounding the capital. Here are located both main
airports for cargo and passengers. Its importance
as a rural leisure and recreation area for the in-
habitants of Minsk city is set to grow sharply with
development of the necessary infrastructure.

Gomel Oblast, situated in the south-east, hosts a
railway line of both local and international
importance. The long-distance highway connect-
ing Minsk with the Baltic Seaports (Klaipeda, Vent-
spils, and Kaliningrad) runs through the region.
In addition, Eastern European metropolises such
as St. Petersburg, Kiev, and Odessa are linked
by this highway. Gomel, the oblast capital, forms
the focus of culture and education, with numerous
specialised universities and institutes. The oblast
is also home to deposits of oil, diamonds, miner-

                                                  9
als, hard coal, and clay.

On the territory of the Vitebsk Oblast lie two trans-
European corridors. One connects Paris, Berlin,
and Warsaw with Moscow. The other connects
Helsinki with Kiev. Vitebsk boasts eleven of the
nineteen major lakes in the country. The large
variety of growing lumber (timber) is an important
economic factor in the region.

The Brest Oblast provides industry with granite,
clay for bricks, chalk and quark-sand for produc-
ing ferro-concrete and silicon-concrete. About 80%
of the overland transport from the CIS states to
Western European countries passes through the
region. Even today, foreign capital already sup-
ports over 500 businesses.

The area of the Mogilev Oblast is situated in
the lowlands of the river Dnieper and its various
feeding rivers. Resident businesses belong to the
chemical, engineering, and wood-working sectors.
The existing road and railway network provides
good connections to most Belarusian cities, as
well as to Russia, the Ukraine, and the Baltic
States.

A characteristic feature of the Grodno Oblast is
its flat relief. Besides, its natural resources include
iron ore (ilmenite), turf, chalk, clay, and raw silicon
sand.

1.3 Population

According to the 1999 census, the population of
9.7 million inhabitants is composed of Belarusians
(81.2%), Russians (11.4%), Poles (3.9%), Ukrain-
ians (2.4%), and others (1.1%). Most of these
(80%) belong to the Eastern Orthodox Church.
The official languages are Belarusian and Rus-
sian. Although both languages belong to the East
Slavonic group of languages, quite profound dif-
ferences exist in grammar, wording, and pronun-

10
ciation. Therefore, even Russian-speaking foreign-
ers find Belarusian hard to understand. As to the
number of people speaking Belarusian, statistics
vary depending on the criteria applied. While 85%
of Belarusians declare the Belarusian language as
their mother tongue, only 37% admit to speaking
it at home, while only 5% use it in their daily lives.
Yet, for example, a number of periodicals are
published in Belarusian, which is regularly used
for metro announcements, as well as on official
occasions.

1.4 Governmental Structure

Article 1 of the Constitution of Belarus proclaims
the country to be ‘a unitary, democratic, social
state based on the rule of law’. Article 6 estab-
lishes the separation of legislative, executive, and
judicial powers and the checks and balances
among them.

Head of state since July 1994 is President Ale-
ksandr Lukashenko, while Prime Minister Sergey
Sidorskiy currently serves as head of government
over a Council of 43 members, of which 24 are
Ministers and 19 are individuals with equivalent
powers. The president is elected by popular vote
for a five-year term. By a referendum in 1996, the
President extended his first period in office for two
years. A second referendum held in 2004 allowed
him to run in a third election, which was not origi-
nally foreseen. On 19 March 2006 the President
was re-elected with a majority of 82.6%

The legislative branch is formed by the bicameral
National Assembly (Natsionalnoye Sobranie),
consisting of the Council of the Republic (Soviet
Respubliki; 64 seats; 56 members elected by
regional councils, and eight members appointed
by the president, to serve for four years) and
the Chamber of Representatives (Palata Pred-
staviteley; 110 seats; members elected by popular
vote to serve four-year terms).

                                                   11
Judicial power in Belarus is exercised by the
Constitutional Court, regular courts, commercial
courts, and other courts. The Constitutional Court
is meant to ensure that state regulations adhere to
the constitution. The Court consists of 12 judges,
half appointed by the president and half by the
Council of Representatives, for an 11-year period.
Regular courts of the Republic of Belarus include
the Supreme Court (judges appointed by the
president), Oblast and Minsk courts, regional
and town courts, and military courts. Commercial
courts include the Supreme Commercial Court of
the Republic of Belarus, the commercial courts
of the six Oblasts, and the commercial court of
Minsk. An international arbitration tribunal has
been established in Minsk.

Far-reaching presidential powers and the actual
involvement of the president in all aspects of
social and economic life in Belarus increase the
likelihood of arbitrary decisions. A constitutional
amendment of 1996 states (Article 137) that
parliamentary legislation of the National Assembly
can be superseded by presidential edicts and
certain decrees.

1.5 The Economy

In spite of an unreformed and extensively bu-
reaucratic system, the Belarusian economy has
recently shown a significant upturn. By far the
largest number of companies consist of small and
medium enterprises, with only about 4% employ-
ing more than 500 people.

Since 1995, when the President drove the country
towards a form of ‘market socialism’, Belarus
has seen little structural reform. The President
adheres to his policy of administrative control
over prices and currency exchange rates. On the
other hand, the ‘golden stock’ rule, allowing the
state to intervene in the management of private
enterprises even when it owned only one share,

12
was abolished at the beginning of 2008. Moreo-
ver, since 2005 cases have arisen where shares
of private companies have been transferred to
public ownership in order to protect them from
insolvency. Along with these actions, the President
recently (2006) amended the Investment Code
of Belarus, weakening the position of foreign
investments in the country. In this context, it is of
particular interest that according to official figures
50.5% of employees are working for the state and
48.0% in the private sector (Belstat for 2007). But
a study of independent statistics (e.g. EBRD for
2007), suggests that only 25% of GDP is generat-
ed in the private sector. This discrepancy can only
be explained by the fact that the official statistics
simply diversify by the legal form of the company
– not by the real owner, which in most cases is
the state.

1.5.1 GDP / Inflation

GDP growth has been strong in recent years,
reaching nearly 8% in 2007. For 2008 more than
9% is forecast, while for 2009 more than 8% is
forecast.




                                                   13
And although inflation still stands at a high level,
the rate has been decreasing over recent years.

In the opinion of economists, the positive data
are due to close economic relations between
Belarus and the Russian Federation. Belarus
receives heavily discounted oil and natural gas
from Russia. Nevertheless, the turn of the year
2006/2007, when Russia threatened to cut off
gas supplies, shows that the Belarusian economy
heavily depends on relations with Russia and can
therefore be considered fragile. This – in the eyes
of economists – also accounts for the re-increase
of inflation in 2007. It is expected that the prices
for natural gas supply will reach the world market
price in 2011 at the latest.




14
1.5.2 Foreign Trade

Russia is by far the largest single trading partner
of Belarus, although its proportion in 2006 fell for
the first time, largely as a result of a change in
the way the Value Added Tax (VAT) on trade was
collected.

Table shows Russia’s proportion amounting to
approximately 50%, pointing to Belarus’ depend-
ence on its large neighbour. Future developments,
especially in the energy sector, may therefore
influence the country’s prosperity.




1.5.3 Currency/Fiscal policy

The official currency of Belarus is the Belarusian
Ruble (BYR). This was pegged to the Russian Ru-
ble until 2007. In August 2007, the National Bank
of Belarus terminated the peg and oriented to the
U.S. dollar. From 2 January 2009, the Belarusian
Ruble is pegged to a currency basket composed
of the U.S. dollar, the Euro, and the Russian Ru-
ble, resulting in a sharp devaluation of some 20%.

The main objective of fiscal policy has been to in-
crease financial and social stability. This objective
can be expected to continue in the near future.
Fiscal policy is meant to establish a macroeco-
nomic environment to stimulate economic growth
on a qualitatively new, innovative basis, to set up
economic restrictions and to improve the popula-
tion’s living standards. According to Belarus Fiscal

                                                  15
Policy 2008, the central state budget deficit will
amount to 1.9% of GDP, meaning an increase of
0.4% in comparison with the previous year.

1.5.4 Privatisation and Investments

The government intends to privatise state-owned
businesses, partially through IPOs of minority
stakes on international stock markets. This will
require the involvement of legal and financial
service providers.

Generally, privatisation can be achieved in three
ways: tender, sale by auction, and targeted sale.
Each might be performed in Belarus. While state-
owned enterprises may only be sold (privatised)
by a decision of the president, enterprises under
the ownership of municipalities are sold (priva-
tised) by a local authority decision which has to
be approved by the president. Where several com-
petitors are involved in acquisition of a state enter-
prise, Belarusian investors are often preferred.

Most public enterprises that have recently been
sold were heavily leveraged with state loans to
ensure continuation of business, while little capital
has been invested to modernise the relevant
technology. Privatisation is thus used primarily to
find skilled management for challenging industries
and recoup financing rather than to attract foreign
investment and know-how crucial for the wider
economy.

1.5.5 Interest rates

Belarusian banks offer loans for, e.g., construction,
acquisition of vehicles and equipment, wage pay-
ments, as well as revolving and non-revolving credit
lines, and overdrafts. Conditions for obtaining loans
depend on various factors, such as type, term, loan
currency, company size, and financial situation.
Some Belarusian banks offer micro-credits for spe-
cific projects under lending programs to Belarusian

16
banks from the European Bank of Reconstruction
and Development (EBRD). The main condition
required by Belarusian banks for granting a loan
is credit security. In most cases, this consists of a
mortgage or pledge. However, investors (foreign
and domestic) find it hard to obtain loans for com-
mercial projects. This is mainly due to high interest
rates, so that investment based on bank financing
becomes unprofitable.

                                 2007	       01/2008	 08/2008

	 Interest	rates	for	loans	in	BYR

  long term
  (for the term over 1 year)
  loans to legal persons         6.7 %       9.3 %    8.1 %

  short term
  for the term under 1 year)
  loans to legal persons         12.9 %      12.7 %   12.0 %

  Interest rates for loans in foreign exchange

  long term loans to
  legal persons                  11.1 %      10.9 %   11.4 %

  short term loans
  to legal persons               11.2 %      11.0 %   10.8 %




                                                              17
1.5.6 Measures to attract investment to Belarus

In order specifically to attract foreign investment,
various measures have been taken during recent
years. These include, e.g.:

• Creation of a database to provide potential
  investors with information on premises and
  circumstances of business investments
  (http://invest.belarus.by/en/).

• Establishment of particular Free Economic
  Zones.

• Legislation, in the shape of a number of
  presidential decrees and edicts in 2008
  granting several advantages, simplifying the
  registration procedure and thereby improving
  the economic climate.

Free Economic Zones

The law of 7 December 1998 established Free
Economic Zones (FEZ). A free economic zone is
defined as a precisely outlined part of the terri-
tory of Belarus with a special regime setting up
more favourable terms for carrying on business
and other commercial activities as compared with
usual standards. Examples of activities permitted
in FEZ include: production, science and technol-
ogy, export, trade, tourism and recreation, insur-
ance and banking. Usually, FEZ concentrate on
specific types of business. Presently, the following
FEZ have been established:

 FEZ              business	sector             restrictions

 Brest            pharmaceutical, auto-       gambling business
                  motive, food, electronic,
                  furniture, machinery con-
                  struction, woodworking
                  priority: organisation
                  of export and import-
                  replacing manufactures




18
 Vitebsk           production of building        trade, trade-purchase,
                   materials, food, oil and      public catering
                   petroleum, electronics,
                   veterinary medicines
                   and chemicals for the
                   agricultural sector, fiber-
                   optic cables, sewage
                   disposal plant and water
                   treatment equipment,
                   liquid-crystal monitors,
                   fur items, lighting equip-
                   ment, sewing industry,
                   wood processing

 Gomel-Raton       export production and         trade, trade-purchase,
                   high-tech development         public catering

 Grodnoinvest      transport, food,              production and
                   medicine, building            realization of exported
                   materials, chemicals          goods and services and
                   and petrochemicals,           of replaceable import
                   wood working, machine         goods
                   building, lighting

 Minsk             production of building,       trade, trade-purchase,
                   food, polygraphic indus-      public catering
                   try and production of
                   mechanical engineering

 Mogilev           machine building,             production and
                   civil and woodworking         realization of exported
                   industry enterprises          goods and services and
                                                 of replaceable import
                                                 goods



Legislation for the FEZ mentioned in table offers
incentives such as tax reliefs or exemptions from
profit tax, VAT, income tax, land tax, state and
social insurance fees, and state duties.

Furthermore, when importing foreign and domes-
tic commodities to the territory of a FEZ, customs
fees are not imposed and economic policy meas-
ures are not applied, except for customs clear-
ing duties. The same applies when commodities
originating from a FEZ are exported to a destina-
tion outside Belarus.

Residents of FEZ face no limitations in engaging for-
eign engineering, technical, and management staff.

Finally, a system of state guarantees assures
protection of foreign investors by giving the right
to return their share in the enterprise’s property at
its depreciation value.



                                                                          19
Recent Legislative Activity

Recently, attempts have been made to improve
the economic climate in the country. The Senior
Counsellor of the International Finance Corpora-
tion (IFC) in Belarus has stated that ‘Belarus will
reform the business environment’ by pursuing
a long-term strategy. Reportedly, the Belarusian
Government has drafted 63 laws and regulations
in order to achieve this goal.

In January 2008, the President enacted new
measures to stimulate production and realisation
of goods in order to attract foreign investment and
to increase Belarus’ export potential. Presidential
Decree No. 1 provides that commercial organi-
sations, including those with foreign investment,
created and located in settlements with less than
fifty thousand inhabitants, will receive a number of
tax benefits and privileges for five years after their
establishment.

On 1 January 2008, the Decree of the President
‘On Registration of Legal Persons’ came into
force. The regulations aim to simplify the proce-
dure for registering legal persons. The Decree
regulates:

• Decrease of the required minimum capital for
  companies (e.g. limited liability company:
  previously 1,600 Euros, now 800 Euros).

• Abolition of the requirement to indicate all
  company activities (objects) in the company
  charter. This requirement had significantly
  obstructed company activity. Companies were
  obliged to perform all activities indicated in
  their charter and were prohibited from
  performing activities that were not specified.
  Thus, if a company wanted to stop an activity
  or to start a new one it had to change its
  charter.


20
  The procedure for registering a change to a
  charter in those cases was similar to the
  procedure for registering a new company. Under
  the new regulations, only activities subject to
  licensing need be indicated in a company
  charter.

• Abolition of some official grounds for declining
  registration of a company.

• Reduction of the term for registration from 30
  to 15 days.

Furthermore, on 1 April 2008, Edict No. 42
introduced amendments to legislation dealing with
FEZ activity. In addition to special taxation pro-
cedures, guaranteed for at least seven years, the
Edict secures the right to tax relief and the right to
import facilitation for specific products. Moreover,
FEZ residents enjoy privileged rental conditions and
are exempt from real estate tax and tax on vehicle
acquisitions. Finally, infrastructure development for
large investment projects is facilitated and FEZ
administrations have obtained additional powers.

To conclude, the Presidential Edict on Measures
for Roadside Service Development was adopted
on 15 May 2008. This aims to create favourable
conditions for roadside service development and
to attract foreign investment. Roadside service ob-
jects are defined as buildings located at the road-
side of state highways and aiming to serve road
users (e.g. motels, hotels, camping sites, service
stations, retail and public catering objects).
The Edict provides a range of tax and other ben-
efits for the owners of roadside service objects.

1.5.7 Barriers to investment in Belarus

Although Belarus is attempting to create an atmos-
phere open to foreign investment, businesses still
have to face some barriers. Especially noteworthy
is the highly complex tax legislation. Added to the

                                                   21
way this is implemented by the public authorities,
the result is that day-to-day business is hampered.
Belarus has one of the most complicated tax
systems in the world. Indeed, not only is it complex
but in addition it frequently changes. This excessive
regulation is often hard to understand and therefore
hard to follow. On the other hand, frequent inspec-
tions force investors to observe all changes care-
fully and to act accordingly in order to avoid fines
or the threat of closure. Furthermore, government
powers to set prices for transport, telecommunica-
tion, housing, and public utilities need to be ob-
served. Many administrative barriers and complex
tax legislation:

• One of the most complicated tax systems
  in the world (complex and frequently changing).

• Excessive regulations, orders and bans
  (often hard to follow and understand as a
  whole).

• Frequent inspections (entrepreneurs often
  viewed as potential criminals rather than one of
  the pillars of the country’s development).

• Belarus ranked 151st in the world in the
  corruption perception index by Transparency
  International (36th in 2002).

• One of the worst Indexes of economic freedom:
  regional rank: 41 of 41 transforming countries.


• The Government sets prices for transport, tele-
  communications, housing, and public utilities.




22
Protectionist legislation in support of Belarusian
enterprises introduced in recent years is to some
extent limiting government efforts to attract foreign
investors. For example, the Import Substitution
Program for 2006-2010 foresees essential cutting
of import of goods and input materials hand in
hand with enhancement of Belarusian produc-
tion. However, it is worth noting that ‘Belarusian
enterprises’ are those registered in Belarus. This
means that the Import Substitution Program does
not target enterprises with foreign capital, since
the program’s limitations and incentives apply
irrespective of whether foreign capital is involved
in a ‘Belarusian enterprise’.

Local non-governmental organizations point out
that the level of corruption has not noticeably de-
clined in recent years. The broad legal regulations,
especially tax rules and compulsory licences or
permissions, provide opportunity aplenty for local
abuse of power. The Corruption Perception Index
by Transparency International ranks Belarus as
number 150 out of 179 in the world.




                                                  23
Examples of recent investments

Major foreign investors in Belarus 2007 – 2010

Year 2007:

Russia – petrochemical industry, motor-car
construction, light industry, telecommunications
Cyprus – banking sector
Switzerland – automobile motor-car construction,
banking sector, petrochemical industry
European Union – construction materials, light
industry

Plans for the years 2008 – 2010:

Russia – construction, pharmaceuticals
China – automobile motor-car construction, white
goods
Iran, Lebanon, United Arab Emirates –
construction, hotel and trade center business
Germany, Switzerland – Electric-power industry

Shere           Enterprise          Project          Foreign	Invest-
                                                     ments,	min	$

Petrochemical   Naftan              Reconstruction   168.0
Industry
                Mozyr Oil Refi-     Reconstruction   100
                ning Factory

Gas and Oil     Gomel Transneft     Re-equipment     15
Industry
                Beltransgas         Gas pipe line    10
                                    building

Chemical        Grodno-Azot         Reconstruction   14,3
Industry
                Gomel Chemical      Reconstruction   5
                Factory

                Mogilev Chem        Production       5
                Volokno

Telecommuni-    BeST (mobile        Infrastructure   119.7
cations         service provider)

                Beltelecom          Construction     10




24
1.5.8 Trends and Forecasts

The cheap supply of energy from Russia to Bela-
rus has prevented investment and progress in en-
ergy-saving technology in the country. Relative to
other economies in the region, Belarus consumes
more than twice as much energy. Even now,
oil processing, which used to be the principal
‘generator’ of profits, taxes, and foreign exchange
for the economy as a whole, needs support from
the state budget. To offset recent and future price
increases for gas and oil, Belarusian enterprises
will have to invest considerably in modern technol-
ogy, which presents opportunities for specialised
producers from abroad.

Belarusian goods are expected to suffer from
deteriorating competitiveness, causing a decrease
in exports. Consequently, an increasing current
account deficit is forecast, while opportunities for
financing will be rather limited due to decreas-
ing currency inflows from exports. This will most
likely result in an overall decrease of investment
by domestic businesses. In total, this will presum-
ably lead to a larger demand for subsidies from
government, slower growth rates of the economy,
and accelerated inflation.


2. Overview of
Investment Regulation
        in Belarus
The legal basis of all investment activity in Belarus
is the country’s Investment Code. This contains
basic legal conditions for performing investment
activity. Besides, Belarus has signed bilateral
agreements on co-operation and mutual protec-
tion of investments with more than 35 states, in-
cluding Germany, France, Poland, Finland, China,
Switzerland, the USA, Italy, Turkey, and others.

                                                  25
The regulations are complemented by numerous
other legal acts.

Investment activity is defined as investments in
manufacturing, works or services, or any other
use of these investments aiming at generating
profit (Article 2 of the Investment Code).

2.1 Investment Code

The Investment Code was first adopted on 22
June 2001 and has been amended several times.
It determines the general conditions for investment
activity in Belarus and is aimed at facilitation and
state support of activities as well as at protection
of investors’ rights. Under the Code, all forms
of regulation may be made in order to stimulate
investor activity, to attract foreign investment, and
to protect investors’ rights.

The Investment Code states in what forms and
under what circumstances different types of
regulation may become relevant. Among other
things, a system of expert examination of invest-
ment projects is set up, as well as the possibility
to conclude an investment agreement between the
Republic of Belarus and investors with the objec-
tive of providing state support subject to realiza-
tion of certain projects.

The Investment Code envisages direct participa-
tion of the state by means of:

• adopting state investment programs and their
  financing from state funds;

• providing investment resources from state funds;

• providing state guarantees for credits;

• preparing comprehensive state expert
  examinations of investment projects;


26
• granting concessions to national and foreign
  investors.

These possibilities and further regulations in the
Act on Privatization denote government attempts
to prevent unregulated privatisation and to estab-
lish socially-oriented economic principles.

In 2006, the President approved amendments to
the Investment Code, weakening the position of
foreign investors but leading to equalization of
business conditions for foreign and national com-
panies. The amendments provide for the following:

• an article stipulating five-year invariability of
  applicable laws after registration of an
  enterprise was excluded for foreign investors;

• a new compensation procedure was
  established for cases of re-nationalization or
  confiscation; now compensation is based on
  ‘market value’ instead of ‘real value’; however,
  market value may be determined by the
  government;

• foreign investors no longer have the right
  to set prices of the commodities and services
  they produce; price-formation is now regulated
  by the government as for all national
  companies;
• an article that had allowed foreign investors to
  keep all export proceeds from the sale of their
  commodities and services (after taxes and other
  obligatory payments) was abolished; similarly, a
  regulation providing preferences for companies
  of certain branches of foreign investors was
  abolished.

2.2 Other Legal Provisions

The number of additional legal provisions con-
cerning commercial activity in Belarus is consid-
erable. Numerous legal acts are in force, along

                                                      27
with presidential decrees and edicts, decisions of
the government, and regulations. The volume of
statutes and their interdependence make it nearly
impossible to successfully start and run a busi-
ness without professional legal advice.
The complexity may be shown by a sample list of
provisions applicable to any investment in Belarus:

• Investment Code of the Republic of Belarus,
  22 June 2001 with amendments.

• Civil Code of the Republic of Belarus with
  amendments.

• Law ‘On Entrepreneurship in the Republic
  of Belarus’ with amendments.

• Law ‘On State Regulation of Foreign Trade
  Activity’ of 29 December 1998 with
  amendments.

• Decision of the Council of Ministers No. 929
  of 22 July 1997, ‘On procedure for Opening
  and Activity in the Republic of Belarus of
  Representations of Foreign Organizations’
  with amendments.

• Presidential Decree No. 11 of 16 March 1999,
  ‘On Putting Order to State Registration and
  Liquidation (Termination of Activity) of Economic
  Entities’.

• Presidential Edict No. 460 of 17 July 2006,
  Regulations On the Procedure for Licensing
  Import and Export of Specific Goods (Works,
  Services) in the Republic of Belarus;
  Regulations on the Procedure for Registration
  of Obligations for Using Imported Specific
  Goods (Works, Services); Regulations on
  the Procedure for Organizing Control over
  Commitment of Obligations on the Use of
  Specific Imported (Exported) Goods (Works,
  Services) for Declared Purposes.

28
• Presidential Edict No. 443 of 13 July 2006,
  ‘On Customs Duties’.

• Law ‘On Counteracting Monopolistic Activity and
  Development of Competition’.

• Law ‘On Economic Insolvency (Bankruptcy).

• Law ‘On Denationalization and Privatization of
  State Property in the Republic of Belarus’.



3. Real Estate –
     Legal environment
3.1. Introduction

The basic legal acts regulating real estate in Bela-
rus are: the Civil Code, the Land Code, the Presi-
dential Edict on Land Acquisition, the Mortgage
Act, the Privatisation Act, the Condominiums Act,
and the Act on Real Property Registration.

3.2. Real Property Rights

Proprietary Interests in Land

A list of persons and corresponding rights to
land has been provided by the Presidential Edict
on Land Acquisition. They are: ownership, right
of heritable possession, permanent right of use,
temporary right of use, and lease.
Most Belarusian land is owned by the state.
Ownership may be granted to Belarusian citizens,
Belarusian legal persons, or foreign states. Belaru-
sian citizens may acquire ownership to land under
certain conditions, namely,

(i) the citizen is permanently resident in Belarus;

(ii) the land is intended for individual housing, a

                                                      29
summer house, gardening, and smallholdings.
Belarusian legal persons may own land only
in two cases: privatisation of real estate, and
implementation of investment projects. The list of
objects for privatisation may only be adopted by
the president. However, so far no legal person has
actually acquired ownership of a plot of land. For-
eign states may own land in Belarus on the basis
of reciprocity. Foreign citizens and foreign legal
persons are not allowed to own land in Belarus.

The right of heritable possession is a right that
may be granted only to a Belarusian citizen for
purposes specified by the Land Code, namely, (i)
individual housing, (ii) summer house, (iii) small-
holding, (iv) farming, and (v) similar purposes.
The right of heritable possession is permanent,
i.e. it may not be granted for a specified term.
The holder of a right of heritable possession may
transfer it only together with a building located on
the land plot.

Permanent right of use may only be granted to
a Belarusian legal person. As well as the right of
heritable possession, a permanent right of use is
transferred only together with a building located
on it. The person entitled may not sell the right or
otherwise transfer it without a building.

A temporary right of use may be granted to Bela-
rusian citizens or Belarusian legal persons for a
maximum of 10 years. However, the term of use
may be prolonged by a local authority upon
application by a right-holder.

A lease may be granted to any natural or legal
person, including foreigners. The maximum term
of a lease is 99 years.

The differences between types of rights to land
appear in the table on page 30.



30
               Owner-         Heritable	     Perma-         Tempora-       Lease
               ship           posses-        nent	right	    ry	right	
                              sion           of	use         of	use

 Who may       Belarusian     Belarusian     Belarusian     Belarusian     Legal and
 acquire?      citizens       citizens       legal          legal per-     natural
               and legal                     persons        sons and       persons
               persons                                      Belarusian     (Belarus
               (Bela-                                       citizens       residents
               rusian                                                      and non-
               residents)                                                  residents)

Maximum        None           None           None           10 years.      99 years
term                                                        May be
                                                            prolonged

Price          Cadastral      Without        Without        Without        Payment
(when          value          payment        payment        payment        for the
acquiring                                                                  right to
from                                                                       conclude
state)                                                                     a lease
                                                                           contract

Current        Land tax       Land tax       Land tax       Land tax       Rental
payments                                                                   payment
(tax, rental                                                               (from 0.1%
payments)                                                                  to 12% of
                                                                           cadastral
                                                                           value
                                                                           annually
                                                                           depending
                                                                           on use of
                                                                           land)

Expropri-      Court          Local          Local          Local          Local
ation          decision       authority      authority      authority      authority
                                                                           (if empo-
                                                                           wered to
                                                                           cancel the
                                                                           contract
                                                                           unilate-
                                                                           rally) or
                                                                           court
                                                                           decision

Transfer       No appro-      No appro-      No appro-      No appro-      No appro-
of right       val of local   val of local   val of local   val of local   val of local
               authority      authority      authority      authority      authority
               needed



Land acquisition

Only local authorities are empowered to expropri-
ate lands owned by the state. Acquisition of land
by auction is now possible (with some excep-
tions) under the new regulations. At auctions,
land plots (ownership right) or lease rights may
be acquired. In a few cases, land parcels can be
obtained directly from the local authority and not
by auction. These cases are enumerated in the
Presidential Edict on Land Acquisition. The price
of land sold at auction must be not less than its

                                                                                    31
cadastral value. The cadastral value is approved
by the State Committee on Property and is usually
close to the market value. The value of a lease (as
well as rental payments) is defined on the basis of
the cadastral value.

Buildings

Under the Civil Code, a building is referred to as
real property along with a land plot. Moreover,
under Belarusian legislation a land plot and a
building constructed on it may be owned by differ-
ent persons. In most cases, a land plot is owned
by the state, whereas the owner of a building (i.e.
a natural or legal person) only has a proprietary
interest, e.g. lease right. However, it is not pos-
sible to transfer a building without simultaneously
transferring the corresponding proprietary interest.
Whenever a building is transferred the proprietary
interest follows the building.
Self-contained premises

Self-contained premises are parts of a building
that are isolated from other adjacent parts of the
same building and have an independent entrance.
Self-contained premises may be owned individu-
ally in contrast to common areas, which are jointly
owned by the owners of self-contained premises.
Common property is directly managed by the
premises’ owners or through the owners’ associa-
tion (if a building has more than five owners of
self-contained premises). Depending on the form
of management, the process of taking decisions
differs. Relations between owners of self-con-
tained premises generally are regulated by the
Condominium Act.

3.3. Real Property Register and other Registers

The real property registration system was estab-
lished in 2003 under the Act on Real Property
Registration. Real estate, rights to it and real
estate transactions are to be registered in the Real

32
Property Register; otherwise they are considered
invalid. Real estate transactions only take effect
from the moment of registration. For instance,
ownership of a real property is acquired upon
entry of the title into the Real Property Register.
After entry in the Register, rights to real estate
may be revoked or a transaction invalidated only
by a court decision.

As the Real Property Register is a public register,
information is available to all on simple applica-
tion. The following data may be provided:

i) descriptions of real properties (cadastral index
    map; plans of buildings and apartments are
    available still only on paper);
ii) records of rights (ownership, lease, mortgage
    and other proprietary interests) and encum
    brances;

iii) records of transactions (sales contracts,
     exchanges, gifts, leases, mortgages, and other
     transactions involving real estate);

Apart from the Real Property Register, two more
public registers contain information about real
estate. These are:

• The Register of Real Estate Prices, which
  contains information about the prices of real
  estate according to registered contracts.

• The Register of Land Values, which contains
  information about cadastral values of land.
  The cadastral value is the basis for
  determining rental payments and the selling
  price for land. Usually, no significant difference
  exists between cadastral value and market value.

  The National Cadastral Agency is responsible
  for maintaining the Real Property Register, the
  Register of Real Estate Prices, and the Register
  of Land Values.

                                                  33
3.4. Transactions

Possible transactions with real estate are gov-
erned by different legal provisions. While transfer
(see 3.4.1) is basically regulated under the Civil
Code, for lease contracts (see 3.4.2) the provi-
sions of the Act on Lease, the Housing Code,
and the Land Code also apply. A mortgage is the
most common form of security for bank loans
(see 3.4.3). A new Act on Mortgages is expected
to come into force on 27 December 2008.

3.4.1. Transfer of Real Estate

Real estate may be transferred by purchase, gift,
or exchange contracts.

Buildings have to be transferred together with the
respective land plot or together with the respective
proprietary interest. Moreover, some restrictions
exist on the transfer of land. For instance, if a land
plot is disposed of for construction purposes, it
may only be transferred when the building has
been erected or suspension of construction is ap-
proved by the responsible authority.

Form of contract

A real estate purchase agreement must be in
writing and signed by both parties. The transfer
certificate confirming transfer of real estate must
also be signed. This transfer certificate may be
included in a purchase contract if ownership is
transferred simultaneously with the signing of the
purchase contract. But the transfer certificate may
also be signed as a separate document after the
contract is signed. As a rule, a purchase, gift, or
exchange contract does not have to be notarized.
However, some exceptions exist. In particular,
transactions relating to land plots owned by natu-
ral persons have to be notarized. To take effect, a
contract transferring real estate must be registered
(see also 3.3 above). The parties to the contract

34
have to apply to the local registration authority
(Registration and Land Cadaster Agency).

Fees

For transfer of real estate, the following fees apply:

 Fees for transfer of real estate
 notarial fee         registration fee
 approx 80 USD - approx 20 USD for natural persons

                     - approx 75 USD for legal persons


3.4.2. Leases

Generally, lease agreements are governed by the
Civil Code and the Act on Leases. Furthermore,
some special regulations exist on leases of resi-
dential premises (the Housing Code) and lease of
state lands (the Land Code and Presidential Edict
on Land Acquisition).

General rules (mostly applying to commercial
leases)

The parties are free to define the content of the
contract, such as the term and the rent. Lease
agreements must be concluded in writing and
signed by all parties. In certain cases, lease
agreements must be registered. For instance, land
lease agreements take effect only after registra-
tion in the Real Property Register. The obligation
to register lease agreements concerning build-
ings or self-contained premises depends on the
term of the contract. Registration is necessary
if the parties agree on a term of more than one
year. Agreements of unspecified duration and with
terms not exceeding one year only have to be
registered if the parties have agreed to do so. The
regulations for unilateral termination of a contract
also depend on its duration. Either party may
terminate a lease agreement with an unspecified
term by three months’ advance notice. Fixed term

                                                         35
agreements may be terminated by decision of a
competent court at the request of one of the par-
ties, on proof of breach of contract by the other
party, or of another cause for termination laid
down in the contract.

Lease of residential premises

These rules do not apply to a lease of residen-
tial premises. Leases of residential premises are
regulated by the Housing Code. The parties in
this case are not free to define the content of the
contract. They are bound to the standard agree-
ment established by the government. Lessors are
not allowed to change the contract by changing
its conditions to the disadvantage of the lessee.
Lessees may terminate the contract at any time.
No specific form is required for termination of a
contract by the lessee. The contract is consid-
ered terminated from the day the lessee leaves
the apartment. However, a lessee must notify the
lessor of the intention to terminate a contract three
months in advance. On the other hand, the lessor
is only allowed to terminate a contract unilaterally
in case of a gross violation of the contract by the
lessee or in cases when apartments have to be
reconstructed or demolished. In the former case,
the contract is terminated by court decision and
in the latter case the lessor has to offer the les-
see a different apartment and may be forced to
conclude a new contract. Information about lease
contracts is not contained in the Real Property
Register. Instead, the contract is subject to regis-
tration by the local authorities. They are responsi-
ble for enrolling lease contracts in a registration
book.

Lease of state land

The Land Code and the Presidential Edict on Land
Acquisition contain detailed regulations on agree-
ments for the lease of state land. In most cases,
state land is acquired at auction.

36
The winner of an auction must sign a lease
agreement and pay for the right to conclude the
lease agreement. A government regulation of 26
March 2008
defines the prices to be paid. These depend on
the cadastral value of the land plot and the term
of lease.

 Term	of	lease                 Coefficient for calculating
                               the agreement fee (to be
                               multiplied by the cadastral
                               value)
 1 year                        0.064
 5 years                       0.138
 10 years                      0.203
 50 years                      0.626
 100 years                     1.000



A standard agreement, which cannot be modified,
has been drafted by the government. Additionally,
the parties are not free to define the rent. This is
fixed by Presidential Edict and depends on the
cadastral value and the use of the land (for exam-
ples see table on next page). Unlike general lease
contracts, the duration of land leases cannot be
unlimited. The maximum term is 99 years. The leg-
islation on state land provides additional grounds
for terminating lease contracts. For example, local
authorities may terminate a lease agreement if
the lessee does not start to develop the land plot
during a specified period (currently half a year for
legal persons and one year for natural persons).

 Use	of	land	(examples)        Coefficient for calculating the
                               rent (to be multiplied by the
                               cadastral value)
 Apartment building            0.001
 parking place, garage (in     0.002
 private or cooperative use)
 all kinds of farms,           0.003




                                                             37
 public health, social servi-    0.03
 ces, education, sciences,
 religion, graveyards, sports,
 cultural activities,
 industry, communications,       0.06
 energy, transport, adminis-
 tration
 finance (banks, insurance       0.09
 companies), theatres, tourist
 services, parking places and
 garages (except those of
 individuals or cooperatives)
 public car parks, petrol        0.12
 stations,


3.4.3. Security for bank loans

Belarusian banks provide loans for different types
of investment project, including real estate acquisi-
tion and construction. Loans are usually granted
for five to six years, but the period may also be
defined in accordance with the project payback
period, e.g. equal to or not exceeding 20% of the
payback period. Banks usually finance from 70%
to 100% of project value. Most commonly, loans
are secured by real estate security. Therefore, real
estate may serve as collateral under a mortgage
agreement or by a title transfer agreement. Be-
sides, other forms of security exist, such as

• security deposits

• pledge

• suretyship

• guarantee.


Mortgages

Under a mortgage agreement, the mortgagee (i.e.
lender) is given preference over other creditors in
recovering a debt from the value of a mortgaged

38
property sold at auction. Under the Land Code,
a building may be mortgaged only together with a
land parcel in cases where the land is owned or
leased. If the land is used on the basis of herit-
able possession or other proprietary interest, a
building can also be mortgaged without the land*.
The Presidential Edict of 7 December 1999 limits
to 16 the number of banks that may become
mortgagees, all of which are registered in Bela-
rus**.

The requirements of a mortgage contract depend
on a number of factors, such as the person and
the mortgaged real estate. If, for instance, the
real estate to be mortgaged already exists, the
mortgage contract must be in writing and regis-
tered in the Real Property Register. On the other
hand, if the real estate to be mortgaged does not
yet exist (e.g., loan for construction of a house
or apartment) the contract must be in writing but
takes effect without registration in the Real Prop-
erty Register. If the mortgagor of land is a natural
person, the contract must be notarized.
The new Mortgage Act was adopted on 20 June
2008. It provides substantial changes in mortgage
legislation, and contains novel regulations on
mortgage deeds. Under the Act, a mortgage deed
is to be issued by a real property registration
authority at the moment when the mortgage is
registered. The mortgage deed certifies the rights
of the holder. The mortgagee may transfer the
mortgage deed to another person. To take effect,
the transfer must be recorded in the Real Property
Register. The new mortgagee must immediately
inform the mortgagor about the transfer. Accord-
ingly, the mortgagor must then only perform its
duties towards the new mortgagee.



* These rights are not transferable. They may not be subject of
   any transaction and always follow the building. See 2.3.
** This list was extended to 16 banks only at the end of 2006.
   Previously, the list contained only 6 banks.


                                                                  39
Title Transfer Agreement

By a title transfer agreement, a bank (lender)
becomes the owner of transferred real property,
which is assigned to the bank by the borrower as
collateral in the event that the borrower defaults
on loan redemption. If the value of the transferred
property exceeds the outstanding credit obliga-
tion, the bank must pay the margin to the borrow-
er. The borrower may retransfer the property after
the secured loan has been duly settled.

3.5. Expropriation

The Belarusian Constitution guarantees the right
of ownership. Under the Constitution, expropria-
tion is only legal if done to meet public needs and
if the value of the expropriated asset is fully com-
pensated. Owners may face expropriation without
compensation (i.e. confiscation) as a penalty for
crimes or serious violations of the law. Under the
Criminal Code, confiscation as a sanction may be
applied in cases of serious crimes (i.e. a crime
incurring a penalty of five and more years’ impris-
onment). Furthermore, the Administrative Code
provides sanctions in the form of confiscation for
violations of legislation regulating commercial
activity. For instance, income received from illegal
entrepreneurial activity is to be confiscated.

Land Expropriation

A presidential edict of 2006 stipulates new rules
on land expropriation. Under these rules, the own-
ers of land plots must start developing their land
plot within six months (natural person) or one year
(legal person). However, if the owner does not
start development in due time, the local author-
ity may apply to the court for expropriation of the
land plot.




40
3.6. Construction

Owners and users of land may only construct a
building if the following main requirements are
met:

1) The purpose of the land plot must be in line
with the intended construction. The purpose is
defined by local authority decision. For example,
the owner may not construct a gasoline station on
a land plot intended for single-family housing.

2) The project documentation is approved by a
competent local architect.

3) A construction permit is issued by a local con-
struction supervisory body.

The construction must conform to the approved
project, the detailed development plan (if any),
and building acts (codes of practice). In the case
of gross deviations of a construction from these
documents, the construction authority may sus-
pend a construction, impose a fine, and require
adjustment of the construction so as to be in ac-
cordance with its documentation.

After completion of construction, the building must
be brought into operation. The developer appoints
a special commission including officials from the
building supervisory board. The commission is
responsible for ascertaining that the construction
complies with project documentation, building
acts, and other requirements. If the requirements
are met, the commission issues an acceptance
certificate.

3.7. Taxation of real estate

Real estate is subject to taxation. The basic provi-
sions on taxation are set forth in the Tax Code.
This lists national and local taxes and establishes
special taxation regimes.

                                                  41
3.7.1. Real Estate Tax

Buildings and self-contained premises are subject
to real estate tax. Apart from the Tax Code, the
Real Estate Tax Act lays down detailed regulations
and fixes the annual real estate tax at the rate
of 1% of property value. For tax purposes, legal
persons determine the value of their real estate
on the basis of its depreciation value. In contrast,
the value of a natural person’s real estate is
determined by the land cadaster and registration
agencies. The value is assessed at least once in
five years at the request of the local authority.

Tax exemptions

The Real Estate Tax Act specifies tax exemptions.
For instance, newly constructed buildings during
the first year of construction, historic buildings,
and buildings for public worship are not subject to
real estate tax. The Tax Code and several presi-
dential edicts on taxation issues provide regimes
for preferential taxation, such as FEZ, uniform tax
for agricultural producers and individual entrepre-
neurs. FEZ residents are relieved from real estate
tax under the Presidential Edict of 9 June 2005 on
the Activity of Free Economic Zones on the Territo-
ry of the Republic of Belarus. Agricultural produc-
ers may apply for uniform taxation under certain
conditions. Under the uniform taxation regime,
agricultural producers are released from most
national taxes including real estate tax. Instead
they are liable to uniform tax which amounts to 2%
of gross revenue. Under the Presidential Edict on
the High Technology Park (HTP), residents of the
HTP (near Minsk) are released from most national
taxes, including real estate tax.

3.7.2. Land tax

Depending on its type, a proprietary interest may
be subject to two categories of payment: land
tax, and rental payments. The owner or user of

42
land pays land tax. A lessee pays rent. The rates
for land tax are defined in the Payments for Land
Act and depend on the quality and location of the
land.

The Presidential Edict on Land Acquisition and the
Presidential Edict on Rental Payments for State
Land regulate the rent of state-owned land. The
annual rental payment depends on the use of the
land, whereby the cadastral value is multiplied by
a specific coefficient defined in the Presidential
Edict on Rental Payments for State Land.
Some special taxation regimes also establish
exemption from rent for state land. For instance,
agricultural producers pay a uniform tax instead
of rent. FEZ residents only pay a reduced rent
amounting to 2% of cadastral value.
From 1 July 2008, specific rules on taxation and
rent of land apply in Minsk. Under the Presiden-
tial Edict of 7 July 2008 on Payments for Land in
Minsk, both land tax and rental payments depend
on cadastral value and the use of land. Rates of
land tax and rental payments differ from general
rates.

 Annual	rates	of	land	tax	
 and	rent	in	Minsk
 Use of land                  Rate
 For multistorey houses       0,015%
 For detached residential     0,05%
 houses, parking lots and
 garages, gardens
 For public and commercial    0,36%
 buildings
 For industrial purposes      1%
 For filling stations         3%


3.7.3. Sale of real estate.

As a company’s profit is subject to profit tax at a
fixed rate of 24%, the income received from sale
of land is included in the company tax base. The
income of a natural person is from 1 January

                                                  43
2009 subject to 12% income tax. However, some
income is exempt from income tax under the regu-
lations of the Income Tax Act. Income received
from sale of one residential house, one summer
house, one garage, or one land parcel once in
five years is not taxable.




44
                                                                                                   2000    2001     2002     2003     2004      2005      2006      2007

     Population (end of year), in thousand                                                         9990    9951     9899     9849     9800      9751      9714      9650

     Average annual number of those employed in national econmy, in thousands                      4414    4417     4381     4339     4316      4350      4402      4477

     Number of registered uneployed (end of year), in thousands                                    95.8    102.9    130,5    136.1    83        67.9      52        44.1
                                                                                                                                                                              Appendix


     Percentage of ecnomically active population                                                   2.1     2.3      3.0      3.1      1.9       1.5       1,2       1.0

     Money income of hoseholds, bin. rubles                                                        5577    11506    17087    22795    29565     38622     48685     58670

     Real disposable income of population, expressed as percentage of the previous year            114.1   128.1    104.1    103.5    109.8     118.4     117.8     113.2

     Nominal average wages and salaries of those employed in the economy, thsd. rubles             58.5    123      189.2    250.7    347.5     463.7     582.2     694

     Real gross average monthly wages and salaries, expressed as percentage of the previous year   112     129.6    107.9    103.2    117.4     120.9     117.3     110

     Average monthly pensions (end year), thsd. rubles                                             36.4    65       89.6     113.5    172.6     211       277.6     382.2

     Real monthly pensions (end year), expressed as percentage of the previous year                143.2   122.1    102.3    101.4    132.4     113.2     123.4     105.4

     Industrial output bln. rubles                                                                 10501   18612    24912    33387    48530     62545     77267     95515

     expressed as percentage of the previous year                                                  107.8   105.9    104.5    107.1    115.5     110.5     111.4     108.7

     Production of consumer goods, bln. rubles                                                     4200    7185     7995     10325    13651     16155     19241     22964

     Capital investment, bln. rubles                                                               1805    3049.3   4484.6   7131.2   10783.4   15095.8   20374.1   26053.3

     expressed as percentage of the previous year                                                  107.8   105.9    104.5    107.1    115.9     110.5     111.4     108.7

     Retail turnover, bln. rubles                                                                  4195    8171     11910    15170    19452     25230     31062     38168

     expressed as percentage of the previous year                                                  111.8   128.2    111.5    110.3    111.5     120       117.4     114.8

     Consumer price index (December to December of previous year; in per cent)                     207.5   146.1    134.8    125.4    114.4     108       106.6     112.1




45
     Producer price index in industry (December to December of previous year; in per cent)         268     139.1    142.6    128.1    118.8     110       109       116.8
bnt: a leading group of law
     firms for Central and
Eastern Europe

bnt is based in ten Central and East European
countries, offering legal advice in all core areas
of commercial law. Our clients come both from
Central and East European countries as well as
from Western Europe and overseas. Discerning
businesses, which our 100 + lawyers, tax counsel,
and accountants advise with their transactions in
their homeland or internationally. Further afield - in
Russia, Romania, or Bulgaria - bnt works along-
side long-standing partners of proven worth.

Our mission is to ensure that the client’s business
decisions are implemented promptly and with le-
gal certainty. As experienced specialists in Central
and Eastern Europe, the signature characteristic
of bnt is a high level of local expertise and close
all-round co-operation between partners and col-
leagues. In this way, we offer one-stop quality to
all our clients, to whom we owe it.

bnt is a leading commercial law firm in the coun-
tries where it operates. This gives you the assur-
ance of optimal advice for your business aims in
Central and Eastern Europe – right from the very
outset. That way, you see clearly ahead.

The bnt Minsk representative office in the shape
of bnt legal & tax Minsk UAB was established in
2007 and works closely with bnt offices in Vilnius,
Tallinn, and Riga.

The bnt Minsk representative office in the shape
of bnt legal & tax Minsk UAB was established in
2007 and works closely with bnt offices in Vilnius,
Tallinn, and Riga.


46
bnt has for some years been advising German
and international companies with their business
projects in Belarus, in particular those specializing
in the fields of corporate/M& A and real estate.
The Minsk office is integrated with the bnt practice
groups in the Baltic States, in the areas of tax,
corporate/M&A, pharmaceuticals & medical/IP,
insurance and energy. The international team on
site consists of five lawyers and other colleagues,
whose knowledge of a language besides Belaru-
sian and Russian also covers German, English,
French, Swedish, Latvian, and Lithuanian.

bnt lawyers regularly publish articles and legal
news on the Belarusian legal system in German
and international legal magazines. They deliver
lectures in university programs and are at the
disposal of public organizations with legal infor-
mation.

Our consulting team consists of qualified and
committed colleagues who have mostly com-
pleted extended work or study stays in Germany,
Scandinavia, the USA, and other countries and
who have an understanding of different legal cul-
tures and ways of doing business as well as the
individual needs of our clients.




                                                     47
Zabolis Partners:
Investment Banking,
     Private Equity,
Real Estate
Zabolis Partners is an investment banking and
private equity group active in Central and Eastern
Europe. The group offers expertise in the retail
trade and in real estate solutions for the retail
sector. Originating from our home markets in the
Baltic States, our activities target the entire region
between the Baltic and the Black Sea. Zabolis
Partners has been active in Belarus since 2003,
being involved in corporate transactions and real
estate development. It is present in the country
with 10 employees in their Minsk office.




48
bnt legal and tax Minsk
Pobediteley Avenue 21 - 1303
220126 Minsk
Phone: +375 17 203 94 55
Phone: +375 29 601 64 11
Fax: +375 17 203 92 73
info.by@bnt.eu
www.bnt.eu




Zabolis Partners BY
Kirova Str. 19 - 6
220050 Minsk
Phone/Fax: +375 17 227 08 06
info@zabolis.by
www.zabolis.by

				
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