Belarus to impose 13% tax on bank deposit interest in 2016

By bne IntelliNews November 12, 2015

Belarusian President Alexander Lukashenko has signed instructions to slap a new 13% tax on interest from certain bank deposits in 2016.

Lukashenko's media office did not reveal details of the document, but according to extracts seen by bne IntelliNews before their publication by state media, the new tax will apply to domestic currency deposits with terms of less than one year, and on foreign currency deposits with terms of less than two years.

Belarusian banks will calculate the sum of the tax and transfer it to the state budget under the new regulations which will take effect on April 1, 2016. Deposits with interest rates not exceeding interest rates on call deposit accounts (currently around 0.5% in Belarus) will be excluded from new regulations.

Classifications of bank deposits will also be changed: fixed-term and conditional deposit accounts will be split into irrevocable (not allowing unilateral early exit by the depositor) and revocable deposits, the National Bank of Belarus (NBB) said in a statement published on November 12.

"It will be possible to withdraw the deposit ahead of the expiration of the contract time only with the consent of the bank," the NBB added, describing irrevocable deposits. The changes apply only to newly-signed deposit agreements, the regulator emphasised.

The former Soviet republic's government has attempted to stabilise the financial environment in recent years. In 2011, Belarus was badly hit by a balance-of-payment crisis when the domestic currency lost up to two thirds of its value. In August 2015, the Belarusian ruble plummeted to a record low against the US dollar.

Meanwhile, Taras Nadolny, deputy head of the NBB, told journalists on November 12 that the new taxation rules may lead to an initial outflow of savings from banks. "Any novelties in the financial market always draw a critical reaction. At the initial stage a certain share of people will most likely be pulling deposits from banks," Nadolny said, according to BelaPAN news agency.

However, the official believes the outflow of funds will not cause liquidity problems for the country's banks. "Yesterday we met with bank executives and discussed the matter. Our conditions are that if a person wants to withdraw the deposit it should be given to him without restrictions," Nadolny said.

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