Belize Economic Substance
International Business Companies (Amendment) Act, No., 24 of 2018
By the end of 2018, the Government of Belize passed a vital piece of legislation that directly affects the International Financial Services industry in Belize. In an effort to follow through on its commitment to the OECD regarding implementation of the Base Erosion and Profit Shifting action plan, Belize passed the International Business Companies (Amendment) Act, No., 24 of 2018. This amendment essentially removes the ring-fencing feature of the IBC and brings IBCs into the Belize domestic tax regime.
Under the new IBC regime, 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.
IBCs that hold a license issued by the IFSC (e.g. Trading in Securities, Forex, Brokerage, etc.) are now required to establish physical presence in Belize before the end of this year.
IBCs that do not hold a license from IFSC may decide to be physically present in Belize.
IBCs that do decide to be physically present in Belize will consequently be deemed as persons resident for tax purposes in Belize.
IBCs that decide to remain outside of Belize and carry out their core income generating activities outside of Belize will not be deemed resident in Belize and will thus not be liable to taxes on income derived outside of Belize.
IBCs, whether physically present or not, may apply for a Certificate of Good Standing, subject to payment of registry renewal fees.
IBCs, physical presence and date of incorporation notwithstanding, may apply for a TIN and thus file annual tax returns along with unaudited financial statements subject to requirements 8 and 9 below.
Accounting records, this requirement has already been established with the Accounting Records Maintenance Act of 2013 and remains in effect.
The Commissioner of Income Tax may require the following companies to be audited by an independent audit firm:
- IBCs with income of at least USD 6m;
- Entities operating in a designated processing area in Belize with income of at least USD250,000;
- 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.
IBCs incorporated on or before 16th October 2017 remain tax exempt up to 30th June 2021 and can still obtain a Tax Exemption Certificate up to 30th June 2021.
IBCs incorporated on or after 17th October 2017 that require Tax Exemption Certificate must give evidence that:
- the IBC is not physically present in Belize;
- its core income generation activities are conducted in a country where taxes under the Income and Business Tax Act would become applicable had it been located in Belize; and
- it is paying the rate of taxes payable.
All Belize IBCs must keep at its registered office up-to-date registers of directors, shareholders and ultimate beneficial owners (duly signed by a director).
Intellectual Property
A new development and further update on the new IBC regime addresses intellectual property (IP) assets. Statutory Instrument No. 11 of 2019 came into force as of 1st January 2019 and essentially abolishes the IP regime. IBCs incorporated on or after 17th October 2017 are not allowed to acquire, hold, own or deal with any IP asset.
IBCs incorporated prior to the aforementioned date shall not acquire any new IP asset and are required to apply to the IFSC for approval to continue holding current IP assets up to 30th June 2021. We have attached a copy of this Statutory Instrument for your reference.
For IP assets, for each case, the company will have to send letter to IFSC to seek guidance. They may be required to establish physical presence, but only upon instruction from IFSC.
Please feel free to contact us for any further information. Kindly note that it might be unfinished information regarding new legislation. If there are any additional changes or clarifications, we will duly notify you.
We would also like to take this opportunity to confirm that the only affected legislation is the International Business Companies Act. The Belize International LLC, International Private Foundation and the International Trust remain the same.
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