Offsetting Belarusian personal income tax where tax has been paid in an “unfriendly” country

Another declaration campaign is approaching — the right time to start thinking about declaring income for 2025. As is customary, we are launching a series of publications on tax declarations and drawing attention to important practical nuances.

In recent years, situations of receiving income from so-called unfriendly countries have become increasingly common. This gives rise to natural questions from taxpayers, including whether it is possible to offset personal income tax paid abroad.

A common misconception

It is widely believed that where income is received in an unfriendly country, the tax will have to be paid in full both in the source country and in Belarus.

In practice, this is not the case.

Article 224 of the Tax Code of the Republic of Belarus allows individuals to offset tax paid abroad, including in an unfriendly country.

How to offset the tax

To do so, the taxpayer must submit to the tax authority at the place of registration one of the following sets of documents:

• a document confirming the income received and the tax paid in the foreign state, certified by the tax (or other competent) authority of that country; or
• a copy of the tax return filed with the foreign tax authority and a copy of the payment document evidencing payment of the tax to the foreign budget.

An important nuance

If it is not possible to promptly obtain confirmation from the foreign tax authority, it is permissible to submit an equivalent document from the tax agent and to carry out the offset on the basis of the individual’s written application.

However, within one year from the date of filing the application, it is necessary to additionally submit a document from the foreign tax authority — otherwise the tax and penalties will be additionally assessed.

Practical examples

Let us consider the receipt of dividends by an individual — a tax resident of Belarus — from organisations in unfriendly countries. We assume that the application of the double taxation treaty (DTT) provisions on dividends has been suspended.

Scenario 1

Dividends are taxed in an unfriendly country at a rate of 15%.

Solution:

The individual files a tax return in Belarus and submits supporting documents. For the purposes of the offset, 13% is credited (the personal income tax rate in Belarus).

The 2% difference is not refundable.

Scenario 2

Dividends are taxed in the foreign state at a rate of 10%.

Solution:

The offset is granted in the amount of the 10% actually paid, and the 3% difference up to the 13% rate must be paid in Belarus.

Author: Katsiaryna Sushko, Ihar Razduyeu.

If you receive income from abroad and are not sure how to correctly declare it in Belarus and offset foreign taxes paid, REVERA’s lawyers are ready to assist you at all stages of the declaration campaign — from analysing income sources to preparing and filing the tax return.