Restrictions on the Remuneration of Heads of Organizations: Tax Implications and Administrative Liability

Remuneration of heads of organizations remains one of the riskiest areas for organizations, as errors in determining the amount of remuneration, bonuses, and additional payments can lead not only to tax consequences (exclusion of expenses, additional taxes and contributions), but also to administrative liability.

Regulatory framework

The main documents limiting the accrual and payment of all types of premiums, bonuses and remuneration for the performance of job duties by a head of organization are the following:

1. Decree of the President of the Republic of Belarus No.381 dated October 26, 2020 No. “On ensuring settlements with budgets” (hereinafter referred to as Decree No. 381),
2. Resolution of the Council of Ministers of the Republic of Belarus No. 597 dated July 08,2013 “On improving the terms of remuneration of heads of organizations depending on the results of financial and economic activities” (hereinafter – Resolution 597 on remuneration of heads of organizations),
3. Local legal acts (for example, the Charter, the Regulation on remuneration and bonuses, the employment agreement (contract), the collective agreement, and others.

Local legal acts

A ban on the accrual and payment of bonuses, awards, and remuneration to the head of an organization for the performance of job duties may also be provided for by a local legal act, contract (employment agreement), for example:

• for the use of the Organization’s property for purposes other than official, the sale of products (works, services) that do not meet the requirements of standards,
• for failure to implement measures to ensure compliance with industrial, work and performance discipline and to ensure safe work in the Organization;
• for untimely performance or non-performance of job duties without valid reasons;
• for violation of the law, as well as failure to fulfill or improper fulfillment of obligations stipulated by the contract, etc.

Decree No. 381

The accrual and payment of bonuses, awards, and remuneration for the performance of job duties to the head and chief accountant (their deputies) of a legal entity (its separate division) stipulated by local legal acts and employment contracts is not carried out:

• for calendar days in which there was arrears in payments to the republican and (or) local budgets, the fund budget;
• for months in which overdue debt on payments to the republican and (or) local budgets, the fund budget was allowed (subparagraph 1.1. paragraph 1 of Decree No. 381).

The following are understood as arrears in payments to the republican and (or) local budgets, the fund budget:

1. the amount of overdue taxes, fees (duties), fines, penalties, non-tax and other mandatory payments payable to the specified budgets in accordance with the law, including payments to pay off debt on budget loans, budget borrowings, obligations to the budget under assignment of claim agreements concluded with banks, under fulfilled guarantees of the Government of the Republic of Belarus, local executive and administrative bodies, accrued interest and penalties on them;
2. obligations arising in the event of failure by users of external government loans and external loans guaranteed by the Government of the Republic of Belarus to fulfill their obligations to make payments for the repayment and servicing of such loans.

Overdue debt on payments to the republican and (or) local budgets, the fund budget means debt that has arisen as a result of failure to ensure payment of the relevant payments starting from the 1st day of the month following the month in which the debt on payments to the republican and (or) local budgets, the fund budget arose.

The accrual of payments to the head for a month (quarter, half-year or other period) is made proportionally to the calendar days (months) in which there was no debt (overdue debt) on payments to the republican and (or) local budgets, the fund budget.

For reference: these restrictions also apply to the chief accountant and deputy directors (head of organization) of a legal entity (its separate division).

Failure to comply with the restrictions regarding bonuses in accordance with subparagraph 1.1. paragraph 1 of Decree No. 381 is a gross violation of job duties.

For reference: The exception to the bonus limitation applies to heads and chief accountants (their deputies) of legal entities (their separate divisions) who have been granted a deferral (installment plan) for the repayment of outstanding payments to the republican and (or) local budgets, the fund budget (subject to timely payment of current payments to the republican and (or) local budgets, the fund budget) in accordance with decisions:

1. of President of the Republic of Belarus;
2. of regional, Minsk city, district, city (cities of regional subordination) Councils of Deputies;
3. of local executive and administrative bodies (clause 2 of Decree No. 381).

Resolution 597 on the remuneration of heads of organizations

Organization heads are not awarded or paid all types of bonuses, awards, and remuneration for the performance of their job duties as stipulated by the terms of their contracts:

1. for a period during which the organization as a whole experienced an increase in losses from sales of products, goods (works, services), or a cumulative net loss compared to the previous period, unless otherwise provided by law. The specific loss ratio is determined by the property owner or the body that entered into the contract;
2. for the month in which the debt was incurred:

• for payment of wages, state benefits to families raising children, as well as a result of the lack of funds for the payment of average earnings during labor leave, final settlement upon dismissal;
• for payment for hot and cold water supply, water disposal (sewage) services consumed since the beginning of the reporting year, which arose as a result of failure to ensure their payment within the timeframes established by contracts or legislative acts, as well as under contracts for gas supply to residential premises in the cases established therein;
• for payment for electric and thermal energy consumed since the beginning of the reporting year under contracts with energy supply organizations, resulting from the failure to ensure payment on the last date of the reporting period or, in cases established by law, on the date relating to the period following the reporting period;
• for payment for natural resources consumed since the beginning of the reporting year (subparagraph 2.5 of paragraph 2 of Resolution 597 on remuneration of executives).

The head of an organization shall be accrued and paid the amounts of bonuses, and remunerations that have not been accrued or paid in accordance with paragraphs 5–7 of part one of subparagraph 2.5 of paragraph 2 of Resolution 597 on the remuneration of head of organization, subject to a 50% reduction, provided that the organization ensures full payment for natural gas, electric and thermal energy consumed since the beginning of the reporting year as of December 31 of the reporting year, and in relation to cases of payment established by law in the month following the reporting month for contracts for gas supply to residential premises, hot and cold water supply, water disposal (sewage) services – as of January 31 of the year following the reporting year (Part 4 of subparagraph 2.5 of paragraph 2 of Resolution 597 on the remuneration of heads of organizations).

It should also be noted that the ratio of the average salary of the heads of organizations, regardless of their form of ownership (with the exception of budgetary organizations and other organizations receiving subsidies, whose employees are equal in terms of pay to employees of budgetary organizations) to the average salary for the organization as a whole cannot exceed 8 (note: also see Local legal acts).

Responsibility

From June 19, 2026, administrative liability is provided for the remuneration of the head of an organization in an amount exceeding the ratio of the average salary of the head to the average salary in the organization or the average salary of the holding’s employees established by law.

Such violation leads to a fine:

• on the “guilty” official in the amount of 15 to 30 basic units;
• for a legal entity – from 100% to 200% of the amount of such excess.

Payments not provided for by law and/or paid in violation of current legislation may be considered as damages and are not taken into account when calculating income tax in accordance with Article 173 of the Tax Code.

Substitution of executive salaries for other payments (e.g., dividends, compensation, etc.) that are not included in the calculation of the 8-fold amount requires detailed study and justification in order to avoid paragraph 4 of Article 33 of the Tax Code.

Administrative liability for non-payment (underpayment) of taxes to the budget amounts to 40% of the underpayment amount.

This publication is for informational purposes only and should be used as a general guide only. Before taking or refraining from any action based on the information in this publication, you should seek professional advice.

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