Belize as a Tax Haven

Despite the inexistence of a specific definition for the term “Tax Haven”, tax havens are generally countries that levy no or low taxes on companies. A country may or may not be regarded as a tax haven based on the criteria used by different countries for identifying a tax haven; and most often, this is done by comparing the level of “special tax treatment” that is given to foreign companies or how “substantially more favorable”, “privileged” or “favored” a country’s tax policies are in respect to another. However, there are certain characteristics that have been used to identify a tax haven.

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Belize for example, has been considered a tax haven for several years. Categorizing Belize as an offshore tax haven may be based on five major characteristics of the country which include its tax policies on offering special treatment and tax incentives such low tax rates and exemptions to certain legal entities, commercial confidentiality laws, offshore banking facilities, facilities for telecommunications and political and economic soundness.

Belize’s growth as a tax haven very much translates into the development of its offshore industry by broadening the number of offshore services available in the country as an offshore jurisdiction for offshore exempt trusts, insurances and International Business Companies (IBC’s) and offshore banks. This was supported by the enactment of several offshore laws such as the Protected Cell Companies Act, Mutual Funds Act, Limited Liability Partnerships Act, Retired Persons (Incentives) Act, International Business Companies Act, and the International Financial Services Commission Act, which were established in 1999 in order to regulate and govern the operation and formation of the different classes of offshore companies in Belize.

This offshore legislation was strengthened by the Revision of the International Business Companies Act in December 2000 (Amendment), under which tax exemption is given to the income earned and capital gains realized by offshore companies, as well as the dividends, interest, rent, royalties and other distributions paid to the owners of such companies. Similar treatment was given to other offshore entities through measures that were established by other Acts on International (Exempt) Insurance (1999) and Trusts (2007 Amendment).

One of the main attributes of Belize as a tax haven is its confidentiality policies which are enshrined in its offshore legislation. The disclosure of any information pertaining to the personal identity of the members of a Belize offshore company, including the business transactions of an offshore bank or its clients is prohibited, and may only be given upon order of the Court. Breach of these rules and regulations is punishable by fine or imprisonment.

Belize’s offshore legislation also allows for the provision of nominee services by offshore service providers, whereby a nominee may be appointed as the director and or shareholder of a Belize offshore company. This is to further ensure that the company’s owners obtain maximum privacy in conducting their business transactions. Further to this, Belize has a closed Companies Registry and as a result, information pertaining to the offshore company is not published or available for public scrutiny.

In 1995 and 1996 respectively, the Banks and Financial Institutions Act and Money Laundering (Prevention) Act authorized and regulated the operation of offshore banks within Belize. Offshore Banks wishing to operate in Belize may be issued one of two types of banking licenses: an Unrestricted “A” Class Offshore Banking License or a Restricted “B” Class Offshore Banking License.

Unrestricted “A” Class Offshore Banking Licenses are granted to offshore banks with a capital that is equivalent to and not less than US $500,000, or, foreign banks with a minimum capital of US $5,000,000. Banks with “A” Class offshore banking licenses are capable of establishing, maintaining and operating a business office in Belize through which they may conduct unrestricted offshore banking activities. Restricted “B” Class licenses are given in order to conduct only the banking activities that are stipulated in the license.

Technological advancements such as the internet, networking and satellite communications systems have facilitated the growth of the offshore industry as well as the efficiency with which offshore business is conducted. Documents can be shipped via express courier services within a very short space of time, money transfers, transactions and payments can be made online, thereby increasing the number and types of services that can be offered offshore, such as professional consultancy, intellectual property, shipping, trading and investing. People are also increasingly able to educate themselves on different offshore jurisdictions and the services offered by offshore services agents, thus increasing the viability and competiveness of the offshore business.

These two factors play an important role in attracting foreign investors by ensuring a sense of social security in a country which is experiencing economic development. Political soundness manifests itself through stable governance and leadership which guarantees few changes in domestic and international policies that may affect locals and foreign businesses alike. Belize is English speaking and surrounded by several Spanish countries which allows for tapping into other markets and business expansion, and its laws are based on English Common Law.

Over the years, Belize has grown as an important offshore center in the financial world, a key feature of the country that has attracted people from all over the world to the country’s shores.

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