Belize is a small Central American country that has been attracting foreign investors for decades with its offshore legislation. However, in recent years, Belize has undergone significant changes in its tax regime and corporate laws. That have made it less appealing for those who seek to incorporate their businesses in Belize. The Risks of Incorporating Your Business in Belize are high.
Belize Incorporation: Why It’s Not a Good Idea
In this article, we will explain why we do not advise for foreigners to incorporate their companies in Belize and what are the alternatives.
One of the main reasons why Belize was popular among offshore investors was its International Business Companies (IBC) Act. The Act provided a number of benefits for IBCs, such as tax exemption, asset protection and confidentiality. A minimal reporting and compliance requirement were among the benefits.
However, in 2018 and 2019, Belize amended its IBC Act to comply with the international standards set by the EU and the OECD on harmful tax practices and economic substance. As a result, Belize IBCs lost their automatic tax exemption status and became subject to the same tax treatment as domestic companies under the Income and Business Tax Act (IBTA).
According to the IBTA, Belize has a territorial tax system, which means that only income derived from sources within Belize is subject to tax. The general corporate income tax (CIT) rate is 25%. It can be reduced to 1.75% or 3% for IBCs and companies operating in Designated Processing Areas (DPA), depending on their chargeable income.
However, this lower CIT rate only applies if the IBC or DPA company meets certain economic substance requirements. Those are having adequate physical presence, employees, expenditure, and core income-generating activities in Belize. Otherwise, the IBC or DPA company will be subject to a higher CIT rate of 12% on its worldwide income.
In addition to CIT, Belize also imposes a business tax on gross income or turnover of certain types of businesses. The business tax rates vary from 0.75% to 25%, depending on the nature of the business activity. However, business tax does not apply to IBCs or DPA companies that derive their income from sources outside Belize or from petroleum operations.
The Risks of Incorporating Your Business in Belize
Another reason why we do not advise foreigners to incorporate their companies in Belize is the high cost of service. Unlike other offshore jurisdictions that offer low incorporation fees, Belize-registered agents charge a relatively high fee of at least US$500 for registering an IBC.
Moreover, an IBC must have a registered agent and a registered office in Belize, which can cost between US$500 and US$1000 per year. An IBC must pay an annual renewal fee to maintain its good standing.
In contrast, incorporating a company in the UK is much cheaper and easier than in Belize. The UK offers a simple online registration process that can be completed within 24 hours for as little as US$15.
A UK company does not need a registered agent. You can rent a street business address for as little as US$15 per month with such companies as Mailboxes ETC. A UK company can also make any amendments to its corporate structure online for free within minutes.
Top Reasons to Choose the UK for Your Business Incorporation
Another advantage of incorporating a company in the UK is the access to banking services and international markets. Due to its low reputation and strict anti-money laundering regulations, it is very difficult for any Belize IBC to open a bank account anywhere in the world, even in Belize itself.
Doing business with a Belize IBC can be challenging due to the lack of trust and recognition from potential customers and partners.
On the other hand, the UK has a high reputation and a strong financial system that allows UK companies to open bank accounts easily and enjoy favorable trade agreements with many countries.
Finally, we do not advise for foreigners to incorporate their companies in Belize because there is no such thing as “no tax” anymore. The offshore era is over and most jurisdictions have adopted measures to exchange information with tax authorities around the world.
Belize is no exception and has signed several agreements to share financial and tax information with other countries upon request or automatically. Therefore, incorporating a company in Belize does not offer any tax benefits or privacy protection.
In conclusion, we do not advise for foreigners to incorporate their companies in Belize because there are more harm than advantages.
Belize has changed its tax regime and corporate laws to comply with international standards, which have reduced its attractiveness as an offshore jurisdiction.
Belize has high costs of doing business, limited access to banking services and international markets, and no real tax benefits or privacy protection. Therefore, we recommend incorporating a company in the UK instead.
UK Company Formation
Contact us to have your company incorporated in the UK within 24 hours.
Tel.: +447490-626038 (UK); Tel.: +1305-5156080 (USA); Tel.: +501-6118605 (Belize)
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