Who is a Tax Resident

The issue of tax residency is becoming increasingly relevant in the context of globalization and increasing mobility of the population. A tax resident is a natural or legal person who, according to the legislation of a particular country, is required to pay taxes on income earned both within and outside the country. It is important to understand the status of a tax resident to properly fulfil tax obligations and avoid negative consequences associated with non-payment of taxes. In this article, we will look at the main criteria for determining tax residency, its impact on tax liabilities, and the specifics that should be considered when planning financial transactions.

Who are the Tax Residents of Belarus

If an individual has spent less than 183 days in Belarus, they are not considered a tax resident of that country and are not required to file a tax return. Accordingly, if a person has been in Belarus for more than 183 days in a calendar year, then he belongs to the tax residents of the country. 

When it is impossible to determine a person’s tax status in the current calendar year, they are guided by the previous calendar year: 

• A person would be a tax resident in 2024 if he stayed in Belarus for more than 183 days in the previous calendar year.
• A person will not be a tax resident if they have been outside Belarus for 183 days or more in 2023.

What Periods are Included in the 183 days of Stay in Belarus

In 2024, the days of stay in Belarus include the days when the person was actually in the country and when the person was outside of Belarus.:

• On treatment.
• On a business trip.
• On vacation, no more than 60 calendar days in total. When the rest lasts longer, the rest period does not fully relate to the time of the person’s stay in Belarus.

What Periods Do Not Relate to the Time Spent in Belarus

The period of stay in Belarus in 2024 does not include the periods of stay:

• As a person with consular or diplomatic status or as a family member of such a person.
• As an employee of an international, intergovernmental or interstate organization established based on an international agreement with the participation of Belarus or as a family member of such employee (for foreign citizens, stateless persons).
• The only purposes of staying in Belarus for medical treatment and rest.
• Transit through Belarus.

What does Tax Residency Affect

Tax residency affects several important aspects, such as:

1. The obligation to pay taxes

Tax residency determines in which country an individual or company must file tax returns and pay taxes on their income. For example, tax residents of a certain country are usually required to pay taxes on income, including income earned abroad.

2. Types of tax rates

In some countries, tax residents may pay taxes on more favourable terms than non-residents.

3. Benefits and tax deductions

Tax residents can claim various tax benefits and deductions, significantly reducing their tax burden. These can be child benefits, mortgage deductions, or other tax incentives.

4. Taxation of income from foreign sources

In countries where the principle of the global tax base applies, tax residents must declare all their income, including those they receive abroad. This may require them to pay taxes in their country of residence despite the income being earned outside of that country.

5. Convention for the Avoidance of Double Taxation

Tax residency plays a key role in applying international agreements to avoid double taxation. If a person is a tax resident of two countries, such agreements help determine which country taxes should be paid to avoid double taxation.

Thus, a tax resident’s status has serious consequences for tax liability, affecting where, how, and how much taxes will be paid.

How to Confirm your Tax Residency at the Tax Office

The tax service may call you to file a declaration for income that you have received abroad, even if you (or your employer or customer) have already paid taxes for it in another country. In this case, it is recommended that you confirm your tax residence in another country (if you have been away from Belarus for 183 days or more). 

The main documents that confirm the actual time of stay in Belarus are identity documents with entry and exit marks from the foreign border service. However, such marks are not always included in passports. Therefore, you can submit any documents to the tax service that confirm your location during the calendar year:

• A passport.
• Temporary residence permit in another country.
• Documents on education, work, and service in another country. 
• Other documents that confirm entry and exit from Belarus.

In cases where a person cannot be identified as a tax resident of any state, he is recognized as a tax resident of Belarus in the calendar year when:

1. The person has Belarusian citizenship in the calendar year for which the tax residence is determined.
2. The person has a residence permit in the calendar year for which the tax residence is determined.

How are the Days of Actual Stay in Belarus Counted

In each calendar year, the days a person spent in Belarus are counted as follows: the period of stay starts on the day following the day the person entered Belarus and ends on the day of departure from the country, inclusive, or on the last day of the calendar year.

How to Confirm that Taxes are Withheld in Another Country

If you are recognized as a tax resident of Belarus, it means that you have an obligation to pay taxes in Belarus on the income you have received in Belarus and other countries. 

Usually, companies that pay income withhold taxes from themselves and transfer taxes to their country’s budget. To avoid double taxation of the same amount in different countries, states conclude international agreements on the avoidance of double taxation. 

When receiving income, you may not know whether such an agreement has been concluded with the state where your employer (customer) is located. In any case, we recommend that you ask him for a certificate of payment of taxes on your income in case you are called to the Belarusian tax office. This certificate is useful for offsetting or recalculating the amount of income tax in Belarus.

When will the Income Tax be Recalculated in Belarus

Income tax can be charged to both a tax resident of Belarus and a non-resident. When income tax has been charged to you, it can be recalculated if there is a double taxation agreement with the state where the income is received.

Belarus has concluded agreements on avoiding double taxation with 75 countries, including Austria, Georgia, Egypt, Israel, Kazakhstan, Qatar, Lithuania, Russia, and Saudi Arabia. 

In order to recalculate the tax, the tax inspectorate needs confirmation of the status of a foreign tax resident and an application for a refund or offset of overpaid income tax within 5 years from the date of payment. In this case, the tax service usually makes a refund or offset of income tax.

What Should be Considered When Planning Financial Transactions

When planning financial transactions, tax residents need to consider the following aspects:

1. Definition of tax residency 

Ensure you understand that you are recognized as a tax resident in your country. In most cases, it depends on the length of stay (183 days or more per year) and/or the centre of vital interests.  

2. Tax obligations in your country  

Tax residents must declare income earned in the country of residence and abroad. Consider the following taxable income:

• Salary.  
• Income from the rental of real estate.  
• Dividends and interest.  
• Capital (sale of assets).  

3. International taxation  

Find out if a Double Taxation Avoidance Agreement (DTA) exists between your country and the country where you receive your income. It will help to avoid double taxation.  

If you have a business abroad, consider the risks of applying the rules of CFCs (controlled foreign companies).  

4. Income and deduction planning  

Optimize your income and expenses to reduce your tax burden:

• Use tax deductions for insurance, education, medical services, and other eligible expenses.  
• Plan large purchases or transactions based on tax periods.  

5. Investments  

When investing, consider the taxation of income from dividends, interest, and capital gains.  

Invest in tax-advantaged instruments (for example, pension funds or tax-exempt bonds).  

6. Currency exchange and transactions abroad 

Consider the tax consequences of transactions in foreign currency, including the possible payment of taxes on exchange differences.  

Know the rules for transferring large amounts of money between countries (AML/KYC).  

7. Tax rates and benefits  

Keep up to date with the current tax rates for different types of income.  

Use regional or special tax incentives (for individual entrepreneurs and startups).  

8. Documentation and Accounting 

Keep full records of income, expenses, and supporting documents.  

Keep all financial documents for a legally prescribed period (usually 3-5 years).  

9. Consultations with tax experts

Consult professional tax consultants to optimize your tax burden and comply with the law.  

10. Changes in legislation  

Keep track of changes in tax legislation that may affect your tax planning.  

Effective financial planning requires a competent approach to taxation and consideration of all individual circumstances.

Conclusion

The issue of tax residency is important for individuals and companies, as it determines their obligations to the tax authorities of a particular country. Understanding the tax residency criteria helps avoid mistakes when filing tax returns and minimize the risks of double taxation. 

It is important to keep in mind that tax residency does not always coincide with citizenship or place of residence but is determined based on time spent in the country and economic and personal ties. In case of difficult situations or doubts, it is recommended to seek professional advice to properly assess your tax situation and competently fulfil all obligations. 

Knowledge and compliance with the rules of tax residency allow to optimize tax processes and effectively plan financial activities in a global economy.