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Belarus Supreme Court Clarifies Application of GAAR — Orbitax Tax News & Alerts

On 3 May 2019, the Supreme Court of Belarus issued a notice on instructions given to lower courts for the application of the country's general anti-avoidance rule (GAAR) under paragraph 4 of Article 33 of the Tax Code. The instructions have been given in light of Presidential Decree No. 151 of 18 April 2019, which amends past decrees in relation to the GAAR with effect from 1 January 2019.

The instructions include that in accordance with paragraph 4 of Article 33 of the Tax Code, the tax base and (or) the amount of tax payable (offset, refunded) according to the results of an audit may be subject to adjustment in any one of the following cases:

  • There is a distortion of information/facts on business operations, on taxable items reflected by the taxpayer in accounting, tax records, or tax returns, or in other documents or information necessary for the calculation and payment of tax;
  • The main purpose of a business transaction is the non-payment (partial payment) or offset/refund of tax; or
  • A business transaction is not real, including cases where goods are not actually received, jobs are not actually performed, services are not actually provided, or property rights are not actually transferred.

With respect to a distortion of information/facts, the instructions include that courts should keep in mind that this applies in the case of actions of the taxpayer itself. This may include concealment or understatement of income, overstatement of expenses and costs, failing to fulfill tax agent (withholding) obligations, or improper use of lower tax rates, tax incentives, or special tax regimes.

With respect to the main purpose of a transaction, the instructions include that the main purpose of a transaction should be a specific reasonable business goal, and not for gaining unreasonable advantages in taxation in violation of the principles established by the Tax Code. At the same time, it is necessary to take into account that the provisions of the Tax Code do not restrict the right of taxpayers to conduct their business operations in a manner that minimizes tax consequences, although the nature of the transaction chosen by a taxpayer should not be artificiality devoid of real economic substance.

With respect to whether or not a transaction is real, the instructions include that this can be confirmed by the facts of the case. This includes confirmation of the facts on how a disputed transaction was executed, whether a taxpayer did not make or could not make a supply for goods, and whether the personnel, equipment, and technical means exist for the rendering of services.