Belize Taxation and the Economic Substance Act 2019

The subject. This chapter examines the Belize taxes that bear on the trusts, limited liability companies, companies and foundations discussed in Parts II to IV, and the Economic Substance Act, Cap. 273:01, which since 2019 has required certain Belize entities to show that they carry on their business in Belize in substance. Four statutes do most of the work: the Income and Business Tax Act, Cap. 55 ("IBTA"); the Stamp Duties Act, Cap. 64; the Economic Substance Act ("ESA"); and the exemption provisions in the vehicle statutes themselves, section 65D of the Trusts Act, section 94 of the Limited Liability Companies Act and section 107 of the Foundations Act. The General Sales Tax Act, Cap. 63, appears briefly, because a Belize structure that buys services in Belize meets it on its invoices. Citations to the IBTA, the Stamp Duties Act, the General Sales Tax Act and the ESA are to the 2020 revised edition, which states the law as at December 31, 2020, read with the later amending Acts named in the text.

Why the subject matters to a protective structure. Tax is rarely the reason a client chooses Belize. The protective provisions of the Trusts Act, the LLC Act and the Foundations Act are (see supra chs. 11, 16, 17, 21). Tax still matters in three ways. First, a structure that incurs Belize tax it did not plan for loses money every year and may be in default of filing duties that carry penalties and, in some cases, criminal liability. Second, the Economic Substance Act and the business-tax rules are enforced partly by striking entities off their registers, and a struck-off LLC or company cannot hold or protect anything (see supra ¶¶ 1470.07, 1870.05–1870.06). Third, the exchange-of-information provisions in the IBTA and the ESA send information about Belize entities and their owners to the tax authorities of the owners' home countries. A planner who understands which Belize vehicle files what, and where the information goes, can design a structure that is compliant at home and in Belize, and can tell the client in advance what the home authority will see (see infra chs. 29, 30).

The position in summary. The present law can be stated in six propositions, each examined in this chapter.

1. A duly registered international trust is exempt from the IBTA, from death duties on its property and from stamp duty on instruments relating to its property, for as long as it remains registered. Trusts Act, Cap. 202, s. 65D(1). The 2019 and 2023 reforms did not amend section 65D (see supra ¶ 580.07).
2. A foundation is exempt from income tax, business tax and a list of other taxes "based upon or measured by assets or income originating outside of Belize or in connection with matters of administration that may occur in Belize," and from stamp duty on instruments transferring property to or by it, except Belize property. Foundations Act, Cap. 24:02, s. 107(1)–(3).
3. Since 2023 a Belize LLC has no exemption. It is "subject to all tax laws of Belize" and, for income and business tax, is disregarded so that its income and receipts are those of its members, unless it elects to be taxed as a company. LLC Act, Cap. 270:01, s. 94(1)–(2) (as substituted by No. 29 of 2023, s. 13).
4. A company under the Belize Companies Act 2022 has no exemption. Since the basis year 2020 companies pay no income tax; every company pays business tax on all its receipts "whether received in Belize or elsewhere," including receipts unrelated to a business in Belize and certain capital gains, unless it qualifies for the foreign-tax-resident exclusion in section 106(5). IBTA ss. 5(6), 106(1)(b), (5).
5. Stamp duty applies to instruments relating to property in Belize or to things done in Belize. A Belize company or LLC that carries on no relevant activity under the ESA and holds no Belize property other than interests in other Belize companies and LLCs is outside stamp duty on transactions in its property and its shares or membership interests. Stamp Duties Act, Cap. 64, s. 14(3), (4A) (as substituted by No. 29 of 2023, s. 18(2)).
6. The ESA applies to Belize companies and LLCs, and not to trusts or foundations. An entity carrying on one of seven relevant activities must have substantial economic presence in Belize. Every company and LLC within the Act, including a holding entity with no relevant activity, must file an annual report, and the Commission sends the report of an entity that carries on no relevant activity to the tax authority of its owners' jurisdiction. ESA ss. 2, 4–10, 12 (as amended).

Plan of the chapter. Paragraph 2810 traces the history from the offshore exemptions to the present regime. Paragraph 2820 explains the structure of the IBTA, its source and residence rules and the two taxes it imposes. Paragraph 2830 applies the IBTA to each vehicle. Paragraph 2840 covers withholding and payments to non-residents. Paragraph 2850 covers stamp duty and the General Sales Tax. Paragraphs 2860 and 2870 examine the ESA. Paragraph 2880 draws the planning points together for each vehicle, with a comparison table and a compliance calendar, and ¶ 2890 closes with a checklist.

A caution on currency and later amendments. The IBTA states amounts in Belize dollars, and rates and thresholds may be changed by resolution of the National Assembly or by Order. IBTA s. 107(2). The rates quoted in this chapter are those in the 2020 revised edition as amended by the Acts of 2019 consolidated in it. Belize counsel or a Belize tax adviser should confirm the current rates, the current forms and the Director General's current filing practice before any return is filed or any structure is priced.