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Income Tax in Belize



Belize as a Tax Haven:

In the early 1990s, the government of Belize started the process of becoming a tax haven, following the lead and legislative practices of Guernsey and the Cayman Islands to create an environment that would attract offshore companies. The primary objective of the Belize government in this initiative was to eliminate taxes on a wide range of income sources, including dividends, interest, capital gains and revenues earned offshore. To create a pure tax-free environment, the country also eliminated its stamp duty, a tax charged to certify the veracity of documentation for the incorporation of companies, trusts and foundations.

To fast-track the incorporation of businesses, trusts and foundations, the country established the International Business Companies (IBC) Act, the Trusts Act, and the Offshore Banking Act in 1996. As a result of the formation of the IBC Act, Belize is considered to be one of the most corporate-friendly nations in the world. Features of the legislation include an incorporation process that can be completed within a few hours, tax-free status and no reporting requirements.

The key features of establishing a Belize International Trust under the provisions of the Trusts Act include a permanent exemption from personal and business taxes on earnings generated by assets in a trust. Estates also receive comprehensive exemptions from taxes related to inheritance, succession and gifting.

One of the key provisions in the Offshore Banking Act allows financial institutions with a minimum of $25 million in capital to apply for an unrestricted license, which allows for banking operations without local regulation. Smaller institutions can apply for a limited license by meeting a capital requirement of $15 million.

Financial Privacy in Belize:

Privacy barriers have progressively weakened in traditional tax havens such as Switzerland and Luxembourg, opening the door for countries like Belize to establish their status as the next generation of tax havens. To secure the financial privacy of companies, foundations and trusts incorporated in the country, banking regulations mandate that names and account information can only be disclosed after the submission of documentation related to criminal investigations, followed by a court order.

To extend confidentiality for account holders, Belize places no restrictions on currency movements in and out of the country. The absence of an exchange control policy provides offshore businesses incorporated in the country with the ability to transfer unlimited amounts of currency without reporting requirements. Belize also has no tax treaties with other governments, which have been used to weaken financial privacy protections, particularly in Europe.

Belize Individual Income Tax Rates:

Taxes for Individuals in Belize:

Rates

Rates for tax year commencing on the first basis day in 1999:

i. The standard rate of twenty-five percent will be charge on the basis of chargeable income of every employed person.
ii. The standard rate of twenty-five percent will be charged on the basis of chargeable income of every person not considered an employed person.
a. Any business tax paid during the current year will count as a credit towards tax owed on chargeable income.
b. Any excess business tax paid over the income tax due will be carried forward as a business expense into the following year.
iii. The rate of five percent on gross interest received from time deposits will be charged at source and is final.
iv. The rate of fifteen percent will be charged on lottery winnings at source and is final.

How can you become resident of Belize?

One very nice advantage is that Belize is one of the few countries in the world where you can become a permanent resident without the obligation to actually reside there on a permanent basis.

The first step is to go to Belize. Depending on your citizenship (read your nationality), you can get a visa free entry in Belize with your international passport. For example, citizens of the EU, the CARICOM, the Commonwealth Republics, the United states, etc. can all get a visa free entry in Belize.

While you’re in Belize, sipping a Mojito and determined to stay in this piece of paradise, it’s nice to know there are two residence statuses available: the Permanent Residence status and the Qualified Retired Person (QRP) status. The Permanent Residence status implies that someone in Belize can still employ you while this isn’t the case for QRPs. It’s also nice to realise that Belize applies a territorial tax system, which is very interesting.

Taxes:

Belize applies a territorial tax system: being a permanent resident, this means you’ll only have to pay personal income tax on income derived from within Belize (when you work as an employee in Belize, for example). This also means that foreign income is not taxed at all and is tax-exempt. This offers opportunitie. Additionally, Belize doesn’t levy capital gains tax nor inheritance tax.

Permanent Residence status:

If you want to obtain the Permanent Resident status, you must have legally resided in Belize for at least one year. All visitors with a valid international passport and/or visa obtain a 30-day tourist entry permit upon arrival. If you want to stay longer than thirty days, then you’ll need to renew your permit at an immigration department office before the expiration date and this for each month (so 11 renewals in total covering a period of one year). The cost of an extension is USD 25 for each month of the first 6 months and USD 50 for each month of the last six months. During this year, you can leave Belize as many times as you like but you cannot leave the country for 14 or more consecutive days.

Strange as it may sound, you must apply for a work permit before applying for permanent residence, even if you never intend to work in Belize. Does this imply that you have to look for a job? Of course not. Strange indeed! You just need to buy a work permit, which can cost up to USD 1,000 if you’re highly qualified. Moreover, you must convince the immigration department that you have valuable skills, in case you should ever decide to start working in Belize. ‘Valuable’ is interpreted in the broadest sense. Present some of your best certificates. But we know cases where people received a work permit based on their swimming certificate (you can always give swimming lessons) or based on their piano skills. Don’t lose any sleep over it. Even in the case you don’t have any skill (some people are just clumsy, lazy or completely useless), you can always volunteer to give computer classes to children. Or you can pay a Belizean who already has a company to obtain that work permit for you. In short, there are creative possibilities enough.

Once you’re able to prove that you’ve been living in Belize for one year, you’re finally ready to apply for the Permanent Residence permit. Before you apply, you (and all your family members who want to come with you) will need to undergo a simple medical examination in Belize, including an HIV test (Human Immunodeficiency Virus test) and an STI test (Sexually Transmitted Infections test). As long as you aren’t infected and you’re still able to breathe, you can complete this medical examination successfully. Furthermore, you should have a crime-free record in the country of your last place of residence.

When you submit your application for the Permanent Residence permit, you should expect a delay of around four months. Always remain patient and friendly, because if you start barking and threatening, they’ll never finish your paperwork. This is the Caribbean, things are a bit different here. The whole application process doesn’t cost more than USD 1,000. Finally, your international passport is stamped indicating that you’re a permanent resident of Belize, and you receive a real permanent residence permit afterwards.

As free as a bird:

Once you’re a permanent resident, almost anything is possible in Belize. You can start your own business or you can start looking for a job. However, you cannot vote or join the army, but we assume that acquiring these rights is not what you’re looking for. You’re free to come and go as you wish: you’re not required to reside in Belize for a minimum number of days! Handy, right? Even if you’re away for ten years, so to speak, you’ll still maintain your permanent residence status. You can only lose your permanent residence status if you’re up to no good or if you do something that upsets the government. After you’ve obtained your permanent residence status, you have up to one year to bring your household effects into Belize duty-free, on a one-time basis.




Qualified Retired Person status:

This residence scheme is very flexible and it’s nice to know that applications for the Qualified Retired Person status are managed by the Belize Tourism Board and not by the department of immigration.

Who qualifies?

The Qualified Retired Person status is open to residents of the US, Canada, the EU and all countries of the Commonwealth. However, in practice, the programme is open to nationals from other countries as well. To maintain your status as a Qualified Retired Person (QRP), you need to reside in Belize for four weeks in any given year (a long holiday). Anyone can apply for the QRP status, even by e-mail, and you don’t have to be a permanent resident of Belize.

Someone who wants to obtain the QRP status must have a monthly income of at least USD 2,000 originating from sources outside Belize. This income can originate from any possible source, such as pension funds, investments, real estate, and so on. This income (USD 24,000 per year) needs to be deposited on your bank account which you’re holding with a Belizean bank. When applying for the QRP status, you’ll need to struggle through the documentation requirements. The most important document you’ll need to submit is the one issued by the company that grants the pension income. That document shall certify that the pension of minimum USD 2,000 per month will be forwarded to your bank account which you’re holding with a reputable financial institution in Belize.

Anyone can apply for the QRP status, regardless the age of the applicant. Officially, anyone older than 45 can qualify for the programme, but in reality, no one seems to bother too much about that. A person who qualifies can also include his/her dependents (spouse and children) in the programme. The QRP application can be wound up within four to six weeks. You can also change your status from Permanent Resident to Qualified Retired Person and vice versa.

Costs of the application:

To participate in this programme, you’ll have to pay the following: (1) a non-refundable application fee of USD 150; (2) a programme fee in the sum of USD 1,000 payable upon acceptance into the programme; (3) a fee of USD 200 for the issuance of the QRP residence card; and (4) each dependent (children for example) is required to pay a programme fee of USD 750 to enter the programme.




Incentives and advantages:

As a QRP of Belize, you don’t need a work permit and you can do anything you like. However, you may not work for anyone in Belize, but this rarely happens as an expat. Therefore, you can go on an extended holiday (or multiple shorter holidays) to Belize and still be a resident of Belize (a minimum presence of four weeks on a yearly basis is required). Obviously, once you have a residence permit of Belize, it’s easier to prove to the authorities of other countries, where you spend your time sometimes, that you don’t live there. Because after all, you have a residence permit of Belize.All QRPs are entitled to import their personal household effects and approved means of transportation into Belize, free of all import duties and taxes.

Advantage of both the permanent residence scheme and the QRP scheme:

Because of the territorial tax system of Belize, residents of Belize don’t pay any taxes on their worldwide income as long as the income doesn’t originate from sources within Belize. Therefore, this means that if you use Belize as an operating base to run your business (but you can run your business from any place in the world), you aren’t subject to any personal income taxes, as long as you don’t have any Belizean customers of course. And the only thing you have to do is reside in Belize for a limited period of time on an annual basis.

Withholding taxes:

Item
Tax Rate
*Dividends paid to non-residents
15%
Gross contract payments in connection with contracts exceeding BZ$3,000
3%
Interest paid to non-residents
15%
Management fees, rental of plant and equipment and charges for technical services paid to non-residents
25%

*Effective 1 January 2011, dividends paid to shareholders by entities licensed to provide telecommunication services that offer real time voice services are exempt from tax.

Income Tax Return:

Filing Dates:

The Business Tax Return along with the Tax Due must be filed by the 15th day of the following month, covering all receipts for the previous month.

Penalties and Interest:

The penalties and interest charges for not complying with the filing and payment deadlines are as follows:
·        Late or Non-filing: 10% of the tax due for every month or part of the month that the return remains outstanding, minimum of $10.00. For maximum of 24 months.
·        Late or Non-payment: 1.5% interest per month on all unpaid balance from the time it was due up to the date of payment.




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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.




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This blog is Created by CA Anil Kumar Jain.