Penalties for Tax Evasion by Sole Proprietors and Self-Employed Individuals in IT
In Belarus, working in the IT sector has long gone beyond traditional employment contracts. Many developers, designers, analysts, and other professionals prefer more flexible arrangements, registering as sole proprietors or self-employed individuals. This approach is especially convenient when working with international clients: simplified reporting, minimal bureaucracy, and the ability to work independently.
However, with tax freedom comes tax responsibility. Whether you operate as a sole proprietor (SP) or a self-employed individual, you are legally required to calculate and pay taxes properly and on time. Failure to meet these obligations can result in penalties, including fines, late fees, and even restrictions on business activity. Even unintentional violations can lead to serious consequences, especially if discovered during an audit or through interagency data exchange.
In this article, we’ll look at the tax obligations for SPs and self-employed individuals in IT, the risks of failing to pay or delaying tax payments, the types of penalties and enforcement measures that may apply, and how to stay compliant with tax authorities.
Tax Regimes for Sole Proprietors and Self-Employed Individuals in IT
IT professionals in Belarus can choose from several tax schemes depending on their work format, income level, and preferred reporting complexity.
Sole Proprietors: Income Tax and Unified Tax
Sole proprietors in the IT field may be subject to income tax (relevant when working with legal entities and other SPs). This applies to services such as website development, installation (or configuration) of computers and software, computer and device repair, maintenance, and training on personal computers, laptops, tablets, or smartphones (excluding official educational programs).
Tax rate:
Sole proprietors pay personal income tax at a rate of 20%. Tax must be paid quarterly and annually. The calculation may be revised each year.
The unified tax is paid at rates that vary depending on the SP’s place of registration.
Self-Employed Individuals: Professional Income Tax (PIT) and Unified Tax
Individuals can operate without registering as sole proprietors and instead provide IT services under the Professional Income Tax (PIT) regime or Unified Tax, if services are rendered to individuals. Before choosing a tax regime, it’s recommended to compare options to determine which is more financially beneficial. Our consultants can assist with selecting the optimal tax structure.
PIT:
Individuals providing remote IT services (e.g., programming, testing, setup, design) over the internet can choose the PIT regime.
Tax rate: 10% on income up to BYN 60,000 (including from companies and SPs, both domestic and foreign). If income exceeds this threshold, 20% is applied to the excess amount.
PIT automatically includes contributions to the Social Protection Fund (SPF): 60% of the tax paid goes toward the pension system.
Unified Tax:
When providing services to individuals — including foreigners — such as website development, computer/software setup, computer repair and maintenance, or basic IT training (excluding accredited education programs), individuals may opt for the Unified Tax.
Tax rates vary depending on the place of tax registration.
- Minsk: BYN 538/month — the highest rate.
- Regional cities and Minsk region: BYN 496/month.
- Other large towns (e.g., Baranovichi, Bobruisk, Borisov, Zhlobin, Zhodino, Lida, Mozyr, Molodechno, Novopolotsk, Orsha, Pinsk, Polotsk, Rechitsa, Svetlogorsk, Slutsk, Soligorsk): BYN 469/month.
- All other areas: BYN 238/month.
Types of Taxable Income
For both tax regimes, the main sources of income for IT professionals include:
- Fees for services and contract work (e.g., development, consulting, design);
- Working with foreign clients — allowed under both SP and self-employed regimes;
- Payments under service agreements and other civil contracts;
- Any IT work or service that meets the criteria of the selected regime: remote, independent, and not location-specific.
What Is Considered Tax Evasion for Individual Entrepreneurs and Self-Employed Professionals in the IT Sector
For individual entrepreneurs (IEs) and self-employed individuals in IT, it’s essential to understand that violating tax obligations can lead not only to additional tax assessments but also to fines, penalties, suspension of activity, and other consequences. Tax violations aren’t limited to complete failure to pay taxes—they may also include technical mistakes in reporting and deadlines. Let’s review the main scenarios:
1. Complete Failure to Pay Taxes
If a person earns income from IT activities (e.g., through contracts with clients in Belarus or abroad) but is not registered with the tax authority and does not pay taxes as required, this is considered a serious violation. Such conduct may be classified as operating without registration or deliberately evading taxation.
Common examples include:
- Working “off the books” without registering as an IE or choosing a taxation regime (e.g., not registering as self-employed through the “Profitable Income” mobile app).
- Deliberately ignoring tax obligations, even when client payments are received in the bank account.
2. Hiding Part of the Income (“Working in the Shadows”)
Even if officially registered as an IE or self-employed, individuals must report all income in the tax app or declarations. Failing to declare part of the income (e.g., when some client payments bypass the accounting system) is also considered tax evasion.
Typical cases:
- Underreporting actual revenue.
- Incomplete declaration of foreign currency earnings.
- Receiving payments in cash or to third-party accounts without proper reporting.
3. Declaration Errors
Sometimes violations happen unintentionally—due to inattention, lack of financial literacy, or technical glitches. However, even accidental mistakes do not exempt one from liability.
Common examples:
- Incorrect income or expense figures in tax returns.
- Omitting certain transactions from declarations.
- Choosing the wrong tax base.
- Filing a return for the wrong reporting period.
Note: If such errors result in underpayment, the tax authorities have the right to recalculate the amount due and apply fines and penalties.
4. Late Filing or Late Payment
Other common violations include:
- Missing the deadline for submitting a tax return (quarterly or annually, depending on the regime).
- Delayed tax payment—even by one day.
Even if the amount of tax is calculated correctly, a payment delay can lead to penalty interest and, in some cases, administrative fines.
Liability for Tax Evasion
Failure to meet tax obligations is strictly monitored in Belarus. Even minor delays can trigger financial sanctions, while serious or repeated violations may result in criminal liability. Here’s what may happen to IEs and self-employed IT professionals.
Fines: Amounts and Calculation Rules
If tax evasion or underpayment is detected, the following penalties may apply:
- For Individual Entrepreneurs:
A fine of 40% of the unpaid tax, but no less than 2 base units (currently 84 BYN). - For Self-Employed Individuals (in cases of accidental error):
A fine is applied if the unpaid tax exceeds 1 base unit (42 BYN). In that case, the fine is 15% of the unpaid amount, but not less than 0.5 base units (21 BYN).
Important: If the IE or self-employed person voluntarily corrects the error and pays the outstanding tax before a tax audit or formal request from the tax inspector, no fine is imposed.
- For Intentional Tax Evasion by Self-Employed Individuals:
The fine is much higher—40% of the unpaid tax, but no less than 10 base units (420 BYN minimum).
If repeated within one year of the first penalty, the fine increases to 100–200 base units (4,200–8,400 BYN).
The final amount is determined by the tax authority based on factors such as intent, mitigating circumstances, and voluntary correction.
Penalty Interest (Late Fees)
Penalty interest is charged for each day of delay in paying taxes, starting from the day after the due date. These penalties continue until the debt is fully paid and can significantly increase the total amount owed, especially if the delay is lengthy.
The rate is based on the refinancing rate, so it may vary depending on economic conditions.
Note: Penalty interest is not charged on fines—only on the original unpaid tax.
Possible Suspension of Activities
If a taxpayer ignores requests from the tax authorities, such as failing to submit reports, disregarding debt notifications, or obstructing audits, the tax office may temporarily suspend their activities.
This can include:
- Freezing the bank accounts of an individual entrepreneur (IE) or self-employed person;
- Restricting the ability to perform certain financial transactions.
Such measures are typically taken after an official warning has been issued and in the absence of voluntary attempts to resolve the issue.
Administrative and Criminal Liability
In less severe cases of tax non-compliance, administrative fines may be imposed on individual entrepreneurs and self-employed individuals.
Criminal liability may arise in cases involving particularly large tax evasion or repeated actions intended to conceal income. Penalties can include heavy fines, correctional labor, and in exceptional cases restrictions on freedom.
Criminal charges are especially relevant in cases involving deliberate concealment of income, the use of straw persons, fake contracts, or other schemes aimed at tax evasion.
How Tax Authorities Detect Violations
Modern technology and process automation allow the Belarusian tax authorities to effectively monitor the activities of individual entrepreneurs and self-employed workers, including those in the IT sector. Even remote work and income received from abroad do not shield violators from detection. Below are the main tools used to identify cases of tax evasion.
Collaboration with Banks: Account Activity Monitoring
One of the primary sources of information for the tax authorities is banking data. Banks are required to provide information upon request, including details of transactions on the accounts of individuals and IEs.
If a person regularly receives funds from legal entities, foreign companies, or with notes such as “payment under contract,” this may attract the attention of the tax office, particularly if the recipient is not registered as an IE or self-employed, or fails to report such income properly.
Cross-checking with ERIP and Payment Apps
Many IT professionals receive payments via the ERIP system or mobile payment services, including the official “Profdohod” app. The tax office may compare:
- Income registered in the app;
- Actual payments received via ERIP;
- Discrepancies suggesting unreported systematic activity.
A mismatch between declared income and actual incoming payments is a common trigger for a tax audit.
Monitoring of Foreign Economic Activity
IT professionals working with foreign clients often receive foreign currency revenue, which passes through banks and is monitored under the currency control system. The tax office tracks:
- The presence of foreign currency inflows;
- The existence and proper registration of contracts with non-residents;
- Correct reporting of such operations.
If a person frequently receives international payments but is not registered or fails to pay taxes, there is a high likelihood of an inquiry into the legality of their business activities.
Possible Suspension of Activities
If a taxpayer ignores requests from the tax authorities, such as failing to submit reports, disregarding debt notifications, or obstructing audits, the tax office may temporarily suspend their activities.
This can include:
- Freezing the bank accounts of an individual entrepreneur (IE) or self-employed person;
- Restricting the ability to perform certain financial transactions.
Such measures are typically taken after an official warning has been issued and in the absence of voluntary attempts to resolve the issue.
Administrative and Criminal Liability
In less severe cases of tax non-compliance, administrative fines may be imposed on individual entrepreneurs and self-employed individuals.
Criminal liability may arise in cases involving particularly large tax evasion or repeated actions intended to conceal income. Penalties can include heavy fines, correctional labor, and in exceptional cases restrictions on freedom.
Criminal charges are especially relevant in cases involving deliberate concealment of income, the use of straw persons, fake contracts, or other schemes aimed at tax evasion.
How Tax Authorities Detect Violations
Modern technology and process automation allow the Belarusian tax authorities to effectively monitor the activities of individual entrepreneurs and self-employed workers, including those in the IT sector. Even remote work and income received from abroad do not shield violators from detection. Below are the main tools used to identify cases of tax evasion.
Collaboration with Banks: Account Activity Monitoring
One of the primary sources of information for the tax authorities is banking data. Banks are required to provide information upon request, including details of transactions on the accounts of individuals and IEs.
If a person regularly receives funds from legal entities, foreign companies, or with notes such as “payment under contract,” this may attract the attention of the tax office, particularly if the recipient is not registered as an IE or self-employed, or fails to report such income properly.
Cross-checking with ERIP and Payment Apps
Many IT professionals receive payments via the ERIP system or mobile payment services, including the official “Profdohod” app. The tax office may compare:
- Income registered in the app;
- Actual payments received via ERIP;
- Discrepancies suggesting unreported systematic activity.
A mismatch between declared income and actual incoming payments is a common trigger for a tax audit.
Monitoring of Foreign Economic Activity
IT professionals working with foreign clients often receive foreign currency revenue, which passes through banks and is monitored under the currency control system. The tax office tracks:
- The presence of foreign currency inflows;
- The existence and proper registration of contracts with non-residents;
- Correct reporting of such operations.
If a person frequently receives international payments but is not registered or fails to pay taxes, there is a high likelihood of an inquiry into the legality of their business activities.
Client Complaints and Automated Data Analysis
Tax violations can also be detected through other channels, including:
- Complaints from clients, partners, or counterparties, especially in the context of disputes;
- Data received from other government agencies, such as the Social Protection Fund or the migration service;
- Automated data analysis, the tax authorities use software tools to cross-reference information from various sources and detect inconsistencies.
Particular attention is paid to individuals who show signs of engaging in business activities without proper registration.
Conclusion
Working in the IT sector as a sole proprietor or self-employed specialist offers freedom and flexibility, but also requires a high level of responsibility, especially when it comes to tax compliance. Failing to pay taxes, even due to negligence or misunderstanding, may result in fines, penalties, or restrictions on business activities. Repeated violations or deliberate tax evasion can lead to administrative or even criminal liability.
To avoid negative consequences, it’s important to:
- Register with the tax authorities in a timely manner;
- Choose the appropriate tax regime;
- Accurately track income and expenses;
- File tax returns and pay taxes without delay;
- Seek professional advice when needed.
Tax discipline is not just a legal obligation, it’s a foundation for sustainable business growth. The more transparent your operations and financial records, the fewer risks you face and the more confidently you can focus on your work.
The Recruitment.by team supports IT specialists and entrepreneurs at every stage, from choosing the right registration format to building transparent tax processes. We help you focus on your core work by handling the routine and minimizing risks, professionally, precisely, and on time.
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