In line with several offshore jurisdictions, such as British Virgin Islands, Cayman Islands and Seychelles, 1 January 2019 Belize has modified its legislation on International Business Companies (IBC) regime. This modification provides for physical presence of IBC companies in the territory of Belize and application of territorial tax regime.
Changes were made by amending of International Business Companies Act 2011 (the Act), and the most important amendments are:
Clarification of definition of resident
The legal definition of the term “resident” has been designed in the following manner: natural person or legal entity that ordinarily resides within Belize or carries on business from an office or other fixed place of business within Belize, including IBC company that:
- complies with physical presence requirements in Belize;
- has its business centrally managed and controlled within Belize;
- is resident for tax purposes in Belize.
Abolishment of restriction to conduct activity within Belize
The abovementioned legal definition of resident expressly states that IBC company are entitled to conduct business activity not only outside of Belize, but also within Belize starting from 1 January 2019. Along with the option to obtain tax resident status in Belize, business activity within Belize will oblige IBC companies to comply with physical presence requirements and will cause certain tax circumstances.
Application of physical presence requirements
IBC companies that carry on relevant activities must comply with the following requirements:
- the employment, whether directly or indirectly, of a sufficient and adequate amount of suitably qualified persons to carry out its core income generating activities;
- expenditures consistent with the size of the business relative relation to the nature and complexities of its relevant activity;
- the control and management activities are conducted from Belize either directly or through a management agency. For meeting this requirement IBC company must have at least 2 directors resident in Belize or arrange meetings of board of directors in the territory of Belize.
Relevant activities with respect to which physical presence requirements are applicable must include only such core income generating activities as prescribed by the Act:
- Banking business. The core activities of such business are:
- raising funds, managing risk including credit, currency and interest risk;
- taking hedging positions;
- providing loans, credit or other financial services to customers;
- managing regulatory capital;
- preparing regulatory reports and returns.
- predicting and calculating risk;
- insuring or re-insuring against risk;
- providing insurance business services to clients.
- taking decisions on the holding and selling of investments;
- calculating risks and reserves;
- taking decisions on currency or interest fluctuations and hedging positions;
- preparing relevant regulatory or other reports for government authorities and investors.
- agreeing funding terms;
- identifying and acquiring assets to be leased (in the case of leasing);
- setting the terms and duration of any financing or leasing;
- monitoring and revising any agreements;
- managing any risks.
- taking relevant management decisions;
- incurring expenditures on behalf of affiliates;
- coordinating group activities.
- managing the crew (including hiring, paying and overseeing crewmembers);
- hauling and maintaining ships;
- overseeing and tracking deliveries;
- determining what goods to order and when to deliver them;
- organizing and overseeing voyages.
- where the business concerns intellectual property assets such as patents, research and development;
- where the business concerns non-trade intangible assets such as brand, trademark and customer data, marketing, branding and distribution.
- transporting and storing goods;
- managing stocks;
- taking orders;
- providing consulting or other administrative services.
Companies that conduct relevant activity are entitled (but not obliged) to fulfill physical presence requirements voluntarily. If companies make such decision, they must comply with these requirements for at least 5 years after the date of making a decision.
Changes of tax regime of IBC companies
Tax regime of IBC companies is established by Income and Business Tax (Amendment) Act 2018.
If company obtains Belize resident status it must file tax returns with competent authorities of Belize and pay income tax, as well as pay fees and stamp duty in some cases.
Standard income tax rate for IBC companies is 3% of the amount less than 3 000 000 Belize dollars (approximately 1 500 000 US dollars), and 1,75% of the amount that exceeds 3 000 000 Belize dollars. Income tax must be paid in US dollars.
The obligation to pay income tax arise only for Belize-sourced incomes of IBC companies. Incomes of IBC companies derived outside of Belize are not subject to tax.
It is important to mention that changes of legislation have not affected the existing exemption provided for dividends and interest paid or received by IBC companies. Independently of Belize resident status of IBC company dividends and interest are not taxable in Belize.
Reporting requirements of IBC companies
As previously, IBC companies are obliged to prepare and to keep financial statements. If IBC company conducts business activity in the territory of Belize, it also must file financial statements with competent authorities of Belize. Preparation and filing of audit of financial statements is obligatory if annual receipts of a company exceed 6 000 000 US dollars.
Audit requirements also may be applicable if company meets at least 2 criterions mentioned below:
- entities listed on an approved stock exchange;
- entities under going through a restructure and liquidation or proposing to sell all of its assets through an auction;
- entities regulated by the International Financial Services Commission (IFRS);
- entities and organizations subject to preparing consolidated financial statements;
- any other business entities. This criterion has been designed for giving IFRS an opportunity to request an audit from the company in question that meets only one criterion mentioned above.
Currency restrictions for IBC companies
IBC companies that obtain Belize resident status and use bank accounts in US dollars are obliged to:
- maintain US dollar account in a domestic, branch of a foreign or international bank that is located in Belize;
- submit monthly report to the Central Bank of Belize describing all transactions in the US dollar accounts and of sales and purchases of the company.
In addition to this, IBC companies fall within the scope of other currency control rules of Belize, in particular of those established by Exchange Control Regulations Act, Cap 52.
Physical presence requirements, Belize residency provisions and territorial tax regime are applicable to all IBC companies incorporated after 17 October 2017 after the Act enters into force (on 1 January 2019) with transitional period of 12 months.
If IBC company was incorporated before 17 October 2017, new legislation will not be applicable to it until 30 June 2021, and afterwards their activity will be regulated by new rules. This provision covers only companies that carry on relevant activity.
Table of changes
|IBC company resident in Belize||IBC company without resident status|
|Physical presence requirements||Yes||Not mandatory, but may be met voluntarily|
|Business activity in the territory of Belize||Permitted||Permitted|
|Ownership of property located in Belize||Permitted||Permitted|
|Income tax to be paid||Yes||Yes (only Belize-sourced incomes are taxable)|
|Taxation of dividends (paid or received)||No||No|
|Taxation of interest (paid or received)||No||No|
|Filing of financial statements and income tax returns||Yes||Only in case if Belize-sourced incomes are generated|
|Audit requirement||If receipts exceed 6 000 000 US dollars||If receipts exceed 6 000 000 US dollars|
|Currency control restrictions||Yes||No|