Belize, like other Caribbean jurisdictions, has enacted a series of laws seeking to comply with international Economic Substance requirements. Please note that the issuance of the final Guidelines on the matter of Economic Substance in Belize is expected sometime before the end of this year. Therefore, this document may not be considered as the final interpretation as it may still vary in certain aspects.
What is the effect?
Accordingly, International Business Companies (IBC) engaged on what is defined as "relevant activities" will need to meet adequate economic substance in Belize. Take note that an IBC carrying on any relevant activity is thus classified as an Included Entity.
Included Entities are therefore:
- IBCs licensed by the Belize
International Financial Services Commission;
- IBCs that carry out any of the following relevant activities, namely
- banking business;
- insurance business;
- fund management business;
- financing and leasing business;
- headquarters business;
- distribution and service centre business;
- shipping business;
- as a holding company, engaged, or where one or more of its subsidiaries is engaged in one of the activities listed under paragraphs (a) to (g)
IBCs that are not Included Entities (Non-Included Entities) do not require substantial economic presence in Belize.
Pure Equity Holding Companies (PEHC) – Reduced Substance Requirements
IBCs that are Pure Equity Holding Companies (only holds equity participations and earn only dividends and capital gains or related incidental income) are subject to reduced substance requirements, as follows– (a) it shall comply with all applicable laws and regulations of Belize; and (b) it shall have adequate human resources and premises in Belize for holding equity participation in other entities and where it manages those equity participations in other entities, have adequate human resources and premises in Belize for carrying out the management.
PEHC IBCs are allowed reduced substance requirements. This requires clarification which should come in the form of Regulatory Guidelines issued by the International Financial Services Commission (IFSC).
Companies are not subject to the economic substance legislation when such company only owns tangible assets (i.e. real estate, vessel, etc.) or perhaps only has a bank account and is not involved in a relevant activity.
IBCs Carrying on Relevant Activity with Outside Control, Management & Tax Residence - Exemption from Economic Presence
Substantial economic presence will not apply to any IBC that is controlled and managed outside of Belize and is tax resident in a jurisdiction other than Belize. This is shown where the IBC is able to provide the IFSC with a letter or certificate stating that the IBC is considered to be resident for tax purposes in that jurisdiction.
Further clarification on what constitutes substantial economic presence in Belize should come in the form of Regulatory Guidelines issued by the International Financial Services Commission (IFSC).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.