In December 2018, the National Assembly of Belize adopted amendments to the Law on International Companies, the Law on Income Tax and Profit Tax and the Law on Stamp Duty.

The amendments to the legislation have made Belize much more transparent in terms of taxation and counteracting the legalization (laundering) of funds and the fight against terrorism, jurisdiction.

So, from January 1, 2019, all Belizean companies, with the exception of those companies that can prove the tax residency of another jurisdiction (i.e., prove connection with another jurisdiction and provide evidence of tax residency), must have a physical presence factor, i.e. . the so-called "Substance". 

What are the new requirements of legal reform?

In essence, the requirements of the Act to register a company in Belize are as follows:

1. The effective management body must be located in Belize, that is, the board of directors must, in order to resolve issues of the company, be collected in Belize, and all corporate documents must be located in Belize.
2. The company must have an office (owned or rented) in Belize, provided that this office is adequate to the size of the company and its turnover.
3. The company must have an adequate type of activity and scale of the company by the number of employees.
4. Employees must be sufficiently qualified and trained and must be located in Belize.
5. The company must carry out expenses adequate to its type of activity.
6. The company must pay taxes in Belize. The tax rate can be:

  • a. 1.75% of the income of a company derived from Belize if the amount of such income exceeds 3 million Belize dollars.
  • b. 3% of the amount of income of a company derived from Belize if the amount of such income is less than 3 million Belizean dollars.
  • c. Income derived from non-Belize is not subject to income tax. Capital gains, dividends and interest earned may be exempt from taxation.

It should be noted that the above taxes are paid in the currency of the United States of America (US dollars).
7. All Belizean companies are obliged to keep accounting records, and if the annual turnover exceeds 6 million US dollars, then a mandatory audit must also take place.
8. All Belize companies with “Substance” automatically become residents of Belize and, therefore, must comply with Belize’s currency control legislation.

The new Act applies to all companies, except those which can prove the tax residence in another jurisdiction.

Transition period for companies

It should be mentioned that the National Assembly of Belize established certain transition periods for IBCs, in order to ensure that existing companies could take measures to meet the new requirements and that these measures were implemented as painlessly as possible for business. As for the transition period for companies registered before 01.01.2019:

  1. Companies registered before October 16, 2017 (inclusive) must take all necessary measures to meet new requirements by June 30, 2021.
  2. Companies registered from 10/17/2017 through 12/31/2018 must by December 31, 2019, take all necessary measures to comply with the new requirements.
  3. All new companies, i.e. registered since 2019 must immediately comply with the requirements established by the new legislation.

It should be noted that the established requirements make Belize an “expensive” jurisdiction for doing business. However, jurisdiction may be suitable for large structures that are willing to comply with the new rules on the actual presence and incur necessary expenses in order to optimize the tax burden of the company.

Thus, a large business will be able to use the extremely attractive tax regime of Belize (compared to other jurisdictions), as well as pass the requirements of banks on physical presence (substance) and reporting, which will greatly simplify the conduct of activities.