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Decree on Development of Digital Economy

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Decree on Development of Digital Economy
Ratified21 December 2017
SignatoriesAlexander Lukashenko
Purposeto liberalize the conditions for conducting business in the sphere of high technologies in the Republic of Belarus

The Decree On the Development of Digital Economy — the decree of Alexander Lukashenko, the President of the Republic of Belarus, which includes measures to liberalize the conditions for conducting business in the sphere of high technologies. The project was initiated by a Belarusian entrepreneur Viktor Prokopenya and then was developed by the Belarus High Technologies Park and representatives of the Belarusian IT market.

History

Proposal

By early 2017, the Belarusian IT Belarusian IT community and, first of all, the High-Tech Park resident companies were concerned that the existed model of work created the conditions for the growth of custom software development and IT outsourcing, but did not help companies that create their software products thus preventing Belarusian IT from rapid growth. The lack of a system and a legal framework for venture financing also obstructed the development of Belarusian startups.[1]

In January 2017, the President’s assistant Vsevolod Yanchevsky, well-known for his liberal views, was appointed to lead the project of drafting a decree that would help create a more favourable environment for the development of the IT sector.[2] On 13 March 2017, Alexander Lukashenko visited HTP residents and held a meeting with the managers, who voiced to the President the reasons why a legislative framework was essential to stimulate the growth of IT businesses and outlined their main ideas in this regard.[3][4] A month later, on 21 April, in his annual address to the parliament and the Belarusian people, Lukashenko ordered to develop a new decree on the High-Tech Park, which would attract international companies engaged in the most promising areas — driverless transport, artificial intelligence, digital currencies.[5][6]

To develop a new decree, the Administration of the High-Tech Park engaged representatives of the IT industry and expert community, held dozens of meetings with technology companies, as well as Belarusian and international legal and consulting firms, including Aleinikov & Partners, Vlasova, Mikhel & Partners, Baker Tilly Bel, and others.[7] Denis Aleinikov, a Belarusian lawyer, is referred to as the main creator of the Decree, he and his company developed a legal framework for smart contracts and proposed to implement certain institutions of English law to boost venture capital financing in Belarus.[8][9][10][11][12][13]

The draft was first published in several sources in July 2017. It sparked widespread discussion among specialists and market participants.[14][15] Afer much debate, in September 2017, the draft was submitted to Alexander Lukashenko as a part of a package of liberal reforms of business legislation. The President suggested rethinking the title of the document, as its provisions affected not only the High-Tech Park, but also the Belarusian economy at large.[16]

Discussion

The draft and the key points of the Decree were published in June 2017, welcomed by the members of the IT industry and harshly criticized by some economists.[17] Critics opposed to the new decree argued that the draft's authors should have focused on the overall development of civil law reform so that the beneficial effect would influence all sectors of the economy; they criticized the orientation of Belarusian IT companies to foreign markets and argued that unmanned cars were irrelevant to Belarusian reality, that crypto-currencies could be risky economic bubbles, and that the technology of the blockchain is technically not legal, and is only applicable to the operation of cryptocurrencies. Meanwhile the supporters responded that the reform should start in a testbox which would be used later for overall reform, so the authors of the Decree focused on the IT sphere they understood and the obstacles to its growth. They emphasized the significance of modern technologies for the country's future; they also noted that the expanded list of HTP work areas was drawn up taking into account the main contemporary trends, and the Decree creates the legal basis necessary for the development of breakthrough technologies.[18][19][20]

Signing

By the beginning of December, a document called the "Decree on the Development of Digital Economy" had been approved by all authorized official bodies and again submitted to the President.[21] The Decree was signed by the President on 21 December 2017,[22][23] and came in force on 28 March 2018.[24]

Key points

The provisions of the Decree "On the Development of Digital Economy" established a legal basis for the circulation of digital currencies and tokens based on blockchain technology, so that resident companies of HTP can provide the services of stock markets and exchange offices with cryptocurrencies and attract financing through the ICO. For legal entities, the Decree confers the rights to create and place their own tokens, carry out transactions through stock markets and exchange operators; to individuals, the Decree gives the right to engage in mining, to own tokens, to acquire and change them for rubels, foreign currency and electronic money, and to bequeath them.[25] According to the Decree, the residents were allowed to exclude revenue and profits from operations with tokens from the taxable base until 1 January 2023.[5][7] The decree authorises individuals to buy and sell tokens without elevating this activity to the rank of entrepreneurial activity and exempting them from the need to declare tokens and income from transactions with them. The peculiarity of the introduced regulation is that all operations must be carried out through the resident companies of the High Technology Park.[26][5]

In addition, the decree includes:[5][7][23]

  • Extension of the validity period of the special legal regime of the High-Tech Park until January 1, 2049, and expansion of the list of activities of resident companies. Under the new rules, developers of blockchain-based solutions, developers of machine learning systems based on artificial neural networks, companies from the medical and biotechnological industries, developers of unmanned vehicles, as well as software developers and publishers can become residents. The list of promising areas is unlimited and can be expanded by the decision of the High-Tech Park supervisory board.
  • Preservation of existing benefits for resident companies in the High-Tech Park, including the cancellation of the profit tax (instead of which a contribution of 1% of the gross revenues proceeding to the administration of the park is applied), reduced to 9% of the personal income tax rate for employees, and the right to contribute to the Social Protection Fund according to the national average figures, and not the actual salaries.
  • Exemption of foreign companies providing marketing, advertising, consulting and other services to the residents of the High-Tech Park from paying value-added tax, as well as paying income tax, which allows to promote IT products of Belarusian companies in foreign markets. To encourage investments, the Decree also exempts foreign companies from the tax on income from the alienation of shares, stakes in the authorized capital and shares in the property of residents of the High-Tech Park (under condition of continuous possession of at least 365 days).
  • Introduction of individual English law institutions for residents of the High-Tech Park, which will make it possible to conclude option contracts, convertible loan agreements, non-competition agreements with employees, agreements with responsibility for enticing employees, irrevocable powers of attorney and other documents common in international practice. This measure is aimed at simplifying the structuring of transactions with foreign capital.
  • Simplification of the regime of currency transactions for residents of the High-Tech Park, including the introduction of a notification procedure for currency transactions, the cancellation of the mandatory written form of foreign trade transactions, the introduction of confirmation of the conducted operations by primary documents drawn up unilaterally. Also, the decree removes restrictions on resident companies for transactions with electronic money and allows opening accounts in foreign banks and credit and financial organizations without obtaining permission from the National Bank of the Republic of Belarus.
  • Simplification of the procedure for recruiting qualified foreign specialists by resident companies of the High-Tech Park, including the abolition of the recruitment permit, the simplified procedure for obtaining a work permit, and the visa-free regime for the founders and employees of resident companies with a term of continuous stay of up to 180 days.

Discussion

The publication of the key points of the “Decree 2.0” in June 2017 was warmly on that momentreceived by the participants of the IT industry, but faced criticism from one of Belarusian economists.[27] A noteworthy episode was the remote debate of Sergei Chaly, an economist and on that moment the host of the TV show "Economics in lay terms", and Nikolay Markovnik, general manager of the investment company VP Capital Belarus, which belongs to Viktor Prokopenya. Chaly expressed his point of view in the release of his own program and an interview to the European Radio for Belarus, and Markovnik – in columns on the Internet sources Dev.by, KYKY.ORG and TUT.BY.[28][19]

According to the economist, the authors of the decree draft should focus on the overall development of civil law reform, the beneficial effect of which would affect all sectors of the economy.[29] Markovnik answered to Chaly that the reform should start in a testbox which would be used later for overall reform, so the authors of the Decree focused on the IT-sphere they understand and on the obstacles to its growth.

Chaly supposed that the tax preferences created by the Decree for the IT market within the High-Tech Park will be provided at the expense of taxes from other branches of the Belarusian economy. According to Markovnik, reducing the bureaucratic burden on the IT companies in the future will serve as a precedent for changes in other sectors of the economy (as it happened earlier with the introduction of a flat scale of income tax and contributions to the Social Protection Fund, first implemented in the High Technology Park in 2005, and then everywhere in 2009) and they are building Communism in IT sector.

Chaly supposed that the activities of the resident companies of the park are not very promising given their record, since the IT startup market is controlled by large international corporations. Markovnik pointed out that the orientation of Belarusian IT companies to foreign markets means that the support of their work can only harm their foreign competitors, and the Belarusian economy will only benefit from increased tax revenues of IT companies.

According to the economist, unmanned cars are not introduced into Belarus and have no demand for their current price, crypto-currencies could be risky economic bubbles, and the technology of the blockchain is technical not legal, and is only applicable to the operation of cryptocurrencies. Markovnik, being himself a lawyer, also blamed the opponent for not understanding modern technologies (unmanned cars, blockchain technology), claimed that the best world education is now offered at Coursera and Khanacademy, and noted that the expanded list of the directions of work at the High-Tech Park was drawn up taking into account the main trends, and the Decree creates the legal basis necessary for the development of breakthrough technologies.[19][14]

One of the developers of the document, attorney Denis Aleinikov noted that as a result of the Decree introduction, Belarus has not only adopted the widespread institutions of UK law like convertible bonds, non-compete agreements, but also has become the first country in the world to legalize smart contracts.[7]

Results and influence

Criticism

Tut.by reported that due to one of the tax benefits of Decree, social security payments are levied from employers and paid to the employees of IT companies calculated not on the basis of their real amounts, which are substantially higher than the average salary, but calculated and paid based on the amount of the country average salary. This leads to low social payments to IT employees for the sick leaves, consequently, IT employees prefer not to take sick leave.[30]

References

  1. ^ Loyko, Olga (2017-03-01). "Чудо или упущенные возможности? За что ополчились на самую расхваленную отрасль Беларуси" [Miracle or missed opportunities? Why the most vaunted industry in Belarus was criticised?] (in Russian). Tut.by. Archived from the original on 2018-01-22. Retrieved 2018-01-21.
  2. ^ Gennady, Mozheyko (2017-03-02). "Увольнение Валерия Цепкало: еще вчера он обсуждал долгосрочные планы на будущее" [Valery Tsepkalo dismissed: only yesterday he discussed long-term plans for the future] (in Russian). Komsomolskaya Pravda. Retrieved 2018-01-21.
  3. ^ "Лукашенко обещает дальнейшую поддержку развитию IT-сферы в Беларуси" [Lukashenko promises further support for IT sector in Belarus] (in Russian). Novosti Belarusi. 2017-03-13. Retrieved 2018-01-21.
  4. ^ "Лукашенко поручил создать в Беларуси совет по развитию IT-технологий" [Lukashenko orders to create a council for IT development in Belarus] (in Russian). Novosti Belarusi. 2017-03-13. Retrieved 2018-01-21.
  5. ^ a b c d "Проект декрета о ПВТ: криптовалюты, упрощение учёта, приход инвестфондов" [Draft RTW decree: cryptocurrencies, simplification of accounting, arrival of investment funds] (in Russian). Dev.by. 2017-07-17. Retrieved 2018-01-21.
  6. ^ "Лукашенко рассчитывает привлечь в Беларусь лучшие ИТ-компании со всего мира" [Lukashenko expects to attract the best IT companies from all over the world to Belarus] (in Russian). Dev.by. 2017-04-21. Retrieved 2018-01-21.
  7. ^ a b c d Cite error: The named reference regulations was invoked but never defined (see the help page).
  8. ^ Andrei Makhovsky (2017-12-22). "Belarus adopts crypto-currency law to woo foreign investors". Reuters. Retrieved 2019-01-07.
  9. ^ Claudia Patricolo (2017-12-26). "ICT Given Huge Boost in Belarus". Emerging Europe. Retrieved 2019-01-07.
  10. ^ "Денис Алейников: Беларусь может легализовать смарт-контракт первой в мире" [Denis Aleinikov: Belarus can legalise smart contract first in the world] (in Russian). Office Life. 2017-11-12. Archived from the original on 2019-02-07. Retrieved 2019-02-06.
  11. ^ Loyko Olga (2017-08-17). "Google купил белорусскую компанию AIMATTER Мельничека и Гурского" [Google acquired Melnicek and Gursky's Belarusian company AIMATTER] (in Russian). Tut.by. Archived from the original on 2019-02-07. Retrieved 2019-02-06.
  12. ^ "Что дадут нормы английского права белорусским технологичным компаниям — комментарий Дениса Алейникова" [What English law will give Belarusian technology companies - commentary by Denis Aleinikov] (in Russian). Pro Business. 2017-12-18. Retrieved 2019-02-06.
  13. ^ "«Айтишный Гонконг для славянского мира» Что за «революционный» закон в IT-сфере приняла Белоруссия" (in Russian). Meduza. 2017-12-23. Retrieved 2019-02-06.
  14. ^ a b Nikolay Markovnik (2017-07-26). "Айтишный топ против Чалого: А за "кастрированный блокчейн" еще придется извиниться" [IT top vs Chalyy: And for the "neutered blockchain" will have to apologise] (in Russian). Tut.by. Archived from the original on 2018-01-18. Retrieved 2018-01-21.
  15. ^ "Как будет выглядеть ИТ-страна: с беспилотниками, криптовалютами и без бюрократии" [What IT country will look like: with drones, cryptocurrencies and no bureaucracy] (in Russian). Tut.by. 2017-07-17. Archived from the original on 2021-01-17. Retrieved 2018-01-21.
  16. ^ "Ключевой документ по либерализации в экономике Беларуси вынесен на рассмотрение Лукашенко" [The key document on liberalisation in the Belarusian economy is submitted for Lukashenko's consideration] (in Russian). Tut.by. 2017-09-26. Archived from the original on 2018-01-22. Retrieved 2018-01-21.
  17. ^ "Неделя за 10 ссылок: пряники проекта нового декрета о ПВТ" [A week for 10 links: perks of the new IT decree] (in Russian). Dev.by. 2017-07-17. Retrieved 2018-01-21.
  18. ^ Sergey Chaly (2017-07-20). "Государство махнуло рукой на традиционную экономику и схватилось за соломинку IT?" [Has the state wavered from the traditional economy and grasped at the straws of IT?] (in Russian). Tut.by. Archived from the original on 2018-01-18. Retrieved 2018-01-21.
  19. ^ a b c Nikolay Markovnik (2017-08-01). ""Сергей, проснитесь!" или 5 вопросов о Декрете ПВТ и "кастрированном" блокчейне Чалому от Марковника" ["Sergey, wake up!" or 5 questions from Markovnik to Chaly about the Decree No. 8 and the "neutered" blockchain] (in Russian). Kyky. Retrieved 2018-01-21. Cite error: The named reference "debate" was defined multiple times with different content (see the help page).
  20. ^ Pavel Sverdlov (2017-07-28). ""Декрет о ПВТ 2.0" с двойным дном. Сергей Чалый отвечает айтишникам" ["Decree on RTW 2.0" with a double bottom. Sergey Chaly responds IT specialists] (in Russian). Euroradio.fm. Retrieved 2018-01-21.
  21. ^ "Декрет о цифровой экономике согласован в самой либеральной редакции" [Decree on the digital economy signed in the most liberal version] (in Russian). Udf.by. 2017-12-05. Retrieved 2018-01-21.
  22. ^ "Президент Республики Беларусь Александр Лукашенко 21 декабря подписал Декрет № 8 "О развитии цифровой экономики"" [On 21 December, President of the Republic of Belarus Alexander Lukashenko signed Decree No. 8 "On the Development of the Digital Economy"] (in Russian). Press Service of the President of the Republic of Belarus. 2017-12-21. Retrieved 2018-01-21.
  23. ^ a b ""Айтишный Гонконг для славянского мира" Что за "революционный" закон в IT-сфере приняла Белоруссия" [IT Hong Kong for the Slavic World" What a "revolutionary" law in the IT sphere Belarus has adopted] (in Russian). Meduza. 2017-12-23. Retrieved 2018-01-21.
  24. ^ "Decree No.8". Belarus High-Tech Park. 2018-01-19. Retrieved 2024-06-17.
  25. ^ Luzgina, Anastasiya (2024-05-16). "The ICT Sector in Belarus: From Growth to Contraction". SCEEUS. Retrieved 2024-06-14.
  26. ^ Artyom Garbacevich (2017-12-12). "В чем прорыв будущего декрета об ИТ?" [What is the breakthrough of the future IT decree?] (in Russian). Nasha Niva. Retrieved 2018-01-21.
  27. ^ "Неделя за 10 ссылок: пряники проекта нового декрета о ПВТ" (in Russian). Dev.by. 2017-07-17. Retrieved 2018-01-21.
  28. ^ Сергей Чалый (2017-07-20). "Государство махнуло рукой на традиционную экономику и схватилось за соломинку IT?" (in Russian). Новости Tut.by. Archived from the original on 2018-01-18. Retrieved 2018-01-21.
  29. ^ Павел Свердлов (2017-07-28). ""Декрет о ПВТ 2.0" с двойным дном. Сергей Чалый отвечает айтишникам" (in Russian). Euroradio.fm. Retrieved 2018-01-21.
  30. ^ ""До последнего ходят на работу". Почему некоторые айтишники не хотят пользоваться больничными" (in Russian). Tut.by. 2018-07-15. Archived from the original on 2018-07-25. Retrieved 2018-07-25.
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