Monday, March 29, 2010

Belize Direct Corporate Taxation
March 27, 2010

The Income Tax (Amendment) Act, 1998 introduced a new method of corporate taxation, under which a turnover tax is levied on most types of company income at various rates, and the tax paid is credited against a conventional corporate income tax, which was previously itself the main tax.

A 15% Value Added Tax, or VAT, which provided the Government with some 30% of its tax revenue, was abolished in 1999 in favour of a ’sales’ tax,’ which in turn was replaced with a 10% Goods and Services Tax (GST) in July 2006.

Said Musa, the former Belizean Prime Minister and Minister of Finance, announced in his 2007 budget speech that the process of tax reform must continue “apace” during the year to come. Musa said that the government would soon reconvene the Tax Committee to advise on several matters:

“First, the Tax Reform Committee will be asked to review proposals to increase the threshold of income tax to $24,000 and reintroduce tax exemptions for charitable contributions to registered organizations, schools and athletic organizations.”

“Secondly, Government will ask the Committee to review the Excise Tax regime to remove the perverse incentives to engage in contraband activities. Although there has been some success in enforcement and interdiction, contraband activities continue to exist in flagrant contravention of the laws and at great cost to revenue.”

“Thirdly, Government will ask the Tax Reform Committee to review the GST with a view to making recommendations for improvements which may be necessary.”

In December 2008, the House of Representatives in Belize approved a number of amendments to the Income and Business Tax Amendment Bill, which will affect the way in which the country’s real estate, banking, and telecommunications sectors are taxed.According to the government, the amended bill will:

Retain the rate of business tax for all non-commission earning categories of the real estate industry at 15%;
Fix the ‘real’ business tax rate for commission earning real estate businesses, including real estate developers, condominium owners, long time lease timeshare operators and share transfer sales at 1.75% (the government had initially proposed to set this tax at 2.5%);
Increase the tax for public investment companies in the banking sector to 12% from 8%; and
Raise the rate of business tax on companies in the telecommunications sector to 24.5% from 19%.

In March 2009, Prime Minister of Belize, Dean Barrow, presented the country’s 2009/10 Budget to parliament, revealing that it will not signal the introduction of any new tax cuts.

Belize Scope of Business Tax

The Business Tax, which is in fact a turnover tax, is payable on a company’s receipts, defined as: “all revenues, whether in cash or in kind, or whether received or accrued, of a person or entity carrying on a trade or business or practising his or its profession or vocation in Belize without any deduction whatsoever.

There are some exclusions, mostly of taxes payable to the Government, to avoid double taxation (see below).

The local subsidiaries of foreign companies do pay the Business Tax, but they are also assessed to Corporate Income Tax at 25% on their profits (as was the case before, although at 35%) and the Business Tax is treated as an advance against Corporate Tax (this is to preserve tax credits in their home countries).

Local companies are charged Corporate Income Tax at 25% on their chargeable income, and if the corporate income tax payable is less than the business tax paid for the year, the business tax paid will be treated as a final income tax. The excess of any business tax paid can be carried forward as an expense to the next basis year.

Belize Rates of Business Tax

As of 2006, the business tax rates were as follows:

* Receipts from radio, on-air television and newspaper business 0.75%
* Receipts from domestic airline business 1.75%
* Receipts of service stations from the sale of fuel and lubricants 0.75%
* Trade and other business taxes to 1.75%
* Business Tax on professionals 6%
* Business Tax on Banks 15%
* Business Tax on PIC groups of companies as defined in Section 115 of the International Business Companies Act 8%
* Business Tax on real estate agents’ commissons 15%
* Rents, royalties, premiums and any other receipts from real property 3%
* Business Tax on gross earnings of casinos or liceensed gaming premises 4%

Belize Calculation of Taxable Base

The legislation defines “receipts” as being: “all revenues, whether in cash or in kind, or whether received or accrued, of a person or entity carrying the trade or business or practising his or its profession or vocation in Belize without any deduction whatsoever.”

The following forms of revenues are not classified as “receipts”:

* Revenue Replacement Duty on fuel;
* Supply sales by a designated bulk fuel importer to another bulk fuel supplier;
* Excise duty;
* Accommodation tax payable under the Hotels and Tourist Accommodation Act;
* Value added tax payable to Government;
* Funds received as an agent;
* Any payment by a Public Investment Company (PIC) of a dividend or other distribution, interest or principal on any indebtedness to the PIC or to another PIC Group Company;
* Receipts from trade, business, profession or vocation of less than US $27,000 per annum;
* Rental receipts of less than US $825 per month where rents form the only source of livelihood of an individual, or where receipts from rents and any other source do not in the aggregate exceed US $825 per month;
* Winnings from Boledo and Jackpot Lottery;
* Any lottery where the winnings is less than US $750;
* Interest from any debentures, treasury bills, treasury notes or bonds issued by or under the authority of the Government of Belize;
* Receipts of any local authority, statutory board, corporation, friendly society, credit union or ecclesiastical, charitable or educational institution of public character in so far as such receipts are not derived from a trade or business carried on by any of these entities;
* Interest on savings paid to individuals (but not to companies or other entities) by financial institutions in Belize (including credit unions, provident funds and similar institutions) subject to the condition that full disclosure of such interest is made to the Commissioner;
* Receipts of Belize Electric Company Limited and its successors and permitted assigns as provided in the Mollejon Hydro-electric Project (Exemptions from Taxes and Duties Act, 1994);
* Absolute and immediate gifts amounting in the aggregate to US $250 or more, taking effect in Belize, for sports, ecclesiastical, charitable, educational or cultural purposes or for the improvement of amenities in towns or villages, up to a maximum of US $10,000 per annum, provided that the Commissioner is satisfied that the gifts were actually made;
* Receipts of an Export Processing Zone Business in accordance with Section 12 of the Export Processing Zone Act;
* In addition, the Minister, on the recommendation of the Revenue Advisory Board and by Order published in the Gazette, may exempt a newly-established business or industry from the payment of Business Tax during the first two years of its operation, if in his opinion it is necessary to alleviate hardship or financial difficulty, and a maximum period of five years for citrus or other long term crops where the date of production is longer than two years from the start of operation.

Interest paid on loans to non-residents is exempt from tax if:

* the loan is to a development industry or projects specified by the Minister by notice published in the Gazette; and

* the Minister is satisfied with the ratio of paid up share capital to loan capital in such industries or projects; and
* tax is not chargeable on such interest payments in the country of residence of the person to whom such interest is paid, (but the Minister may waive this requirement if he is satisfied that the loan capital could not be reasonably procured in Belize).

Additionally, the Minister, on the recommendation of the Revenue Advisory Board and by Order published in the Gazette, may exempt a newly-established business or industry from the payment of Business Tax during the first two years of its operation, if in his opinion it is necessary to alleviate hardship or financial difficulty, and a maximum period of five years for citrus or other long term crops where the date of production is longer than two years from the start of operation.

NB: This brief summary of some of the more important aspects of Belizean tax law is given for general information only; it should not be relied upon in actual situations, for which professional tax advice is necessary.

Belize Filing Requirements and Payment of Tax

All companies should file a Company’s Income Tax Return, together with their financial statements within three (3) months of the end of the financial period, to the nearest Income Tax Department. If more time is required a request in writing should be directed to the Commissioner of Income Tax BEFORE the due date. Otherwise a penalty for late filing is a levy of 3% of the tax for the financial period, for each month or part of the month in which the return is late to a total of twenty (20) months.

The penalty for late payment of income tax is 1.5% per month on the unpaid amount from the due date to the date of payment. This applies to any deficiencies in installment as well as to any other amount. In the case of installments this charge is based on the tax calculated on the chargeable income for the previous financial period or the actual income tax for the financial period for which this return is filed, whichever is less. This charge also applies to any amount unpaid after the date for final payment.

A company should pay its income tax by quarterly installments. Installments are due no later than the last day of the 3rd, 6th, 9th, and 12th months of the company’s financial period.

If a company wishes to employ foreign consultants, technicians etc. who are not normally resident in Belize, their names should be registered at the Income Tax Department and the company should deduct 25% of total income paid to such non-residents.

For additional information contact:

Income Tax Department
Phone: (501) 2-24776, 24005, 24956
Fax: (501) 2-24029
Belize Withholding Tax

25% tax is applied to non-resident companies and individuals on any sum paid in respect of management fees, rental of plant and machinery, mortgage and debenture interest, and insurance premiums. For many other types of payment, the Business Tax acts as a withholding tax (see above).
Belize Goods and Services Tax

On July 1, 2006, a new 10% Goods and Services Tax (GST) went into effect in Belize. The GST replaced the 9% sales tax which had been in effect since April, 1999.

The GST applies to most goods and services, including some real estate transactions and all hotel and tourism charges. Exceptions are certain food items, including rice, flour, bread, fresh fruits and vegetables, chicken, and fish. Also, electricity useage of less than BZ$150 a month won’t incur the GST.

The GST is similar to a value added tax in that the tax are included in the price of goods and service before purchases, rather than added on at the sales point at time of purchase.

Under the old sales tax regime, a sales tax of 9% was levied at the point of importation or production of most goods and services, while fuel, alcohol and tobacco were taxed at 12%. There was also an upper bracket of sales tax which was levied at 13% on certain luxury goods. The Sales Tax itself replaced a previous Value Added Tax which was levied at 15%.

The following goods and services were exempt from the application of the sales tax, the majority of which have also escaped taxation under the new GST regime, as previously mentioned:

* Supply of electricity;
* Supply of water and sewerage services (but not bottled water);
* Provision of financial services by institutions not licensed under the Banks and Financial Institutions Act which are closely related to financial intermediation, market intermediation, risk pooling, and credit purchase services, including services performed by credit unions, cooperative societies, building societies, mortgage finance institutions and moneylenders;
* Goods in transit through the national customs territory bound for a Belize Export Processing Zone, a Belize Commercial Free Zone, or a destination outside the country;
* Goods exported from Belize as verified by the Comptroller of Customs;
* Accommodation charges that are subject to the accommodation tax levied under the Hotels and Tourist Accommodation Act;
* Goods or services which are made available from funds provided under grant agreements with external donor agencies, or funds borrowed from external financial institutions by the Government of Belize, or under a Government Guarantee, to assist the economic development of Belize;
* Basic foodstuffs;
* Some medicines and medical supplies;
* Some agricultural chemicals;
* Fees and charges collected from students for services provided by a private school registered under the Education Act, or an educational institution that is approved for this purpose by the Minister of Education;
* Text books, school work books and other educational texts;
* Equipment and furniture for the use of recognized educational institutions as certified by the Ministry of Education;
* Labour services in connection with the construction of buildings for educational use provided to private schools registered under the Education Act, or educational bodies approved for this purpose by the Minister of Education;
* Transport of passengers in any vehicle, ship or aircraft designed or adapted to carry not less than 12 passengers or on any scheduled flight, vehicle or vessel;
* Freight services, provided that the provision of this service does not form a part of the provision of any other service;
* Services rendered to persons not resident in Belize; provided that the services do not relate in any manner to any land or building situate in Belize, that the services are not utilized in Belize and the benefit of the supply is not derived by any person or entity within Belize, and that the services are paid for in a currency other than the currency of Belize.

Belize Stamp Duty

The cost of a transfer of title to real property is 10% of the value for Stamp Duty and a token fee for registration.

Unless there an agreement to the contrary these costs are usually shared between seller and buyer.

Other types of transaction are also stamped, at various rates, especially if they involve the Government.

Belize Environment Tax

Under the Environmental Tax (Amendment) Act 2001 (revised in 2009), every good imported into Belize is charged a 2% Environmental Tax in addition to any customs duties levied under any customs law. Certain prescribed medicines and foodstuffs are exempted from the tax.

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