Belize Economic Substance Requirements
In October 2019, Belize introduced economic substance rules for local companies, to comply with European Union tax governance principles.
Types of company subject to Belize economic substance requirements
- International Business Companies (IBCs) carrying out i) banking ii) insurance iii) fund management iv) financing and leasing v) headquarters activities vi) distribution and service centre business vii) shipping viii) holding company activities, engaged, or where one or more of its subsidiaries is engaged in an activity listed above.
Types of company not subject to Belize economic substance requirements
- IBCs controlled or managed outside Belize and which are not tax-resident in Belize. The company must prove i) its tax residency in another jurisdiction ii) it is not physically present in Belize iii) 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 iv) it is paying the applicable tax rate in that country.
Compliance requirements for IBCs subject to economic substance
- The IBC must have i) core income generating activities (CIGS) and ii) a substantial economic presence, in Belize. CIGS criteria include:
- Amount of annual operating expenditure;
- Number of qualified full-time employees;
- Physical office(s);
- An included entity may, however, outsource its CIGS to a Belize-licenced managing agent.
- Substantial economic presence criteria include:
- Having an adequate number of Board of Directors meetings in Belize;
- Having a quorum of directors present at board meetings in Belize;
- Having strategic decisions during meetings recorded in minutes of meetings;
- Having all records and minutes kept in Belize;
- Having a Board of Directors with a necessary knowledge and expertise.
- Pure Equity Holding Companies have reduced economic substance requirements;
- Holding companies are not subject to economic substance legislation i) if the company only owns tangible assets (i e real estate, vessels etc) or ii) only has a bank account and iii) is not involved in a relevant activity.
- All IBCs whether subject to economic substance requirements or not, must report to their respective competent authorities within nine months from the end of a fiscal year;
- As of March 2021, all IBCs in Belize must obtain a Tax Identification Number;
- All IBCs that are now under the domestic tax regime are able to carry on business in Belize, and own real estate property. These entities are liable to pay income tax and levy, and must file an annual tax return;
- Companies incorporated on or before 16 October, 2017 must, by 30 June, 2021, comply with all economic substance requirements;
- For companies incorporated from 17 October 2017 to 31 December 2018, and for new companies (2019 onwards), the new amendments are applicable immediately.