As of October 11, 2019 the ES Act (ESA) (the “Act”), came into force in Belize and it is required that Belize entities carrying on relevant activities (included entity) must demonstrate adequate economic substance in the Belize. The Belize entities that do not carry out relevant activities (non-included entity) have to inform the authorities accordingly in order to be exempted from substance requirements and avoid penalties too.

The relevant activities are the following:

a. Banking business;

b. Insurance business;

c. Fund management business;

d. Financing and leasing business;

e. Headquarters business;

f. Distribution and service center business;

g. Shipping business;

h. As a holding company, engaged, or where one or more of its subsidiaries is engaged in one of the activities listed under (a) to (g);

i. All regulated entities under the IFSC Act.

Satisfying Substantial Economic Presence in Belize

The included entities must establish adequate economic presence in Belize. What is adequate for each company depends on the particular facts of the company and its business activity. See below requirements

The following criteria relating to board management and control are to be satisfied

• e meetings,
• quorum,
• strategic decisions,
• records and minutes,
• necessary knowledge and expertise

It must demonstrate that it conducts core income generating activity ( CIGA) in Belize proportionate to its business activity , including

• adequate amount of annual operating expenses,
• number of qualified employees and
• physical offices

Outsourcing CIGA is an option to the managing agent (MA) .

An entity which engages in business as a Pure Equity Holding Company (PEHC) is subject to reduced substance requirements and must comply.

An entity which engages in business as a Holding Company is subject to substance requirements if one of the entities that is under the umbrella is engaged in a relevant activity.

Filing of Economic Substance Forms

The Forms must be submitted completed annually and submitted within nine (9) months after the end of the fiscal year reporting period.

For example for companies that were incorporated before 1 January 2020, it is established that 30 April 2020 will be the commencement date. The fiscal year will be completed 12 months later i.e. on 30 April 2021; therefore the economic substance form must be filed within 9 months from fiscal year end i.e. not later than January 31, 2022

Tax Requirements for the IBC’s

Under the new legislation all Belize International Business Companies are required to have a TAX ID number (Tax Identification Number) from the Registry.

Who Should Pay Tax

The companies that are liable to pay taxes in accordance with Section 106 of the IBT Act, are the companies incorporated under the IBC Act and have physical presence in Belize. The tax rate that each company must pay is according to the ninth schedule. Based on the relevant activities most IBCs will pay the following tax rates

• Trade and Business 1.75% of gross revenue ("Trade" includes every trade, manufacture, adventure or concern in the nature of trade as per the Income and Business Tax Act.)

• Professional services 6%
• Receipts of persons licensed by the International Financial Services Commission of Belize to provide international financial serves 3% or 6% if there is comingling with domestic services
• Receipts from commission (tax rate of 5% for commission less than $25,000 and 15% for commission greater than $25,000)

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.

What is Taxable

• Companies liable to pay business tax must pay on all
• Receipts whether received in Belize or elsewhere (Receipts: All revenues whether in cash or in kind, or whether received or accrued without any deduction)
• Receipts that are not related to a trade, business, profession, or vocation carried on in Belize
• Gains, including gains of a capital nature

Exemptions

The following are exemptions under the Business Tax:

• Receipts from trade less than $75,000 per annum where such receipts are the only source of income
• Receipts from profession or vocation of less than $20, 000 per annum where such receipts are the only source of income
• "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.

Filing Deadlines

All IBCs incorporated on or before October 16, 2017:

a) Continue to benefit from the previously existing tax and stamp duty exemptions for 2020 and 2021until 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.

Tax returns should be filed accompanied by financial statements internally generated (management accounts) but audited financial statements must be presented when requested by Director General

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Globalserve Overseas department is available to discuss the above with you and assist you to understand the new environment.

You can contact us for further information at the below email addresses or call us at 00357 25817181

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