We are regularly asked by clients looking to incorporate in Belize should I set up a Belize LLC or a Belize IBC?
So let’s look at the features of each beginning with the Belize LLC…
An LLC (Limited Liability Corporation) is, effectively, a hybrid of a Limited Company and a Partnership.
It’s like a Company in that that liability of the Company is limited to the capital invested and assets purchased by the Company.
Like a partnership it’s a flow through entity: An LLC does not have to file a tax return; the nett profits are passed through to the members of the LLC (members are to an LLC what shareholders are to a Limited Company) who are responsible for taxes (if applicable) in their country of tax residence (ie same tax treatment as partners in the case of a Partnership).
From a member/partner’s viewpoint an LLC is superior from a liability perspective to a Limited Partnership (“LP”) because in the case of a Limited Partnership (which is constituted by a Limited Partner and a General Partner) one partner can be made liable for the debts of the partnership. In the case of an LLC the liability of the members is limited to the extent of the member’s capital contribution (unless a personal guarantee has been given by a member to a supplier of the LLC).
LLC members can fully participate in the management of the LLC (which is different to an LP – in the case of an LP the Limited Partner usually can’t participate in the management of the enterprise without risking his/her Limited Liability status).
Key Benefits include:
· Privacy: There is no public register of owners/members or Directors/Managers in Belize
· Tax Effectiveness: Belize LLCs are not liable for corporate tax or business tax or any other form of tax in Belize
· Simplicity: There is no requirement in Belize to prepare annual accounts or appoint an auditor
· Flexibility: Belize LLCs can be used to own/operate a wide range of businesses as of right
· Asset Protection: Before you can sue a Belize LLC you have to pay into Court (in Belize) a deposit being an amount equal to the greater of (i) one half of the amount claimed or $US50,000 whichever is the greater
Other features of the Belize LLC Law include:
- A Belize LLC can be structured according to its own rules rather than being dictated to by statute
- A Belize LLC is a legal entity with separate rights and liabilities distinct from its members & managers. (This means nobody other than the LLC itself can be made liable for the debts of the LLC)
- Somebody suing a Belize LLC member at best can only have the members rights assigned to him; he can’t participate in the management of the LLC
- Belize doesn’t recognize foreign judgments. Only a judgment made by a Belize Court can be given against a Belize LLC
- LLCs from other jurisdictions can migrate to Belize and vice versa (ie a Belize LLC can redomicile and become eg a Nevis LLC)
- Civil legal proceedings against a Belize LLC must be held in private (and there are penalties for unauthorised disclosure).
Set Up cost: $UD1,200 From 2nd year $890
Belize Companies & Compliance
Belize LLCs are not subject to any reporting requirements, have no Belize tax obligations and ownership/management information is not publicly accessible.
However, it must comply with the usual KYC/DD requirements (same as IBCs).
Also, there is no limitation on LLCs owning IP Assets.
The setup requirement for an LLC is similar to that of an IBC (similar information required on application form). There is an important distinction, however, in that, because of economic substance, the activity of the IBC needs to be specific so as to determine if it is carrying on a relevant activity or not.
All IBCs need to obtain a TIN (Tax Identity Number) from the Belize Registry. Having a TIN does not mean that the IBC is liable for tax in Belize. The purpose for this initiative is strictly for regulatory and tax authorities to efficiently monitor the status of the IBC.
Regarding the current tax position of the Belize IBC, there is a presumption of residency for all entities registered in Belize. This means that moving forward Belize IBCs will be required to file a tax return by the first tax filing date unless the company claims to be tax resident in an outside jurisdiction. For non-grandfathered Companies, the first tax filing date is 31st March 2021, and for grandfathered Companies, this is 31st March, 2022.
The foregoing requirement will not apply to an IBC that:
- Is tax resident in another country (other than a country on the European Union list of non-cooperative jurisdictions for tax purposes);
- Has no permanent establishment in Belize
- Files an information return at the same filing dates mentioned above, wherein said form will include the jurisdiction of which the company is a tax resident, the beneficial owners of the company owning or controlling 5% or more, as well as all direct and indirect legal owners, including information on the tax residency of such legal or beneficial owners.
Tax resident IBCs are subject to Business Tax, which is a tax on gross revenue and ranges from 1.75% (for trade) to 6% (on professional services).
Set Up cost: $UD1,000 From 2nd year $690
Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up a Company such as that described above.
Would you like to know more? Then please Contact Us:
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.