In general, when a non-resident entity has a permanent establishment (PE) in the country, income attributed to the PE will be taxed in the same manner and at the same rates as the income of a resident entity. Income not attributed to a PE is generally subject to withholding tax.
The Belarusian Ministry of Taxes and Duties, has issued a specific guidance on computing the taxable income of PE’s. As per the guidance, expenses incurred by a PE, in Belarus or abroad, in connection with its business activities in Belarus are deductible in computing its taxable income. Such expenses may also include travel expenses of any personnel sent to work in Belarus. In support of its claim for deduction, the PE must furnish adequate and relevant primary documents, contracts, and an auditor’s report from the foreign state where the non-resident entity has its permanent tax residence. In case of any expenses recognized by the PE, that are not specifically attributable to its business but are in the nature of general aggregate expenses incurred by its non-resident parent, then deductibility of such expenses is limited to the extent they relate to the PE’s business and must be apportioned and indicated in such manner, in the auditor’s report.
Effective 1 January 2016, the Tax Code was amended to increase of scope of deductible expenses of a PE, to include non-operating expenses incurred outside Belarus. Deduction is permissible, only if such expenses incurred are considered deductible under standard Belarusian tax rules and details of such expenses are confirmed by a foreign auditor (details include expense type, amount and date recorded as deductible in accordance with the tax laws of the jurisdiction of residence of the foreign company).