Belize IBC Act Changes February 2019

A new IBC Regime came into force on 1st January 2019 in Belize.


Following several consultations with our legal advisors and some guidance received from the Belize International Financial Services Commission (“IFSC”) and the Belize Income Tax Department, we can now provide the following clarifications on the impact of the new regime on Belize IBCs.


Under the new IBC regime in Belize:


1. 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


2. IBCs that hold a license issued by the IFSC (e.g. Trading in Securities, Forex, Brokerage, etc.) are now required to establish a physical presence in Belize before the end of 2019;


3. IBCs that do not hold a license from IFSC may decide to be physically present in Belize;


4. IBCs that do decide to be physically present in Belize will consequently be deemed as persons resident for tax purposes in Belize;


5. 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;


6. IBCs, whether physically present in Belize or not, may apply for a Certificate of Good Standing, subject to payment of registry renewal fees;


7. 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;


8. Accounting records – this requirement has already been established with the Accounting Records Maintenance Act of 2013 and remains in effect. (ie a Belize IBC shall maintain accounting records and must keep a note in its registered office revealing a street address where those records are kept).


9. The Commissioner of Income Tax may require the following companies to be audited by an independent audit firm:

(a)  IBCs with income of at least USD6m;

(b)  Entities operating in a designated processing area in Belize with income of at least USD250,000;

(c)  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;


10. 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;


11. Any IBC incorporated on or after 17th October 2017 that requires a Tax Exemption Certificate must give evidence that:

  • the IBC is not physically present in Belize;
  • the IBC’s 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
  • the IBC is paying the rate of taxes payable;


12. Each Belize IBC must keep at its registered office up-to-date registers of directors, shareholders and ultimate beneficial owners (duly signed by a director).


Tax Resident Companies


For IBCs that choose to be physically present in Belize or those that carry out a licensed activity, the following rules are applicable/relevant:


1. Belize has a territorial tax system;


2. The Belize Income and Business Tax Act Cap55 (IBTA) provides:

(a) A Tax exemption on income below USD37,500 per year;


(b) Interest on a bond and dividends paid or received by an IBC is tax exempt and free from withholding tax provided it is not paid or received in Belize by a tax resident;


(c) Royalties and commissions paid to a non-resident are tax exempt and free from withholding tax;


(d) There is no capital gains tax in Belize;


(e) IBCs that are physically present and are resident in Belize for tax purposes: i. Must file monthly business tax returns;

ii. Income below USD37,500 is tax exempt;

iii. IBCs with income greater than USD37,500 per year will be subject to the payment of business tax every month as per the tax rates applicable to business type, this will count as a credit toward annual tax assessments. Business tax will be on gross receipts. Business tax rates range from 1.75% to 19%, depending on business type. E.g. Most business pay at 1.75% of business tax rate; professional services business pays 6%.

iv. Annual tax returns (annual assessments) 3% on net Income up to USD1.5m; 1.75% on Net Income greater than USD1.5m; tax payable in USD. This assessment is done yearly, before March 31, and requires completion of corporate tax return accompanied by an audit report.


3. General Sales Tax Act (GST): IBCs with income greater than USD37,500 per year will be required to register as a General Sales Tax Agent, and depending on income source, will be required to charge 12.5% GST on its sales to consumers in Belize and will also be able to nett of general sales tax paid on its purchases. The net amount of general sales tax is payable to the GST department on a monthly basis.


For the avoidance of doubt, an IBC is therefore only liable to taxes in Belize if it is a person resident in Belize. Furthermore, the IBTA was also amended to provide that, “…where a company is engaged in a trade, business, or profession where the revenue or income is derived outside Belize, the company shall not be liable for payment of income tax in Belize.”


Intellectual Property


A 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. Key provisions to note include:

  • 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.
  • 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.


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How To Set Up a Franchised Based Business Offshore


Entrepreneurs whose business model involves developing then commercializing a Franchise Prototype model can benefit enormously from Offshore (tax free) Incorporation.


Typically how it works is you set up (i) a nil tax Master Franchise Company and (ii) a nil tax IP Holding Company Offshore. But more on that later, first up let’s look at the concept of a Franchise…


What is a Franchise?


A successful small business is typically one comprised of a series of demonstrable (usually documented) interconnected systems. Once formulated and documented/recorded these business systems can form the basis of a Franchise prototype. For someone looking to set up a small business it’s often though less risky to buy a Franchise because the systems have been successfully deployed already.


The most successful franchise-based business model is McDonalds Hamburgers.


McDonalds for example have written documented systems which explain, in fairly simple terms, to staff members:

  • How to greet a customer
  • How to put together a burger (ie stages of production and who does what)
  • How to make a coffee
  • How to pour an ice cream Sundae
  • How to cook chips
  • How to deal with a disgruntled customer
  • Etc etc etc

All these things are inventions of the mind ie Intellectual Property (“IP”).

In addition, Franchisees are given the inalienable right to be part of the McDonalds advertising/marketing system. The (successfully developed over many long years) know-how behind this marketing system (a unique commercial upper hand which sets McDonalds apart from its competitors) is at its heart also an invention of the mind ie IP.


Further the Franchisee also gets to use and benefit from the inimitable McDonalds (guaranteed to bring in customers of itself) Laughing Clown/Golden arches etc logos. These too are IP.


The Franchisor/Franchisee Relationship – Typical


In the above scenario the Franchisor typically supplies the Franchisee with 4 things:

  1. A Manual which enables the Franchisee to run the business (using just teenager labor in McDonalds’s case), ie Intellectual Property (“IP”)
  2. Exclusive Products (ie products with unique, well-known brand names such as “BigMac” & “Quarter Pounder” etc) which are guaranteed to bring in value ie attract customers, ie IP
  3. An advertising/marketing program/system guaranteed to, at all times, bring customers through the Franchisee’s door, ie IP
  4. The right to use the Franchisor’s Trademarks (these trademarks are also IP)


Usually what happens here is:

  • The IP is held by one Company. (The “IP” Company). This Company is usually based in a zero-tax jurisdiction
  • The IP Company provides an exclusive use License to a/the Master Franchise Company (which is usually also incorporated in a zero tax or low tax jurisdiction) providing the Master Franchise Company with the right to market/commercialize this IP
  • The Master Franchise Company (ie the “Franchisor”) sells a Franchise to a Franchisee and collects an up- front payment plus a percentage of profit or revenue moving forward. In return for these payments the Franchise owner (ie the Franchisee) is entitled to use the Franchisor’s IP
  • The payments made to the Master Franchise Company are usually received in a nil tax or low tax environment
  • In return for having the exclusive right to use/commercialize the IP the Master Franchisor Company pays royalties or license fees to the IP Company.


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Asset Managers – Trading Under a PoA – Why Do I Need a Contract?

Powers of Attorney are commonly used by Traders (eg Forex Traders) to trade funds for a third party to avoid having to apply for a Fund or Broker’s License.


How it works is:


(a)  In the case of forex etc trading an account is opened in the name of the third party investor (“the Account Owner”);


(b)  The Trader sets up a tax-free Offshore Company (“IBC”);


(c)  The Account Owner (ie a third party investor referred to in a PoA as “the Principal”) signs a Power of Attorney with the Trader’s IBC which appoints at law the Trader’s IBC as the Account Owner’s Authorized Trader and attorney-in-fact (the “Agent”);


(d)  The Trader trades the Account Owner’s account and charges a trading fee as agreed (which is commonly a percentage which could be anywhere from 20% to 50%);


(e)  The Trading Fee is banked into the Trader’s IBC’s Bank Account free from tax


The Trader/Agent is given full power and authority on behalf of the Principal to buy, sell (including short sales) and trade in a range of things as specified in the PoA/Authority document including for example:

  • Currencies
  • Stocks
  • Mutual funds
  • Index funds and securities
  • Bonds
  • Options (including uncovered option writing)
  • Physical commodities
  • Financial instruments
  • Commodity futures contracts
  • Financial futures contracts
  • Equities and single-stock futures contracts
  • Foreign commodities
  • Foreign commodity futures contracts
  • Forward contracts
  • Contracts in unregulated foreign exchange markets, and options and other derivatives on each of the foregoing, on margin or otherwise,


If you are going to trade someone else’s money under a Power of Attorney, before a Power of Attorney gets signed, first and foremost, you will need to have a legal contract in place (ie signed by both you and the investor) which clearly sets out:

  • The services you are going to provide
  • How you are going to provide those services
  • That you are entitled to get paid for those services
  • What you are going to get paid for those services
  • How you are to receive payment
  • What out of pocket expenses you are entitled to be reimbursed for
  • When you are entitled to invoice/receive payment
  • That the client will provide you with a Power of Attorney
  • What the terms of the Power of Attorney will include
  • In what circumstances the contract can be cancelled by you
  • In what circumstances the contract can be cancelled by the investor
  • How the Power of Attorney can be revoked and by whom
  • Whether you can assign the benefit of the contract (and how you can assign the benefit of the contract)
  • Proper law forum (ie what Country’s courts are to hear the case if there is a legal dispute)
  • etc


OCI’s in house Lawyer can draw and settle this contract for you for a price of $1,000. Or you could retain an outside lawyer to do this for you.


Would you like to know more? Then please Contact Us:







How To Dropship Using a Tax Free Offshore Company


By “Dropshipping” we mean a business where the customer orders something either via email or directly via your website and you then arrange for the manufacturer to post or airmail or courier the item direct to the customer.


In principle here’s how dropshipping can/will work via a tax free Offshore Company :


  1. A nil tax offshore company (commonly an International Business Company ie “IBC”) is incorporated (Let’s say the Company is called “IBC Trading Limited”)
  2. IBC Trading Limited (hereinafter “IBC”) owns/operates the business (eg it owns the web-domain and the website/artworks or trademark/s or any sole distributor rights are held by or transferred to the IBC)
  3. You post terms and conditions on your website and or in your order form that effectively say the client is buying from IBC and that the contract is concluded Offshore (ie in a nil tax environment).
  4. The client submits his order via the website or via email
  5. IBC sets up an Offshore bank account, in a nil tax banking centre, which receives customer payments (including ultimately those made via a merchant account)
  6. Ideally the website and server are hosted/located in a country which does not tax business on the basis of server location (eg Singapore)
  7. Customers contract with and pay IBC. All such monies are banked free of tax in the first instance
  8. IBC pays the manufacturer for the goods. The manufacturer ships (or couriers or posts or airmails) the product or goods direct to IBC’s customer
  9. You or your local company would be contracted by IBC to manage sales/delivery of product/website maintenance/whatever.

10.You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expense against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income.

11.Often there is some kind of intellectual property (“IP”) created or behind the website based business (even if it’s just the website/design). It may be advantageous to you down the track if ownership of the business and the IP were held by 2 different entities. What you can do there is set up a 2nd IBC to own the IP. The first IBC (ie the Trading Company) pays license fees periodically to the 2nd IBC which fees would be receipted tax free. This could be advantageous if you wanted to bring ownership of the web-business onshore or if you wanted to sell the business but keep a passive (potentially tax free) income stream

12.Ideally once you start to grow, and to add substance, you would be wise to set up your MD/Board and or a sales team onshore to take orders and receive income in a low tax onshore environment (eg Hong Kong, Ireland, Singapore, Cyprus etc ie as per the Amazon/Google model)


To minimise the chances of the IBC being taxed onshore ideally the IBC should be (and be seen to be) managed and controlled from offshore. How this can be achieved is including a Nominee Director etc as part of the Corporate structure. See this page for details of how that can work:


To get around local CFC (“Controlled Foreign Corporation) laws and or prevent the existence of IBC’s bank Account coming to the attention of your local authorities you will also want/need to set up a Foundation to hold the shares of your tax free IBC/Offshore Company.


Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up an Offshore Company for such purposes.


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