Belize’s New Tax Regime and Its Impacts on IBCs

Changes to Belize taxation regime

Abolishing tax exemption regime: By virtue of the new territorial tax system that Belize has just devised and implemented as of late, All Belize IBCs whether tax-residents or non-tax residents are now liable for both income taxes for carrying out a trade, business, or profession inside Belize and stamp duties (stamp duty applies when IBC owns property in Belize other than shares in another IBC). This tax legislation has come into force immediately since January 2019.

IBC will be considered being not resident in Belize for tax purpose if it can pass 3 tests below:

• It’s not physically present in Belize;
• Its core income-generating activities are conducted outside Belize;
• It’s subject to tax in other jurisdictions.

In the case of IBCs registered on or before 16 October 2017, they may continue to enjoy benefits under the former regime until 30 June 2021. IBCs incorporated on or after the aforementioned date are mandatory to immediately assume tax liability.

Subjecting IBCs to annual reporting and auditing: IBCs are obliged to file annual tax returns, accounting records, pursuant to the requirement of the Income and Business Tax Act. IBCs that are physically present in Belize must also file and pay monthly business tax.

Following entities with physical presence or tax residency status in Belize might be required to file an audited report by the Commissioner Income Tax:

1. IBCs with annual income exceeding US$6m;
2. Entities operating in a designated processing area in Belize with an income of at least USD500,000;
3. Any other entity:

• Listed on a stock exchange;
• Restructuring or liquidating or selling all assets via auction;
• Regulated by the IFSC;
• Preparing consolidated Financial Statements;
• That the commissioner may direct to be audited and having regard to total revenues, assets and employees;

Expanding the scope of business that an IBC is allowed to conduct:

Belize IBCs can now:

• Acquire real property or an interest in real property in Belize
• Hold an interest in any Belize company, whether domestic or international
• Conduct business with any Belize resident person
• Open and operate a domestic bank account in local Belizean currency
• Engage in direct investment and trade in Belize

Abolishing Intellectual Property (IP) regime: as per the Intellectual Property Asset Prohibition, IBCs incorporated under the new regime are required to abandon all of their Intellectual Property Assets.

As to IBCs incorporated on or after 17 October 2017, the IP prohibition is immediately applicable. IBCs registered on or before 30th June 2018 (IP assets acquired up to 16th October 2017) are obliged to submit a record of their current IP for approval to continue holding current IP assets up to 30 June 2021, during which all of their approved IP must be disposed of.

On a side note, the legislation also includes a transition period of 1 year, after which some of the new requirements, including that of tax compliance, audit, and physical presence, will be thoroughly imposed.

Impacts of the new taxation regime on Belize IBCs

Aside from the collapse of the zero-tax regime and the nuisance of going through a vast volume of paperwork related to it, this legislation could create several favorable impacts upon Belize IBCs, which are presented as follows:

Winning international recognition: Strictly complying with the requirements set by some of the world-renowned intergovernmental organizations (that is, OECD and G20 countries with BEPS initiative), Belize had the potential to alter the public opinion of itself from an offshore tax haven to an attractive financial hub to invest.

On that same account, any change in or amendments to Belize’s legislation will be mutually consistent with policies formulated by the aforementioned institutions. This rigor, though demanding as it seems, has the potential to build up Belize’s profile as a viable and transparent financial center.

Low taxes: The tax rates are 1.75% on companies whose gross receipts greater than 3 million Belize dollars; or 3% on those whose gross receipts lower than that same amount. This rate is, by all means, puny when considering all the benefits you can reap from having a business in Belize.

Removing ring-fencing: The new regime makes ways for residents to found their own IBCs and remove the preferential tax regime for foreign business.

If you have any questions regarding the new tax system, do not hesitate to contact us via service@bbcincorp.com