Filing Income Taxes In Belize: What Expats Need To Know

Belize is considered a tax haven, allowing individuals and corporations to legally reduce their tax liabilities. The country has a territorial tax system, meaning individuals are only taxed on income earned within the country. For US expats, this means that while you are required to file a US tax return every year, reporting your worldwide income to the Internal Revenue Service (IRS), you may also need to file a tax return in Belize if you have income sourced in the country.

US expats in Belize must file US taxes

As a US citizen or green card holder, you are required to file a US tax return every year, regardless of where you live or work. This means that you need to report your worldwide income to the Internal Revenue Service (IRS), even if you earn all of your income in Belize. The IRS form to file is Form 1040. While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be further extended to October 15th upon request.

If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your name, you also need to file Form 8938 to declare them. If you had at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also need to file FinCEN Form 114, also known as a Foreign Bank Account Report (FBAR).

Belize is considered a tax haven, allowing individuals and corporations to legally reduce their tax liabilities. However, US residents must still report their earnings to the IRS unless their company does business solely in Belize. If you are a US citizen, green card holder, or US/Belize dual citizen living in Belize, you may qualify for the Foreign Income Tax Exclusion, which shields up to US$108,700 of offshore earned income for those who qualify. To take advantage of this exclusion, you must live in Belize and be outside the US for 330 days within a consecutive 12-month period.

In addition to your US tax obligations, you may also be required to file a tax return in Belize if you are considered a resident or if you have income sourced in Belize. Belize has a territorial tax system, which means that you are only taxed on income earned within the country. The Belizean tax year is the same as the US, following the calendar year from January 1 to December 31, and tax returns are due by March 31st of the subsequent tax year. The tax authority in Belize is called the Income Tax Department, and the primary tax form for residents is BTS203 – Income Tax Return for Employees.

It is important to stay informed and up to date on your tax obligations in both the US and Belize to ensure compliance and avoid penalties.

Foreign income exclusions and exemptions

The Foreign Earned Income Exclusion (FEIE) is a common tax benefit for U.S. expats, allowing them to exclude all or part of their foreign-earned income from U.S. taxes. This exclusion is intended to prevent double taxation, as Americans living abroad are taxed twice on the same income.

To claim the FEIE, you must meet certain requirements:

• You must be a U.S. citizen or resident alien.
• Your tax home must be in a foreign country.
• You must have foreign-earned income.
• You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
• You must be physically present in a foreign country for at least 330 full days during any period of 12 consecutive months.

The FEIE is not a blanket exclusion and has stipulations on what can and cannot be excluded. It only applies to earned income, such as self-employment income, and does not include passive or investment income. The exclusion amount is adjusted annually for inflation and was $112,000 for 2022 and $120,000 for 2023.

In addition to the FEIE, there is also a foreign housing exclusion or deduction. This represents the housing costs paid abroad with foreign-earned income and is taken as an exclusion by employees and as a deduction by self-employed individuals. The foreign housing amount is the housing costs that exceed 16% of the maximum exclusion amount, with a cap of 30% of the maximum exclusion amount.

It is important to note that the FEIE is not the only tax relief option for expats. There is also the foreign tax credit, which may be a better option depending on an individual's specific situation. Expats should consult with a tax advisor to determine the best course of action for their tax situation.

Belize's tax year and deadline

Belize's tax year runs from January 1st to December 31st, following the same schedule as the US. The tax deadline for the previous year is March 31st of the subsequent tax year. For example, taxes for the 2022 tax year must be filed by March 31st, 2023.

The Belize Tax Service Department (BTSD) has stated that taxpayers will be required to file electronic tax returns with the BTSD from the tax period ending March 31st, 2023, and thereafter. These returns and payments will only be accepted online through the Integrated Revenue Information System (IRIS Belize).

The Belize tax system is based on a territorial principle, meaning individuals are only taxed on income earned within the country. If you earn income from a source outside of Belize, it is generally not subject to Belizean taxes. Both residents and non-residents pay a flat income tax rate of 25% on taxable income. If you earn below $26,000 BZ, you are exempt from income tax.

There are, however, certain individuals who are required to file taxes in Belize. If you are a resident of Belize, you must file a tax return if you have taxable income that exceeds the annual threshold. Taxable income includes income from employment, business or self-employment, rental income, and investment income. Non-residents who earn income from Belize are also required to file a tax return, including those who earn rental or investment income from Belizean sources.

Additionally, there are certain categories of individuals who must file taxes in Belize regardless of their income level. These include:

• Directors or officers of a Belizean company
• Recipients of dividends or other distributions from a Belizean company
• Owners of property in Belize
• Beneficiaries of a trust established in Belize

Who is considered a resident in Belize

Belize offers two types of residence status: Permanent Residence and Temporary Residence.

Permanent Residence

Permanent Residence is for individuals who want to make Belize their home and stay in the country for a long period. To be eligible for the Permanent Residency application, you must have lived in Belize for at least a year and not left the country for more than 14 days during that time. You must also demonstrate financial stability and that you have not been convicted of a criminal offence in any country for which you could have been sentenced to a year or more of imprisonment.

Temporary Residence

Temporary Residence is for individuals who have made or are in the process of making a substantial commercial investment in Belize but cannot meet the ordinary Permanent Residence restrictions due to commitments outside of Belize. A Temporary Residence status is given for one year and is renewable at the end of that period. To be eligible for Temporary Residence, you must show evidence of investments in Belize valued at no less than BZ$500,000.

How to file taxes as a Belize resident

As a Belize resident, you are required to file a tax return if your taxable income exceeds the annual threshold. This includes income from employment, business or self-employment, rental income, and investment income. The tax year in Belize runs from January 1st to December 31st, and the tax deadline is March 31st of the subsequent tax year.

To file your taxes, you will need to submit the BTS203 – Income Tax Return for Employees form to the Belize Tax Service (BTS). This form is available for printing and mailing or for online submission. Be sure to sign the form before submitting it, and attach a copy of your Social Security Card.

If you are claiming a refund, you will also need to fill out a vendor form with your current banking information. If you are applying for Charitable Donations/Relief, you must attach original receipts or a letter from the institution on company letterhead. If you are applying for Contribution to Education/Education Relief, you must provide a receipt or letter from the school with the child's name, your name, and the amount donated.

It's important to note that Belize has a territorial tax system, which means that you are only taxed on income earned within Belize. If you have income from a source outside of Belize, it is generally not subject to Belizean taxes. However, as a US citizen or resident, you are still required to file a US tax return every year and report your worldwide income to the Internal Revenue Service (IRS).

Frequently asked questions