Belize's Tax Haven: A Comprehensive Guide To Understanding The Country's Tax-Free Status

Belize is considered a tax haven, offering a favourable tax regime for citizens, residents, and foreigners. The country has a territorial tax system, meaning individuals are only taxed on income earned within Belize. Belize does not impose corporate taxes, capital gains taxes, or property taxes, and has a flat income tax rate of 25% for residents and non-residents earning over $26,000 annually.

Belize's status as a tax haven

Belize is a small country in Central America, with a diverse economy driven by tourism, agriculture, and construction. It is considered a tax haven, offering a highly attractive proposition for individuals and companies looking to legally reduce their tax liabilities.

In the early 1990s, the Belizean government embarked on a mission to transform the country into a tax haven. They consulted with experts from renowned safe havens, such as Guernsey, and crafted legislation to create a tax-free and privacy-focused environment. This included the International Business Companies Act (IBCA), the Trusts Act, and the Offshore Banking Act, all established in 1996.

Belize's tax system is territorial, meaning individuals are taxed only on income earned within the country. The country imposes no corporate taxes, capital gains taxes, or property taxes, making it highly desirable for those seeking to minimise their tax exposure. Additionally, Belize offers tax exemptions for specific sectors, such as finance, pharmaceuticals, and agricultural products.

The process of incorporating offshore companies in Belize is straightforward and swift, often completed within a few hours. The country's tax code defines offshore income as dividends, capital gains, earned interest, and revenues, all of which are tax-free for non-citizens. Belize also boasts a flat income tax rate of 25% for both residents and non-residents, with the first $10,000 to $14,500 of income exempt from taxes.

Belize's appeal as a tax haven is further enhanced by its privacy protections. The country does not share information with international taxing authorities, ensuring confidentiality for corporations and individuals. Additionally, there are minimal reporting requirements, and the country imposes no restrictions on currency movements, allowing for unlimited transfers without reporting obligations.

In conclusion, Belize's combination of a favourable tax regime, privacy protections, and simple incorporation processes solidify its status as one of the most sought-after tax havens in the world.

Income tax in Belize

Belize is considered a tax haven, allowing individuals and corporations to legally reduce their tax liabilities. The country has no capital gains tax and does not share information with international taxing authorities, providing confidentiality for corporations and individuals.

Belize has a flat income tax rate of 25% on taxable income. If you earn under $26,000 Belize Dollars (BZD) annually, you are exempt from income tax. The first $14,500 of annual income for residents is also exempt, and pension income is not taxed.

The tax year in Belize runs from January 1st to December 31st, and taxes must be filed by March 31st of the following year. This flat tax rate applies to both residents and non-residents, with non-residents only paying income tax on income earned within Belize.

Who Has to Pay Income Tax in Belize?

Belize residents with an annual income over $26,000 BZD from all sources are required to pay income tax. Non-residents earning income from Belizean sources are also required to file a tax return.

Additionally, certain individuals must file taxes in Belize, regardless of their income level, including:

• Directors or officers of a Belizean company
• Recipients of dividends or distributions from a Belizean company
• Property owners in Belize
• Beneficiaries of a trust established in Belize

Other Tax Considerations in Belize

Belize has a territorial tax system, meaning individuals are taxed only on income earned within the country. The country also has no wealth or inheritance tax.

For the self-employed, a 7% Social Security tax must be paid, calculated on a weekly estimated income. There is also a value-added tax (VAT) of 12.5% on goods and services.

Belize's taxation system

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. Belize does not impose corporate taxes, capital gains taxes, or property taxes, although there is a property transfer tax of 5%. The country also has a Value Added Tax (VAT) of 12.5%, with some exemptions, including income from foreign sources, and financial services, medicines, and certain agricultural products.

For companies, there is a tax on economic activities, which is levied on all income above the following thresholds: $37,500 for a company or commercial activity and $10,000 for those who are self-employed. The tax rate depends on the type of company and ranges from 0.75% to 25% of management rights and other charges paid by non-residents. Companies can also file an income tax return, set at 25% of profits above $20,000. If the income tax is higher than the tax on economic activities, the excess tax is waived.

Belize also has a Qualified Retired Person (QRP) Program, which offers incentives for retirees and entrepreneurs to live, retire, and work in the country. To qualify, individuals must be 45 or older, have a spouse and/or children as dependents, receive a pension or annuity of $2,000 per month or $24,000 per year from a source outside Belize, pass a security clearance, and remain in Belize for at least 30 consecutive days annually.

Trusts and funds in Belize

The Belize Trusts Act, Chapter 202 of the Laws of Belize, defines a trust as a legal relationship where the owner of certain assets ("Settlor") transfers these assets to an independent party ("Trustee"), who is legally bound to maintain and manage these assets for the benefit of another person or group ("Beneficiaries"). The Belize Trusts Act was substantially amended in 2020, and it now represents one of the strongest and most flexible asset protection trust legislations in the world.

A Belize International Trust offers permanent exemption from income and business taxes, estate, inheritance, succession, or gift taxes, and stamp duties. Additionally, the trustee of a Belize International Trust is considered a non-resident and is exempt from exchange control regarding the trust property and transactions. The Belize Trusts Act also provides substantial confidentiality provisions for all trusts registered in Belize, ensuring the privacy of settlors, beneficiaries, and protectors.

The establishment of a trust in Belize requires a Trust Deed or "Deed of Settlement," which outlines the duties of the trustee, names of beneficiaries, and assets subject to the trust. To qualify for tax exemption, the Belize International Trust must adhere to certain limitations and rules prescribed by the Trusts Act. The trust must be in writing, properly filed, and registered with the Registrar of International Trusts in Belize. The Belize Registrar of International Trusts maintains specific information about each International Trust, including the name of the trust, settlement and registration dates, trustee, protector, and trust agent.

Belize also offers a range of investment vehicles, including mutual funds, which are regulated by the Belize Mutual Funds Act 2000. Mutual funds in Belize benefit from minimum or zero taxes on capital gains, incomes, profits, and dividends. Additionally, fund managers, advisors, and administrators enjoy minimum or zero taxes on fees, commissions, and profits. The establishment process for a mutual fund in Belize is relatively straightforward and fast, with lower running and administration costs.

In summary, Belize's trusts and funds offer individuals and corporations a highly secure, confidential, and tax-advantaged environment for managing their assets. With its advantageous tax regime, commitment to privacy, and English common law-based legal system, Belize has established itself as one of the world's top tax havens.

Belize's residency options

Belize offers a wide range of visa and residency options. Here are the most common options:

• Tourist Visa: This is a 30-day visa granted when entering the country, which can be extended for an additional 30, 60, or 90 days, for an indefinite period. Each 30-day extension costs $100.
• Temporary Employment Permit (Work Permit): This visa allows you to stay in Belize for up to one year and work for a specific employer. The application process involves three steps, and the permit is valid only for the employer it was issued for. The cost of the permit varies depending on the type of work and usually falls around $1,500.
• Qualified Retirement Program (QRP): This program is for those over 45 years of age who can demonstrate a monthly retirement income of at least $2,000. It includes benefits such as duty-free importation of vehicles and personal items, tax exemptions, and the ability to import personal items without value limits. The program fee is $1,000, with an additional $750 per dependent, and an annual renewal fee of $25.
• Permanent Residency: To be eligible, you must have lived in Belize for at least one year, with no more than 14 days spent out of the country. You must demonstrate financial stability and a clean criminal record. Application costs vary depending on nationality, with US citizens paying $4,000 and EU citizens $3,000. The process can take anywhere from six months to two years to complete.
• Citizenship: After five years of permanent residency, individuals can apply for Belizean citizenship. The process involves medical tests, police records, and an interview. Citizenship can also be obtained through marriage to a Belizean citizen after one year of marriage.

It is important to note that the requirements and procedures for obtaining residency and citizenship in Belize may change, and it is advisable to consult official sources and seek legal advice for the most up-to-date and accurate information.

Frequently asked questions