Belize economic substance requirements in 2023
In October 2019, Belize introduced economic substance rules for local companies, to comply with European Union tax governance principles.
- Belize International Business Companies (IBCs), and subsidiaries, must meet ESRs if they are engaged in i) banking ii) insurance iii) fund management iv) financing and leasing v) headquarters activities vi) distribution and service centre business vi) shipping vii) holding company activities, engaged, or where one or more of its subsidiaries is engaged, in an activity listed above and viii) all regulated entities under the IFSC Act.
- The IBC must have i) core income generating activities (CIGAs) and ii) a substantial economic presence, in Belize. CIGS criteria include a) amount of annual operating expenditure b) number of qualified full-time employees and c) physical office(s). A company may, however, outsource its CIGAs to a Belize-licensed managing agent.
- Substantial economic presence criteria include i) having an adequate number of Board of Directors meetings in Belize ii) having a quorum of directors present at board meetings in Belize iii) having strategic decisions during meetings recorded in minutes of meetings iv) having all records and minutes kept in Belize and v) having a Board of Directors with necessary knowledge and expertise.
- IBCs controlled or managed outside Belize, and which are not tax-resident in Belize, are not subject to ESRs. To be exempt from ESRs, the company must prove i) its tax residency in another jurisdiction ii) it is not physically present in Belize iii) its CIGAs 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.
- 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.
- Pure Equity Holding Companies have reduced economic substance requirements.
- All IBCs, whether subject to ESRs 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.
Problems and solutions
|New legal requirement||Simple, practical low cost solution|
Belize companies engaged in relevant activities must i) conduct income-generating activities in Belize ii) rent physical office space in Belize iii) hire staff in Belize and iv) have active directors in Belize.
Healy Consultants Group will assist you to:
Effective 2020, all Belize companies must complete an annual economic substance declaration (Form D) confirming whether or not the company is conducting relevant activities within 9 months after the end of the fiscal year. The notification must be submitted to the Belize IFSC.
The declaration includes i) tax residence, ii) business activity iii) amount and type of gross income iv) premises v) number of employees, including number of full-time employees and vi) information on core income-generating activities.
Failure to timely comply with the above may result in i) a fine of approximately $75,000 and/or ii) suspension or revocation of licence iii) dissolution of the company.
Our multi-national Client does not want to submit an annual ESR report to the Belize government.
In 2021 i) there is a 50% probability that Belize will be blacklisted again by the EU or another western government and ii) it will become even more challenging to secure and maintain multicurrency corporate bank account numbers for Belize LLCs.
As a short-term solution, engage Healy Consultants Group to register your Belize company for tax, and complete its international accounting and tax filing obligations.