ALL IBCS IN BELIZE WILL BE SUBJECT TO NEW TAX REGIME AS OF JULY 2021. WE MAY HAVE THE RIGHT SOLUTION FOR YOU.
As of 1 July 2021 all IBC companies in Belize will be subject to tax rate of 1.75 % on gross revenue.
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For years, Belize has been known as a popular tax-free jurisdiction for International Business Companies, this is, however, no longer the case for most companies.
In an attempt to meet the transparency requirements and be removed from the EU blacklist, Belize has recently made substantial changes to its tax regime and introduced strict economic substance requirements, which are significantly different from other jurisdictions with similar acts, mainly, one major term to be taken in consideration is that holding companies engaged or having a subsidiary that is engaged in any of the ESA relevant activities will be classified under “included entity” for ESA purposes. The first set of ESA Annual Report under the Belize Economic Substance Act, 2019 will become due on May 1, 2021, as the first fiscal year for companies incorporated before January 1 2020 is April 30 2020- April 30-2021. The authority advised that hefty administrative fines that can exceed $300,000 BZD will be charged for non-compliance, depending in the level of failure to submit Annual Report.
Kindly note that the deadline for the submission of the report is 9 months from now, however, we wish to bring your attention specifically to the following: "All IBC's need to obtain a TIN number (Tax Identification Number) from the Registry", and adequate actions should have been taken before the end of the first financial year, which is April 30, 2021. Although, the authorities state that having a TIN number does not mean that the IBC is liable for tax in Belize and the purpose for this initiative is strictly for regulatory and tax authorities to efficiently monitor the status of the IBC, we would like to underline that Belize IBCs are now within Belize's domestic tax regime and will thus be required to file Annual Tax Returns and to pay taxes/stamp duties in Belize. Rates are tied to the business activities and type of incomes:
- All IBCs incorporated on or before October 16, 2017:
- a) Continue to benefit from the previously existing tax and stamp duty exemptions until June 30, 2021.
- b) The fiscal year for the first Annual Tax Return is July 1 2021 to December 31 2021.
- c) The first IBC Annual Tax Returns should be filed to the Tax Authority in Belize by March 31 2022.
- All IBCs that were incorporated after October 16, 2017:
- a) Are already subjected to taxation in Belize
- b) The fiscal year for the first Annual Tax Return is January 1 2020 to December 31 2020.
- c) The IBC Annual Tax Return should have been filed to the Tax Authority by March 31 2021; however, Belize Tax Service (BTS) has granted a six month extension to September 30 2021 for the filing of Annual Business Tax Returns and Financials for the basis year 2020.
- Receipts from trade less than US$37,500 per annum where such receipts are the only source of income.
- Receipts from profession or vocation of less than US$10,000 per annum where such receipts are the only source of income.
III. "Receipts" are all revenues whether in cash or in kind, or whether received or accrued without any deduction.
- A deduction is allowed on any gifts in the aggregate of US$250.00 up to a maximum of US$15,000 for sports, religious, charitable, educational, or for cultural purposes or for the improvement of amenities in towns or villages in Belize.
- IBC Annual Tax Return:
- IBC Annual Tax Return Form (BTS290) should be completed in Belize dollars (USD 1.00 = BZD 2.00)
- Tax returns should be filed accompanied by financials. Financials can be internally generated but audited financials should be presented when requested by the Director General.
- Tax Rates:
- 1.75 % of gross revenue should apply to Trade/Business/Real Estate Sale business, and
- "Trade" includes every trade, manufacture, adventure or concern in the nature of trade as per the Income and Business Tax Act.
The newly enacted regime may appear attractive at first glance however, for a company to be able to benefit from these incentives and the double tax treaties it must have a quorum of the Board of Directors present for meetings in Belize, local employees and physical offices with adequate expenditure in the country, which significantly rise operational costs due to lack of facilities and sufficient qualified staff on the local market, and no infrastructure to support it, not to mention the jurisdictions’ untrustworthy reputation of a tax haven which may lead to difficulties with bank account opening and execution of business transactions with counterparties.
It is worth noting that non-included entities as well as entities that do not conduct any business activities in Belize are not required to pay taxes in Belize nor satisfy the substance requirements stated above, provided that they can provide the local authorities with evidence of their tax residence in another country in the form of a valid tax residency certificate and/or proof of tax payment in the country of tax residency, however, the Belize authorities will share and exchange all information received from the non-resident company with its reported country of tax residence in accordance to the OECD convention of Mutual Administrative Assistance in Tax Matters.
Now, considering the challenges a business may encounter based on the above, re-domiciliation to a different jurisdiction can be safely considered one of the best solutions in most cases. The major advantage of re-domiciliation as opposed to company wind-up and new incorporation is the benefit of continuity. If the company’s Articles of Association and countries of origin and transfer allow for it, a company can simply change its legal address and jurisdiction under the laws of which it is governed in a simple process whilst maintaining its legal identity, name, and financial history, working contracts, without interrupting the flow of its business activities and most importantly keep the existing bank accounts.
Bearing in mind the worldwide tendency of the regulatory authorities towards higher transparency, the registration of a business in a jurisdiction with low or zero substance requirements is a temporary or ineffective strategy. On the other hand, not all jurisdictions have the necessary infrastructure to provide effective solutions. Here are some thoughts to consider:
- Advantages of a business formation comparing to other jurisdictions
- Confidentiality and Assets Protection
- Will registration and succession planning
- Economic Substance and practical implementation challenges
- Tax Residency and reputation of the jurisdiction
- Management efficiency and cost
We are confident that UAE is one of the most advantageous business locations in terms of cost and management effectiveness, while wide array of tailor-made and affordable solutions give the opportunity for business expansion and effective tax and investment planning.
Redomiciliation from Belize to UAE from €1,975 in 1 working day!
Over the last decade, UAE have recommended itself as one of the most progressive and innovative business centre - one of the Top performers (9th place) in the 2020 IMD World Competitiveness Ranking. The government of UAE has proved its consistent commitment to liberal economic policies, built on a basis of leading-edge technologies and sound regulatory systems, with no exchange controls, quotas or trade barriers, corporate profit or personal income taxes. Businesses resident or operating in the UAE can benefit from the Double Taxation Agreements which the UAE concluded with most of its trade partners for the purpose of promoting its development goals.
The list of benefits of a business located in UAE is extensive and for this reasons we chose to promote the United Arab Emirates as the main business destination:
- Redomiciliation in 1-7 business days
- 100% ownership with no requirement for UAE sponsor
- Taxation - Zero income tax for individuals and zero corporate tax and Double Tax Treaty benefits
- Exchange of information and residency – Investors and employee can obtain residency visa in just 5 days. Holders of residency are not subject to Automatic Exchange of Information.
- Substance - UAE has a long and stable journey into the future of business and has begun developing the infrastructure for economic substance more than a decade ago, long before other jurisdictions started considering it. While some packages have physical offices included, a wide array of business solutions give the opportunity for expansion.
- Stability and Opportunity - UAE is one of the leading business destinations in the world, the political security and stability of which are backed by renowned credit rating agencies.
At Arnos, we understand that complying with the complex substance requirements can be both difficult and expensive which is why we have developed a variety of packages and alternative cost-effective solutions to suit various business models:
Included in the package
International Business Company
Free Zone RAKEZ company
Free Zone RAKEZ company
Free Zone RAKEZ company
If you are interested to find out how choosing UAE will benefit your business, please contact us to arrange a videoconference meeting.