Joining the Hi-Tech Park
What is the Hi-Tech Park?
The Hi-Tech Park (HTP) is a specific preferential tax and legal regime that is available to organizations engaged in high-tech activities, such as software, mining, and the like.
The Administration of the Hi-Tech Park
The Administration of the Hi-Tech Park is a state non-profit institution.
This Administration is responsible for the following tasks:
– Implementation of the national plan and state policy in the field of development and export of information technologies;
– Improvement of exported software development facilities using new and high technologies;
– Employment of professionals in the IT sector, development of their performance;
– Creation of favorable conditions for investment, assistance in introducing the national economy into international economic relations;
– Execution of events aimed to improve the business reputation of the HTP and its residents;
– Promotion of Belarusian high-tech companies.
It is to the HTP Administration that documents are submitted by entities applying for inclusion in the HTP.
The documents required for joining the HTP include: an application form, a business project (specific forms are stipulated by law), copies of the company’s Charter and the certificate of state registration (verified by the head of the company).
In cases where a project being implemented includes tokens, the Administration can also request an external audit report.
When receiving documents for registration, the Administration makes an inventory. The applicant receives a copy of it.
The period for consideration of documents submitted for joining the HTP is no longer than 30 days.
The number of HTP residents as of April 2020
According to the data published on the HTP website, the number of HTP residents as of April 2020 stands at 818 organizations. These companies provide services to clients from at least 67 different countries.
Who can become a resident of the HTP: criteria
Any legal entity or sole trader can become an HTP resident if they are registered in the Republic of Belarus. This can be both small companies and large IT organizations.
The main rule for inclusion of a company in the HTP is that its type of activity must correspond with the one stipulated by law for HTP residents.
In order to become an HTP resident, the organization must be involved in one of the following types of activities:
– Development and implementation of educational programs in the field of information and communication technologies;
– Work with eSports teams, eSports tournaments and their broadcasts;
– Work with artificial intelligence and formation of unmanned transport management systems;
– Mining, storage and disposal of cryptocurrencies.
In situations where it is difficult to determine exactly whether the organization’s specialty corresponds with the above-mentioned types of activities, this organization will be required to prove that it belongs to these types of activities by using additional documents, explanatory notes and so on. Each case is considered individually by the Administration of the HTP.
If a company is involved in a type of activity that HTP residents cannot engage in, then that type of activity must be withdrawn from the organization or liquidated before applying for membership in the Park.
The main and most popular types of activities of the HTP resident-companies
HTP residents are required to exclusively engage in the activities specified in their business project. To carry out other activities that fall under the list of specializations for HTP residents, the organization must approve a new additional business project.
The main and most popular types of activities of the HTP resident-companies are:
– research, design and software of information systems;
– data processing using the client’s or proprietary software;
– fundamental and applied research, experimental developments in the field of natural and technical sciences and their implementation.
Practice shows that the HTP Administration often refuses organizations that are engaged in a large number of different types of activities. As a rule, residents are companies that use one or two specializations in their business project.
Cryptocurrency and blockchain companies in the HTP: how to join
To conduct any operations with cryptocurrency, such as issuing or purchasing, an organization must be an HTP resident or carry out such activities through other HTP residents.
There are special requirements for those who want to engage in cryptographic activities. They are fixed in the rules for regulating cryptographic activity in Belarus.
The first requirement is the size of the authorized fund of such an organization. It should amount to about 1 million US dollars, and for companies engaged in ICO – 250 thousand US dollars.
Operators of crypto-trading platforms and cryptocurrency exchanges have additional requirements. Their Belarusian bank accounts must hold an amount of at least 500 thousand and 100 thousand US dollars respectively.
Another requirement is that the team of a party looking to obtain HTP resident status must include the following employees:
– Head of the organization with a higher education;
– Chief accountant who has graduated from a university with the relevant profession and has training in the field of IFRS standards, as well as at least 3 years of experience working as a chief accountant or deputy head of financial affairs;
– An employee responsible for system administration and information security who has a higher education and at least 3 years of experience in the relevant field;
– A party responsible for risks;
– A party responsible for fulfilling AML requirements;
– A party responsible for compliance with the requirements of the HTP.
To join the HTP, companies involved in cryptocurrency and blockchain must obtain a conclusion on the legality of their activities from one of the following companies: PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, KPMG.
If it is not possible to receive a report from the aforementioned companies, a potential resident can conduct an external audit.
Before submitting documents to the HTP Administration, the organization must provide for compliance with the following standards in its business project:
– International obligations of the Republic of Belarus in the field of countering criminal proceeds laundering and terrorism financing, FATF recommendations;
– Technological security, including protection from cyber attacks.
It is also necessary to have strong guarantees of financial stability, procedures for financial coverage of potential risks, as well as compensation for possible damages, and other measures to protect the rights and legitimate interests of consumers.
The information systems used must be audited annually.
These specific rules do not exclude the need to comply with all the general rules and requirements for joining the HTP.
Business project development for the HTP
A business project for obtaining HTP resident status is developed on the basis of the form established by law.
Such project must provide information about the organization, including the history of its creation and development, as well as the rationale behind the need to join the HTP. The company’s specialties, its main projects that will be implemented once a member of the HTP, and its business model must also be specified.
Each organization should approach the preparation of a business project individually, taking into account the specifics of its activities.
However, every party should pay special attention to calculating the results of financial and economic activities (planned profit, profitability, and so on).
Main tax preferences for HTP residents
Such keen interest of IT companies in the HTP is explained by the presence of special preferences for its residents.
Tax benefits received upon joining the HTP include:
– No VAT;
– Income tax is 9 percent;
– Payments to the Social Protection Fund are linked to the average wage in Belarus rather than the actual wage;
– Reduction of tax on foreign organizations income;
– Reduction of the offshore fee.
Grounds for refusal to join the HTP
Companies that submit documents to join the HTP are often rejected. One of the reasons for this may be the presence of a negative conclusion based on the results of scientific and technical expertise, which is requested by the HTP Supervisory Board to assess the technical prospects of the business project.
Another reason for refusal may be the HTP Supervisory Board’s decision on the lack of significance of the relevant business project for the development of high technologies.
In any case, the refusal must be justified, and the grounds for refusal must be specified. Such decision of the HTP Administration can be appealed by the applicant in court. Should errors identified by the HTP Administration be corrected, the company can re-submit documents for joining the HTP.
How we can help?
Our attorneys at law will advise you on all legal matters related to HTP entry in Belarus as well as will help you to understand all regulations about HTP residents activities.