25 October 2004 № J-178/2004
The Constitutional Court of the Republic of Belarus in composition of the Presiding Officer - Chairman of the Constitutional Court G.A. Vasilevich, Deputy Chairman A.V. Maryskin, judges T.S. Bojko, K.I. Kenik, V.V. Podgrusha, A.G. Tikovenko, R.I. Filipchik, G.B. Shishko, V.Z. Shuklin
with participation of representatives:
of the House of Representatives of the National Assembly of the Republic of Belarus - V.F. Kuchinsky, Deputy of the House of Representatives of the National Assembly of the Republic of Belarus;
of the Ministry of Taxes and Dues of the Republic of Belarus - L.A. Kondratova, Deputy Minister of Taxes and Dues of the Republic of Belarus, A.Ch. Sundukova, Head of Department of International Tax Relations of the Ministry of Taxes and Dues of the Republic of Belarus, A.A. Selitskaya, Head of Legal Department of the Ministry of Taxes and Dues of the Republic of Belarus
has examined in open court session the case "On the conformity between the Constitution, legislative acts of the Republic of Belarus, international legal acts ratified by the Republic of Belarus, Resolutions of the State Tax Committee of the Republic of Belarus of 8 May 2001 No. 62 "On procedure of payment of tax from income of foreign legal entities earning the income from operations with stocks from the sources in the Republic of Belarus" and of 25 May 2001 No. 72 "On approval of Instruction on taxation of "other income" of foreign legal entities which carry out activities in the Republic of Belarus through the permanent mission".
The court session was attended by:
V.N. Vyshkevich - First Deputy Chairman of the Supreme Court of the Republic of Belarus; L.G. Kozyreva - Deputy Head of the Supreme Economic Court of the Republic of Belarus, N.M. Kuprijanov - Deputy Procurator-General of the Republic of Belarus; V.Y. Kalugin - First Deputy Minister of Justice of the Republic of Belarus.
The proceedings have been brought by the Constitutional Court of 28 June 2004 as a result of the constitutional motion of the House of Representatives of the National Assembly of the Republic of Belarus on the grounds of Article 116 of the Constitution of the Republic of Belarus, Articles 5 and 6 of the Law "On the Constitutional Court of the Republic of Belarus" and Article 43 of the Rules of Procedure of the Constitutional Court.
The subject to verification were the Resolutions of the State Tax Committee of the Republic of Belarus of 8 May 2001 No. 62 "On procedure of payment of tax from income of foreign legal entities earning the income from operations with stocks from the sources in the Republic of Belarus" (National register of legal acts of the Republic of Belarus, 2001, No. 55, 8/6218) (invalid as a result of adoption of Resolution of the Ministry on Taxes and Dues of the Republic of Belarus of 14 October 2003, No. 92) and of 25 May 2001 No. 72 "On approval of Instruction on taxation of "other income" of foreign legal entities which carry out activities in the Republic of Belarus through the permanent mission" (National register of legal acts of the Republic of Belarus, 2001, No. 59, 8/6259; 2002, No. 63, 8/8134; No. 120, 8/8679; 2003, No. 76, 8/9704) (invalid as a result of adoption of Resolution of the Ministry on Taxes and Dues of the Republic of Belarus of 28 October 2003, No. 97).
The House of Representatives has specified in its motion that Resolution of the State Tax Committee of the Republic of Belarus of 8 May 2001 No. 62 "On procedure of payment of tax from income of foreign legal entities earning the income from operations with stocks from the sources in the Republic of Belarus" (hereinafter is also referred to as Resolution No. 62) as regards violation Articles 70 and 71 of the Law "On enforceable legal acts of the Republic of Belarus" contains extended interpretation of the norms of Decree of the President of the Republic of Belarus of 23 December 1999 No. 43 "On taxation of income gained in certain spheres of activities" (hereinafter is also referred to as Decree No. 43) in part of referring foreign legal entities which do not carry out activities in the Republic of Belarus through a permanent mission to the payers of income tax under Decree No. 43.
In the opinion of the House of Representatives, point 3 of Instruction on taxation of "other income" of foreign legal entities which do not carry out activities in the Republic of Belarus through a permanent mission approved by Resolution of the State Tax Committee of the Republic of Belarus of 25 May 2001 No. 72 (hereinafter is also referred to as Instruction No. 72) contained substitution of one notion - "income from alienation of stocks, bonds and other securities" contained in Resolution of the Cabinet of Ministers of the Republic of Belarus of 26 July 1996 No. 492 "On issues on income and profit taxation" (invalid as a result of adoption of Resolution of the Council of Ministers of the Republic of Belarus of 12 May 2004 No. 551) for another notion - " income from realization (retirement) of securities" stipulated by Decree No. 43. In addition, in the opinion of the House of Representatives, retirement of a bill means its payment but not alienation or realization, i.e. the income settled the bills is not related to alienation of a bill and therefore, shall not be subject to taxation in accordance with Instruction No. 72.
The proposal specifies that for the taxation the Law "On income and profit taxes" (Article 10) specifies two types of income of foreign legal entities: "other income" - at the rate of 15 per cent (list of incomes of foreign legal entities which are subject to taxation as "other income" shall be determined by the Council of Ministers of the Republic of Belarus); income from debt instruments (demands) of any kind, in particular, bonds (except for the state bonds), bills, loans, (contributions, deposits, credits, use of temporarily free resources on the accounts in the banks of the Republic of Belarus), - at the rate of 10 per cent. Instruction No. 72 has specified that the tax to "other income" of foreign legal entities shall be paid at the rate of 15 per cent (point 2), and the income tax from realization (retirement) of securities - at the rate of 40 per cent (sub-item 2.1 of point 2). At the same time, sub-item 3.2 of point 3 of Instruction No. 72 has included income from realization (retirement) of securities into the list of "other income". Thus, the House of Representatives considers that Instruction No. 72 is at variance with the Law "On income and profit taxes" both as regards types of "other income" and regarding the fixed rates on the payment of the tax on "other income".
The proposal specifies that Article 10 of the Law "On income and profit taxes" regulates taxation of income from debt instruments and the bills are referred thereto. At the same time, Instruction No. 72 without the norms in question taking into account shall envisage taxation of income formed as the difference between the price of realization (retirement) of a security by a foreign legal entity and the price of acquisition with the privileges stipulated by Decree No. 43 taking into account. Thereby, yield of a bill shall be subject to double income tax, and, therefore, in the opinion of the House of Representatives, Instruction No. 72 is not in line with point 1 of Article 5 of the Law "On taxes and dues collected into the budget of the Republic of Belarus" which enshrined that the same object may be subject to the same tax only once within the relevant payment period. The House of Representatives also deems that Instruction No. 72 is at variance with the ratified by the Republic of Belarus agreements on avoidance of double taxation both as regards direct effect of the norms (Instruction presupposes complex procedure of exemption from double taxation) and fixation of tax income interest rate exceeded 10 per cent of total (gross) interests' sum stipulated by the agreements concluded between the Government of the Republic of Belarus and the Governments of the Republic of Moldova, Kyrgyzstan Republic, Russian Federation.
The Constitutional Court, based on the content of the proposal of the House of Representatives and on the ground of its right to specify the frames for settlement of the issues put for consideration (Article 11 of the Law "On Constitutional Court of the Republic of Belarus") is confined itself to examination of Resolution No. 62 and Instruction No. 72 as regards their conformity to the Constitution and legislative acts of the Republic of Belarus, international agreements about avoidance of double taxation concerning the provisions on taxation of income from operations with securities (realization (repayment) of securities) of foreign legal entities which do not carry out activities in the Republic of Belarus through thepermanent mission.
Having heard the Judge-speaker, Mrs. T.S. Bojko, representatives as parties, analyzed the provisions of the Constitution, international agreements, legislative and other enforceable legal acts of the Republic of Belarus, studied the practice and other materials of the case, the Constitutional Court held the following.
1. Part one of Article 1 of the Law "On taxes and dues collected into the budget of the Republic of Belarus" has specified that "legal persons (including enterprises with foreign investments and foreign legal entities), their branches, agencies and other isolated departments irrespective of their subordination and forms of ownership, as well as natural persons should pay into the budget the taxes and dues in instances stipulated by the legislation of the Republic of Belarus". Thus, the Law in question, which at the moment of adoption of the enforceable enactments under verification, shall be the basis of the unified tax system of the Republic of Belarus, both legal entities of the Republic of Belarus and foreign legal entities have been regarded to legal entities.
Legislation sometimes stipulates differentiated approach to specification of the circle of payers, rates and object of taxation. Thus the Law "On income and profit taxes" shall specify in its Chapter the peculiarities of calculation of income and profit taxes of foreign legal entities both those which carry out activities in the Republic of Belarus through the permanent mission and without such. Article 10 of the given Law shall fix, in particular, rates of taxes on income of foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission: on dividends, royalty, licenses, "other income" - at the rate of 15 per cent; on income from debt instruments (demands) of any kind, in particular, bonds (except for state bonds), bills, loans - 10 per cent.
In accordance with the legislation of the Republic of Belarus, the obligation on deduction of income tax of foreign legal entities, which do not carry out activities in the Republic of Belarus through the permanent mission has been given the tax agents, i.e. legal and natural persons paying an income for a foreign legal entity.
For the purposes of improvement of mechanism of taxation of income gained in certain spheres of activities, Decree No. 43 issued in accordance with part three of Article 101 of the Constitution shall stipulate that the income tax shall be paid by banks, non-bank credit and financial establishments, insurance and reinsurance organizations - at the rate of 30 per cent, and by other legal entities on income from operations with securities - at the rate of 40 per cent. Decree in question has been enforced since 1 January 2000 and has been taken into consideration by the Chambers of the National Assembly of the Republic of Belarus.
The Constitutional Court emphasizes that Decree No. 43 has specified equally with banks, non-bank credit and financial establishments, insurance and reinsurance organizations also "other legal entities" and, at the same time, fixed no exclusions as regards "other legal entities", and that may be interpreted as covering by the norms of Decree No. 43 all the circle of subjects of taxation gaining income from realization (retirement) of securities in the Republic of Belarus. Decree No. 43 contains no norms envisaging special procedure for taxation of income from realization (retirement) of securities for foreign legal entities. It also contains no indications that its provisions shall cover only the legal entities of the Republic of Belarus.
Decree of the President of the Republic of Belarus of 12 November 2003 No. 22 has made alterations in sub-item 1.1 of point 1 of Decree No. 43 under which income of banks, non-bank credit and financial establishments, insurance organizations, as well as other organizations specified by point 2 of Article 13 of the Common Part of the Tax Code of the Republic of Belarus for operations with securities shall be subject to income tax. According to point 2 of Article 13 of the Common Part of the Tax Code of the Republic of Belarus the foreign legal entities shall be also deemed to be foreign legal entities.
Due to the fact that Decree No. 43 shall specify the circle of tax-payers on tax income from operations with securities without any exception (circle of tax-payers is covered equally with specification of concrete subjects by using the term "other legal entities" and that shall give ground to refer to this circle all the legal entities without exception), therefore, the Constitutional Court sees no legal grounds for finding that in the context of Decree No. 43 foreign legal entities are not referring to "other legal entities".
This conclusion is also confirming by the fact that according to the information of the Ministry on Taxes and Dues of the Republic of Belarus, from among nine banks (tax agents), which were subject to inspection, six banks have deducted the income tax from operations with securities at the rate of 40 per cent, and as a result of inspection of two banks additional calculation of the tax sum and sanctions entered the budget without their judicial appeal.
Under the Law "On the Constitutional Court of the Republic of Belarus" while verifying an act, the Constitutional Court shall bear in mind both its literal meaning and the meaning attached to it by the practice of application.
2. According to Article 2 of the Law "On state tax inspection of the Republic of Belarus" and point 3 of Provision on State Tax Committee of the Republic of Belarus approved by Resolution of the Council of Ministers of the Republic of Belarus of 11 April 1997 No. 333, one of the main tasks of the State Tax Committee was issue of methodical instructions and explanations on procedure of calculation, accounting and collection of taxes and other payments into the budget. In accordance with point 7 of the given Provision the State Tax Committee within its competence has issued in the prescribed procedure the orders, instructions, methodical instructions, has given explanations and instructions which are obligatory for execution by all ministries and other republican state bodies, enterprises, establishments, organizations and citizens.
State Tax Committee of the Republic of Belarus (at present - Ministry of Taxes and Dues of the Republic of Belarus) for the purposes of explanation of application of Decree No. 43 in Resolution of 8 May 2001 No. 62, in particular, has stipulated that foreign legal entities on the income gained in the territory of the Republic of Belarus from operations with securities shall pay the income tax under Decree No. 43 at the rate of 40 per cent. The object of taxation shall be the total sum of income from realization (retirement) of securities taking into account the privileges specified by Decree No. 43 (point 1); income tax from operations with securities gained by a foreign legal entity which does not carry out activities in the Republic of Belarus through the permanent mission shall be deducted and transferred into the budget on or before the date after the day of calculation of the payment (point 3).
Since Decree No. 43 equally with indication of the concrete subjects uses the term "other legal entities", and, in fact, covers all the circle of tax-payers, the Constitutional Court deems that explanations of points 1 and 3 of Resolution No. 62 are not beyond the provisions of Decree No. 43.
The Constitutional Court underlines that although Resolution No. 62 has been adopted of 8 May 2001, i.e. after about one year and a half after enforcement of Decree No. 43, but before its adoption there were effective Methodical Instructions "On procedure of taxation of income gained in certain spheres of activities, approved by Resolution of the State Tax Committee of the Republic of Belarus of 10 February 2000 No. 3. Provisions of the specified Methodical Instructions as regards explanation of the circle of tax-payers, object of taxation and application of the rates of income tax from operations with securities have repeated the norms of Decree in the main. However, at the same period of time there were effective methodical Instructions of the Main State tax inspection under the Cabinet of Ministers of the Republic of Belarus of 21 May 1996 No. 14 on calculation of income and profit tax of foreign legal entities (invalid due to adoption of Resolution of the Ministry of taxes and dues of 14 October 2003 No. 92) and Methodical Instruction "On taxation of "other income" of foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission" approved by order of the State Tax Committee of the Republic of Belarus of 2 May 1997 No. 7 with alterations and addenda of 3 February 2000 No. 1 (invalid due to adoption of Resolution of the State Tax Committee of the Republic of Belarus of 25 May 2001 No. 72) which repeated the norms of the Law "On income and profit taxes" and which contained explanations of its provisions as regards the object of taxation and application of the rates for foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission on income from bonds, bills and "other income" without taking into account the provisions of Decree No. 43.
Such an ambiguous legal regulation is becoming complicated due to the fact that the Law "On income and profit taxes" after enforcement of 1 January 2000 of Decree No. 43 has not been amended as regards taxation of income of foreign legal entities from operations with securities, although point 2 of Decree No. 43 has ordered the Council of Ministers within two months period of time to make proposals on bringing the legislative acts into line with the Decree in question. Moreover, Article 10 of the given Law has been corrected time and again after enforcement of Decree No. 43, but the specified in this Article rates and other elements of taxation of foreign legal entities on income from bonds and bills have not been amended.
Having studied the practice, the Constitutional Court underlines that the situation with application of concrete scale of tax rates was aggravated by the fact that the official sites of a number of state bodies which are responsible for pursuing economic and tax policy, as well as in official printing edition (Vestnik of the Ministry on Taxes and Dues of the Republic of Belarus. 2004. No. 3 C. 106, 110), which are issuing for the tax-payers, contained the information not only about the tax rates of income of banks, non-banking credit and financial establishments, insurance and re-insurance organizations, but also there have been singled out the item on payment of income tax of the concrete subject - foreign legal entity which does not carry out activities in the Republic of Belarus through the permanent mission at the rate of 10 and 15 per cent.
The multi-valued nature of understanding the norms of the legislation concerning taxation of foreign legal entities shall display that even the tax bodies after expiry of several months after the adoption in May 2001 of Resolutions of the State Tax Committee No. 62 and No. 72 have met the doubts with respect to the proper rate for the calculation of the tax of income of foreign legal entities from realization (retirement) of securities.
Due to that, the Constitutional Court has come to the conclusion that the effective within the specified period of time enforceable legal acts have not promoted clarification of what norms shall the source of payment of income (tax agent) be guided in practice by fixing the tax rate from operations with securities: Law "On income and profit taxes" which stipulated 10 and 15 per cent or Decree No. 43 which has fixed 40 per cent.
3. Analysis of Article 10 of the Law "On income and profit taxes" shall signify that initially the object of taxation were the income as per cent. The Law of 19 April 1996 has given a new wording of point 1 of Article 10 of the Law in question. It stipulated such an object of taxation as income from debt instruments (demands) of any kind, in particular, bonds (except for state bonds), bills, loans (deposits, credits, use of temporarily free funds on the accounts in the banks of the Republic of Belarus). At the same time, the Law has not determined which income from debt instruments (percentage, discount or etc.) shall compose taxation base.
Point 1 of Article 10 of the Law "On income and profit taxes" envisages also that the object of taxation may be also "other income" the list of which shall be specified by the Government. This List was approved by Resolution of the Cabinet of Ministers of the Republic of Belarus of 26 July 1996 No. 492 "On issues of collection of income and profit taxes". Income as a result of alienation of stocks, bonds and other securities without determination of the notion of this income was referred to "other income". The presence in the given list of income as a result of alienation of stocks, bonds and other securities shall be admissible only before the enforcement of Decree No. 43.
In accordance with point 2 of Decree No. 43 the Council of Ministers was ordered within two months period to take the measures aimed at realization of provisions of the Decree in question. Due to that, the List of income of foreign legal entities which is subject to taxation as "other income" approved by Resolution of the Cabinet of Ministers of the Republic of Belarus of 26 July 1996 No. 492 by way of exclusion from it of income as a result of alienation of stocks, bonds and other securities had to be brought into line with the provisions of Decree No. 43. However, the specified List has not been amended properly, in spite of the fact that after the enforcement of Decree No. 43 the given List has been corrected twice (Resolutions of the Council of Ministers of the Republic of Belarus of 16 April 2001 No. 527 and of 26 June 2002 No. 855). Moreover, Resolution of the Council of Ministers of the Republic of Belarus of 12 May 2004 No. 551 "On issues of collection of income and profit taxes" which found to be invalid Resolution of the Cabinet of Ministers of the Republic of Belarus of 26 July 1996 No. 492 has added again the List of types of income of foreign legal entities which are subject to taxation as "other income" by the income gained as a result of alienation of the stocks, bonds and other securities. Thereby, the Government has practically oriented the source of payment of income (tax agent) for the foreign legal entity, which does not carry out activities in the Republic of Belarus through the permanent mission to the application of the rate fixed in the Law "On income and profit taxes", i.e. 15 and not 40 per cent, as it is stipulated by Decree No. 43. However, due to the supremacy of Decree No. 43 with respect to Resolution of the Government the rate of 40 per cent, fixed by Decree No. 43, should be applied while carrying out taxation of income from operations with securities.
In accordance with sub-item 1.2 of point 1 of Decree No. 43 the object of taxation for "other legal entities" which carry out activities with securities there shall be recognized the full sum of income from realization (retirement) of securities in tax period. Sub-item 1.3 of point 1 of the Decree in question shall specify that taxation base shall be determined for "other legal entities", which carry out operations with securities as a difference between the price of realization (retirement) of securities in tax period and the price of their acquirement taking into account the expenses for acquisition and realization. According to sub-item 1.13 of point 1 of the specified Decree the terms and procedure of payment of income tax shall be specified by the Council of Ministers of the Republic of Belarus.
The Constitutional Court notes that analysis of the norms of Decree No. 43 and the Law "On income and profit taxes" shall make it possible to give the conclusion that Decree No. 43 has removed from regulation of the specified Law taxation of income from operations with securities by giving concrete expression to taxation base, as well as by fixing the 40 per cent rate of the object in question. Therefore, since 1 January 2000 income of legal entities from operations with securities shall be subject to taxation in accordance with Decree No. 43.
4. Sub-item 2.1 of point 2 of Instruction No. 72 has explained that as for the income from realization (retirement) of securities the income from realization (retirement) of securities shall be paid at the rate of 40 per cent. According to sub-item 3.2 of point 3 of the given Instruction the income from realization (retirement) of securities shall be income as a result of difference between the price of realization (retirement) by a foreign legal entity and the price of acquisition, taking into account the privileges determined by Decree No. 43. Instruction No. 72 in this part is based on the relevant provisions of Decree No. 43.
By making estimation of the reasons of the House of Representatives as for the substitution of one notion - "income from alienation of stocks, bonds and other securities" which contained in Resolution of the Cabinet of Ministers of 26 July 19996 No. 492, for another notion - "income from realization (retirement) of securities" stipulated by Decree No. 43, the Constitutional Court deems that for the purposes of taxation the differences of notions have no decisive nature.
Taking into account the above mentioned, the Constitutional Court deems that the provisions of Instruction No. 72 as regards taxation of income from operations with securities were in line with the provisions of Decree No. 43.
At the same time, the Constitutional Court notes that Instruction No. 72 contained the provisions explaining application of the rate of 40 per cent from realization (retirement) of securities and taxation base, whereas preamble to the Instruction (before making alterations and addenda by Resolution of the Ministry on Taxes and Dues of the Republic of Belarus of 13 June 2003 No. 68) contained the reference not to Decree No. 43, but to the Law "On income and profit taxes" which specify the peculiarities of calculation of income and profit taxes of foreign legal entities, the 15 percentage rate on "other income" has been also fixed.
5. Article 8 of the Constitution enshrines that the Republic of Belarus shall recognize the supremacy of the universally acknowledged principles of international law and ensure that its laws comply with such principles.
It shall be in line with the given constitutional provision point 4 of Resolution No. 62 envisaging that unless otherwise specified by an international treaty of the Republic of Belarus, then the provisions of this international treaty shall be subject to application, as well as point 9 of Instruction No. 72 which shall also specify that if an international treaty specifies other rules, then the rules of the international treaty shall be subject to application.
In the Republic of Belarus at the moment of examination of the case there were about 50 effective international treaties on avoidance of double taxation. Certain agreements contain the provisions, which grant the Republic of Belarus the right to tax an income as per cent, if a recipient is a true owner of percentage at the rate of not more than 10 per cent of the total sum of percent (item "Percentage"). The term "percentage" in the use of those agreements shall mean income from debt instruments of any kind, irrespective of mortgage securing and regardless of having the right to participate in the profits of a debtor and, in particular, income from governmental securities and income from the bonds and debt instruments, including bonus and winnings from those securities, bonds or debt instruments.
The Constitutional Court emphasizes that the provisions of obligations shall be applied to the persons who are residents of one or both Contracting States where the Republic of Belarus is a party. The given agreements contain no procedure of confirmation of the status of a resident. This procedure shall be established by the national tax legislation.
In accordance with part three of Article 15 of the Law "On international treaties of the Republic of Belarus" the norms of the law in the effective international treaties of the Republic of Belarus shall be the part of the effective legislation in the territory of the Republic of Belarus, shall be subject to direct application, except for the instance, where under the international treaty the application of the norms in question presupposes the requirement of issuing the national act, as well as shall have the legal force of the legal act which expresses the consent of the Republic of Belarus to have the relevant international treaty to be binding.
According to point 3 of Article 10 of the Law "On income and profit taxes" a foreign legal entity, which under the international treaty of the Republic of Belarus has the right to full or partial release from income tax from the sources in the Republic of Belarus, shall apply for reducing or repeal of the tax under the procedure specified by the Ministry on Taxes and Dues of the Republic of Belarus.
Procedure for the application and the procedure of its examination have been determined in Chapter 5 "Special provisions" of Instruction No. 72. In particular, sub-item 9.1 of point 9 of Instruction No. 72 shall specify that for the full or partial exemption from payment of income tax the foreign legal entity is bound itself or through the person deducting the taxes into the budget of the Republic of Belarus to submit to the tax bodies the official confirmation of the fact of permanent locality of this person in the country and the Republic of Belarus has the relevant effective international (intergovernmental) agreement on tax issues with this country. Submission of the official confirmation of the fact of permanent locality of the foreign legal entity by the person deducting the tax into the budget of the Republic of Belarus may be carried out without the warrant. Confirmation about permanent staying of the foreign legal entity may be submitted to the tax bodies both before the payment of the tax and after the payment of the tax.
The Constitutional Court points out that the similar approach towards the confirmation of the status of the resident is enshrined in Article 312 of part two of the Tax Code of the Russian Federation under which in case of application of the provisions of international treaties of the Russian Federation the foreign organization must submit to the tax agent which pays the income the confirmation of the fact that the foreign organization in question has permanent locality in the state with which the Russian Federation has an international treaty (agreement) regulating the issues of taxation which should be certified by the competent body of the relevant foreign state.
The reasons of the House of Representatives that Instruction No. 72 is not in line with the ratified by the Republic of Belarus agreements on avoidance of double taxation as the Instruction stipulating complex procedure of exemption of double taxation, are ill-grounded and have no legal nature.
The Constitutional Court, by making evaluation of the reasons of the House of Representatives as regards the double taxation of percentage income under the bill, emphasizes that in accordance with sub-item 3.2 of point 3 of Instruction No. 72 the provisions of Article 10 of the Law "On income and profit taxes" shall not be applicable to the foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission, gain income from operations with securities from the resources in the Republic of Belarus and which are bound to pay the taxes under the tax legislation of the Republic of Belarus, since the income in question is subject to income taxation in accordance with Decree No. 43. Thus, Instruction No. 72 shall not violate the provisions of Article 5 of the Law "On taxes and dues collected into the budget of the Republic of Belarus" stipulating that the same object is subject to the same tax only once within the relevant period of payment.
For the European region it is characteristic to have more intensive process connected with the abolition of the death penalty. It has been started from the moment of adoption of the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter referred to as the European Convention) signed in Rome of 4 November 1950 by ten Member States of the Council of Europe.
Under the Constitution of the Republic of Belarus the state, all the bodies and officials thereof shall operate within the confines of the Constitution and the laws enacted in accordance therewith (Article 7); all shall be equal before the law and entitled without discrimination to equal protection of their rights and legitimate interests (Article 22). The constitutional principle of equality shall stipulate the requirement of definiteness and clarity of legislative regulation, since only under the condition of the unified understanding and interpretation of a legal norm by all law appliers this equality may be secured. Uncertainty of the content of the legislative regulation shall make the situation to be conflicting in practice, lead to subjective discretion in the process of law application. Thereby, under violation are the constitutional principles of the supremacy of the law and equality of all before the law, as well as the basic principles of taxation. Comparative analysis of wordings and effect of enforceable legal acts of various levels, first of all, the legislative acts, as well as acts of the Government and the Ministry on Taxes and Dues shall signify on contradictive nature of the used notions and definitions, references to the acts which regulate the same tax relations. On points of fact, there was no unified normative regulation, understanding and application of the acts of legislation in practice, and it is also signified by the fact that within five years period of time after adoption of Decree No. 43 Article 10 of the Law "On income and profit taxes" preserves former rates (10 and 15 per cent) to the income of foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission, but the other provisions of the given Article were subject to repeated alterations and addenda thereto.
In the state ruled by law the tax enforceable enactments must have clear and understandable norms. Everyone must know which taxes, when and what is the procedure for their payment. Indistinct nature of a tax norm may be resulted in its arbitrary application.
The Constitutional Court notes that the Law "On enforceable legal acts of the Republic of Belarus", which was enforced since 21 January 2000, shall contain the requirements on enforceable legal acts. Among them there are: consistency of an enforceable legal act with other enforceable enactments (Article 9); obligation to use in the text of enforceable enactment of the terms and notions which should be unique and understandable (Article 23); text of an enforceable enactment should be simple and clear (precluding different interpretation of the norms) (Article 31); the same terms shall be used in the same meaning and should have the same form (Article 32) etc.. (Proceeding from the subject of the issue under consideration in the given case, the Constitutional Court shall not touch upon other branches of law and evaluation of the balance of their norms).
Based on the abovementioned and guided by Article 116 of the Constitution of the Republic of Belarus, Articles 5, 6, 38, 40 and 43 of the Law "On the Constitutional Court of the Republic of Belarus", the Constitutional Court
RULED:
1. To find to be in conformity between the Constitution of the Republic of Belarus and with Decree of the President of the Republic of Belarus of 23 December 1999 No. 43 "On taxation of income gained in certain spheres of activities", with the Law of the Republic of Belarus "On taxes and dues collected into the budget of the Republic of Belarus", international legal acts, ratified by the Republic of Belarus and Resolutions of the State Tax Committee of the Republic of Belarus of 8 May 2001 No. 62 "On procedure of payment of tax from income of foreign legal persons gaining income from operations with securities from the sources in the Republic of Belarus and of 25 May 2001 No. 72 "On approval of instruction on taxation of "other income" of foreign legal entities which do not carry out activities in the Republic of Belarus through the permanent mission" in part of taxation of income from operations with securities (realization (retirement) of securities).
2. To note the contradictory nature of legal regulation of tax relations, untimely bringing of enforceable enactments (Law of the Republic of Belarus "On income and profit taxes", Resolution of the Cabinet of Ministers of the Republic of Belarus of 26 July 1996 No 492, enforceable enactments of the Ministry on Taxes and Dues of the Republic of Belarus) into line with the acts of higher legal force, as well as violations of the specified by the Law of the Republic of Belarus "On enforceable legal acts of the Republic of Belarus" requirements made on the acts of legislation (their consistency, unity of terminology, clarity of statements etc.), that entails multi-valued understanding and application of enforceable legal acts in practice.
Due to that the Government of the Republic of Belarus and other state bodies have been proposed to take steps on securing unified legal regulation, timely elimination from legal collisions, as well as on ensuring fair solution of conflict situations in the field of taxation, bearing in mind that to a certain extent the grounds for dispute arising are stipulated by imperfection of the acts of legislation, their contradictoriness, failure to take the proper steps on their elimination.
3. To publish the present Judgment within the period of time specified by the legislation in newspapers "Zvyazda" and "Narodnaya gazeta", as well as in the National register of legal acts of the Republic of Belarus and in "Bulletin of the Constitutional Court of the Republic of Belarus".
4. The present Judgment shall come into legal force from the date of its proclamation, is final and subject to no appeal or protest.
Presiding Officer —
Chairman of the
of the