Belize Llcs: Navigating Irs Blacklist Concerns

Belize is a popular jurisdiction for offshore company formation due to its International Business Companies Act (IBC), which has been in place since 1990. Belize is considered a tax haven that allows individuals and corporations to legally reduce their tax liabilities. However, this has also made it an attractive location for those seeking to hide their assets and evade taxes. In 2015, the Internal Revenue Service (IRS) was authorized to issue summonses to discover U.S. taxpayers with offshore bank accounts in Belize, and in 2017, the IRS won a case against the use of secret Belize bank accounts for tax fraud. Belize Limited Liability Companies (LLCs) offer benefits such as tax exemption, limited liability, privacy, and asset protection. While Belize LLCs must follow certain naming conventions and maintain a local registered agent and office address, they are not required to have a minimum number of members or authorized capital. The ease of incorporation and tax advantages of Belize LLCs raise the question of whether they are blacklisted by the IRS.

Belize's status as a tax haven

Belize is a tax haven that allows individuals and corporations to legally reduce their tax liabilities. Belize's status as a tax haven can be attributed to its advantageous tax benefits, privacy protections, and simple incorporation process.

Tax Benefits

Belize does not impose corporate taxes, capital gains taxes, or property taxes, making it attractive to those seeking to minimise their fiscal exposure. Additionally, the property tax rate is only 5%, providing an appealing option for real estate investors. While Belize does have a Value-Added Tax (VAT) of 12.5%, there are notable exemptions, especially for income generated from foreign sources. Belize also provides tax exemptions for specific sectors, including finance, pharmaceuticals, and agricultural products.

Privacy Protections

Belize prioritises financial privacy for companies, foundations, and trusts incorporated in the country. Banking regulations mandate that names and account information can only be disclosed after submitting documentation related to criminal investigations, followed by a court order. Belize also imposes no restrictions on currency movements in and out of the country, allowing offshore businesses to transfer unlimited amounts of currency without reporting requirements.

Simple Incorporation

Incorporating offshore companies in Belize is straightforward and legal due to its International Business Companies Act (IBCA). The incorporation process can be completed within a few hours, granting tax-free status and minimal reporting requirements. Additionally, there is no requirement to reveal beneficial ownership to government authorities, and no annual report is necessary. The formation of a Limited Liability Company (LLC) is also possible under the International Limited Liability Companies Act, providing superior protection for its members.

Belize LLC's asset protection

Belize is a tax haven that allows individuals and corporations to legally reduce their tax liabilities. Belize does not share information with international taxing authorities, providing corporations and individuals with confidentiality. However, U.S. residents must still report earnings to the IRS unless their company does business solely in Belize.

A Belize LLC or Limited Liability Company offers superior protection of its members (owners) than other legal entities offered in Belize. This is because when a Belize LLC member is sued personally, the company and the assets held inside the company are protected from being taken away from an LLC owner. Belize does not recognise foreign judgments and court orders against members of an LLC. The only courts which could order a seizure of an LLC's assets are Belize Courts enforcing claims made against the LLC pertaining to acts that occurred in Belize against the claimant.

The Belize International Limited Liability Companies (LLC) Act of 2011 is a formidable legislation with features that set it apart from similar laws in other jurisdictions. The Belize International LLC Act is based on certain provisions contained in U.S. LLC law but offers more effective asset protection as demonstrated by its case law history.

The only remedy that the Belize International LLC Act recognises against a Belize LLC is a charging order. A charging order gives a creditor the right to extract distribution or payment from an LLC in which the debtor has an interest or membership. However, the Belize International LLC Act severely limits the scope of a charging order. The creditor has a right only to distributions that would normally have gone to the debtor – if any. A charging order does not give the creditor the right to seek payment from the income or interest arising from the other assets included in a Belize LLC in which the debtor holds membership.

Belize LLC laws also define fraudulent transfers very narrowly. To bring a case against an LLC, a creditor must prove that the LLC member-debtor knowingly and willfully transferred assets to the LLC in an attempt to specifically defraud them. Proving this specific intent is nearly impossible under ordinary circumstances, let alone in a court of law. By enforcing a limited definition of fraudulent transfers, Belize LLC laws provide a level of asset protection that is hard to match.

Another way that the Belize LLC Act protects your assets is by imposing a strict statute of limitations on claims that can be brought against a Belize LLC. For a claim to be given any consideration in a Belize court, a creditor must file a fraudulent transfer claim within two years from the date of the asset transfer or one year from the date of the establishment of the LLC (whichever is earlier). Taken together with the series of rules and regulations above, the statute of limitations provides your assets in a Belize LLC an added layer of protection against frivolous or unjust claims.

Before a claim against a Belize LLC can be heard in a Belize court, the claimant must show proof that they have a deposit in the amount greater than 50 percent of the amount claimed, or $50,000 – whichever is greater. If the stipulations and conditions mentioned earlier are not sufficient to deter a determined creditor, this may be the requirement that will prove to be a dealbreaker.

US citizens' tax obligations

US citizens are required to pay taxes on their worldwide income, regardless of where they live. This includes income from a variety of sources such as interest, dividends, wages, rental property, and royalties. US citizens living and working outside of the United States must still file a US tax return and report their worldwide income. They may, however, qualify for certain foreign earned income exclusions and/or foreign income tax credits.

US citizens who are considering renouncing their citizenship should be aware that it is a significant and irreversible decision with substantial tax implications. Those who renounce their citizenship will no longer be subject to US taxation but must first resolve any outstanding income tax debts. They may also be required to pay an exit tax if their net worth exceeds a certain threshold.

US citizens with offshore accounts or assets are required to report these to the Internal Revenue Service (IRS). This includes reporting foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation.

US citizens who are residents of Belize are still required to report their assets to the IRS. They may, however, be able to protect a portion of their income using the Foreign Income Tax Exclusion, which allows for the exclusion of up to $108,700 of offshore earned income for those who qualify.

Belize's International Business Companies Act

Belize is considered a tax haven, allowing individuals and corporations to legally reduce their tax liabilities. Belize's International Business Companies Act (IBCA) was established in 1996 to fast-track the incorporation of businesses, trusts, and foundations. Here are some key points about the Act and its implications:

• Simplified Incorporation Process: The IBCA makes it relatively easy to incorporate offshore companies in Belize, providing a fast and straightforward process.
• Tax-Free Status: Companies incorporated under the IBCA enjoy tax-free status, with no income taxes, capital gains taxes, stamp duty taxes, or dividend taxes.
• No Reporting Requirements: There are no mandatory annual tax return filings for companies established under the IBCA. However, if they engage in business activities generating income within Belize, they become subject to income taxes.
• Quick Registration: Registering a company under the IBCA can be completed within a few hours or a couple of business days. The only document required to be filed with the Belize Registrar is the Articles of Organization, which does not disclose the names of members, managers, or beneficial owners.
• Limited Liability: Members' personal liabilities are limited to their initial invested funds in the company, offering superior protection compared to other legal entities in Belize.
• Privacy: The privacy of companies, foundations, and trusts incorporated in Belize is protected by banking regulations. Disclosure of names and account information can only be mandated after the submission of documentation related to criminal investigations, followed by a court order.
• No Foreign Exchange Controls: Companies operating under the IBCA can use any currency without government-imposed limits or restrictions, allowing for unlimited currency transfers without reporting requirements.
• Flexible Business Activities: IBCA companies can act as holding companies for trusts, foundations, and other entities. They can hold various types of assets, engage in international trade, and open securities trading and bank accounts.
• English as Official Language: Belize is the only country in the region with English as its official language, making it a convenient jurisdiction for international businesses.
• No Minimum Authorized Capital: There is no requirement for a minimum authorized capital amount for companies established under the IBCA.

While Belize offers these advantages, it's important to remember that U.S. residents must still report their earnings to the IRS, unless their company conducts business solely within Belize. Additionally, despite its status as a tax haven, Belize does cooperate with international taxing authorities in certain cases, as evidenced by the court order authorizing the IRS to issue summonses to Belize Bank International Limited and Belize Bank Limited to obtain information about U.S. taxpayers with offshore accounts.

US tax authorities' blacklist

Belize is a tax haven, allowing individuals and corporations to legally reduce their tax liabilities. Belize's International Business Companies Act (IBC) has been in place since 1990, making it simple to incorporate offshore companies. Belize does not share information with international taxing authorities, providing corporations and individuals with confidentiality.

In 2015, the Internal Revenue Service (IRS) was authorized to issue summonses to discover US taxpayers with offshore bank accounts at Belize Bank International Limited (BBIL) and Belize Bank Limited (BBL). The IRS used "John Doe" summonses to obtain information about possible tax violations by individuals whose identities were unknown. This was part of an investigation into suspected tax evasion by customers of a group of companies in Belize, a well-known secrecy haven.

In 2017, the IRS won a case against the use of secret Belize bank accounts to hide income. Mr Casey Padula pleaded guilty to conspiracy to commit tax and bank fraud, including using Belize bank accounts to conceal almost $2.5 million. Padula was the sole shareholder of Demandblox Inc. and conspired with others to move funds from Demandblox to his Belize bank accounts, disguising the transfers as business expenses. He also created two offshore companies in Belize and opened bank accounts in their names.

Belize Bank International (BBI) and Belize Corporate Services (BCS) have been blacklisted by US tax authorities. They are owned by Lord Ashcroft, former deputy chair of the UK's Conservative Party. While there are no allegations that Ashcroft's businesses evaded tax or helped others to do so, US investigators have a record of cases involving criminals and tax dodgers who have used Ashcroft's Belizean companies to hide assets and dodge taxes.

The inclusion of BBI and BCS on the US tax authorities' blacklist means that US tax evaders who wish to disclose hidden assets and pay a fine now face much higher penalties if they use these entities to conceal their wealth.

Frequently asked questions