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.”
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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