Belizean Government has enacted the INTERNATIONAL BUSINESS COMPANIES (AMENDMENT) BILL, 2018, to amend the International Business Companies Act, Chapter 270 of the Laws of Belize, Revised Edition 2011.
Specifically, the act has been enacted to eliminate ring-fencing by extending the regime to Belizean residents, removing the restrictions from international business companies to carry on business with Belizean residents, removing the prohibitions in relation to owning of real property, and removing the exemptions from taxes and duties; to provide for physical presence by international business companies; and to provide for matters connected therewith or incidental thereto.
As of 1st January, 2019, the most important aspects which have been modified are summarized here below:
1. An IBC is a company that conducts any activity that is not prohibited under a law in Belize and includes:
- providing services such as managing, co-ordinating or controlling business activities for a group as a whole or for group members in a geographical area;
- carrying on the business of purchasing raw materials or finished product from other group members for re-sale;
- carrying on banking business provided that it is licensed under an enactment authorising it to carry on such business;
- carrying on business as an insurance or a reinsurance company, insurance agent, or insurance broker provided that it is licensed under an enactment authorising it to carry on such business;
- carry on the business of providing the registered office for companies provided that it is licensed under an enactment authorising it to carry on such business;
- carrying on trust business provided that it is licensed under an enactment authorising it to carry on such business;
- carrying on collective investment schemes provided that it is licensed under an enactment authorising it to carry on such schemes;
- carrying on the business of managing or administering of funds provided that it is licensed under an enactment authorising it to carry on such business;
- carrying on the business of financing or leasing of assets;
- carrying on the business of shipping, such as, managing or crew, hauling and maintaining ships, overseeing and tracking of deliveries, ordering and delivery of goods, or organising and overseeing of voyages;
- operating a holding company business;
- carry on the business of research and development, creating, or owning intellectual property;
- carry on international business, management or professional services, technical services or consultancy services; or
- carry on distribution and service center business;
2. Any person which has its business centrally managed and controlled within Belize; and is resident for tax purposes in Belize; will be considered as a “person resident in Belize”.
3. Physical-presence will be required to all companies engaging in what the act refers to as “relevant activity”, which are the ones licensed under the International Finances Commission Act. Cap. 272.
Physical presence includes the following:
(a) the employment, whether directly or indirectly, of a sufficient and adequate amount of suitably qualified persons to carry out its core income generating activities;
(a.1.) According to the Bill, Core Income Generating Activities may include:
- in respect of finance and leasing business: agreeing funding terms | identifying and acquiring assets to be leased (in the case of leasing) | setting the terms and duration of any financing or leasing | monitoring and revising any agreements | managing any risks.
- iii.in respect of fund management business: taking decisions on the holding and selling of investments | calculating risk and reserves | taking decisions on currency or interest fluctuations and hedging positions | preparing reports and returns to investors and the International Financial Services Commission or other appropriate authority with equivalent functions relating to the supervision or regulation of such business.
- in respect of insurance business: predicting and calculating risk | insuring or re-insuring against risk and providing insurance business services to clients.
- i.in respect of banking business: raising funds, managing risk including credit, currency and interest risk | taking hedging positions | providing loans, credit or other financial services to customers | managing capital and preparing reports and returns to the International Financial Services Commission or other appropriate authority with equivalent functions relating to the supervision or regulation of such business.
- in respect of headquarters business: taking relevant management decisions | incurring expenditures on behalf of group entities | co-ordinating group activities.
- in respect of shipping business: managing crew (including hiring, paying and overseeing crew members) | overhauling and maintaining ships | overseeing and tracking deliveries | determining what goods to order and when to deliver them, organising oerseeing voyages.
- vii. in respect of holding company business: all activities related to that business.
- viii.in respect of intellectual property holding business: taking strategic decisions and managing (as well as bearing) the principal risks related to development and subsequent exploitation of the intangible asset generating income | taking the strategic decisions and managing (as well as bearing) the principal risks relating to acquisition by third parties and subsequent exploitation and protection of the intangible asset | carrying on the underlying trading activities through which the intangible assets are exploited leading to the generation of revenue from third parties | research and development, branding or distribution.
- ix.in respect of distribution and service centre business: transporting and storing goods, components and materials | managing stocks | taking orders | providing consulting or other administrative services.
(b) expenditures consistent with the size of the business relation to the nature and complexities of its relevant activity; and
(c) the control and management activities are conducted from Belize either directly or through a management agency.
(c.1.) According to the Bill, “controlled and managed” may be fulfilled if the company:
- engages at least two directors resident in Belize for the purpose of -
(a) holding assets that are required to be managed;
(b) acquiring and disposing of assets;
(c) managing of the business;
(d) making banking and financial arrangements;
(e) instructing lawyers, accountants and other advisors;
(f) distributing of income and dividends;
ii. convenes its meetings of directors pursuant to section 54, in Belize;
iii. includes in its Memorandum under section 12, a statement that disputes arising out of or in connection with a relevant activity shall be settled pursuant the Arbitration Act; and
iv. upon prescribing regulations for the company for the purpose of its Articles under section 13, shall include the prescription for disputes arising out of or in connection with a relevant activity to be settled pursuant the Arbitration Act.
4. A person who contravenes what has been established by the Act commits offence and shall be liable to the according penalties there prescribed.
5. According to the Bill, an International Business Company that is resident in Belize shall
(a) be levied and paid to the Commissioner of Income Tax the relevant taxes at the rate specified in the Income and Business Tax Act, Cap. 55.
(b) file an annual tax return based on the requirements of the Income and Business Tax Act, Cap. 55.
(c)be subject to the Stamp Duties Act including the payment of stamp duty in relation to an instrument -
(i) to transfer property to or by such company;
(ii) on transactions in respect of the shares, debt obligations or other securities of such company; and
(iii) relating to the assets or activities of a company."
6. A company that is physically present in Belize shall:
(a) be eligible to maintain a dollar account in a domestic, branch of a foreign or international bank that is located in Belize.
(b) submit to the Central Bank of Belize a monthly report of all transactions in the dollar accounts held by the company; and all sales and purchases of the company.
(c) be subject to the Exchance Control Regulations Act.
7. A company incorporated under this Act shall not be a resident of Belize if the company is able to supply satisfactory evidence to the Minister responsible for Finance that -
(a) it is not physically present in Belize;
(b) its core income generating 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
(c) it is paying the rate of taxes payable in that country."
8. Companies existing prior to 30th June 2018, conducting any business in relation to research and development or owns intellectual property assets may apply to the International Financial Service Commission for determination of whether it may continue operating within the regime of International Business Companies Act.
9. International Business Companies whose business activities consist of the core income generating activities in relation to a relevant activity shall have a period up until 30th June 2021 in order comply with the requirement of the Act and shall report to the International Financial Services Commission the existence of a relevant activity with core income generating activities.
10. If an international business company was incorporated –
(a) on or before 16th October, 2017, then a relevant activity or new asset acquired after this date shall not be eligible to benefit from the tax exemption saved up to 30th June 2021.
(b) on or after 17th October, 2017, that company shall not be eligible to benefit from the tax exemption existing prior to the commencement of the Act which was saved up to 30th June, 2021.
(c) for the purposes of paragraphs (a) and (b), that regime shall stand abolished at 31st December, 2018.
11. After the granted period of 30th June, 2021, all savings under this section and the regime in respect of public investment companies saved by section 19 of the International Business Companies Act (1995) shall stand abolished.
12. A company that is licensed by the International Financial Services Commission at the commencement date of the Act, shall comply with the physical presence requirement within one year of this date, unless it decides to comply with physical presence requirements through a managing agent, and the regulations relating to physical presence do not come into force on or before 30th June, 2019.