Belize: Law of Offshore
Free Zone Acts
The Commercial Free Zone Act 1994 established a Commercial Free Zone at Corozal to attract foreign investment. The zone provides facilities for various activities including manufacturing, processing, packaging, warehousing and distribution of goods and services.
Merchandise warehoused in the CFZ may be wholesaled or retailed for:
- sales to diplomats of other countries who under customary and conventional international law are exempt from payment of duties;
- sales to ships that dock at ports in Belize and are destined for other foreign ports;
- sales for direct export whether by sea, air or land, provided that such merchandise arrive at the port of exit under customs control;
- entry into national customs territory, provided the goods are sold wholesale, and the import license if so required, is secured and the customs duties paid;
- entry into national customs territory, provided that the goods are sold retail in operations which have licenses to sell duty-free to residents and non-residents who are leaving the country and have submitted proof of departure. Such duty-free retailed goods shall be delivered to the buyers at a port of exit or embarkation.
Merchandise may be sold inside a CPZ from one business to another, provided that a proper record is kept of such transactions.
There are no restrictions on foreign exchange including the sale of foreign currency or the transfer of foreign exchange into, out of or within a CFZ by CFZ businesses. There are no government charges or taxes on the use of foreign currency within a CFZ. Businesses within a CFZ are permitted to open an account in any currency with a duly registered bank of their choice which is in the CFZ.
Duty exemptions and tax holidays are available to the investors in the Zone as follows:
- All merchandise, articles, or goods entering a CFZ for commercial purposes are to be exempt from import duties, stamp duties and revenue replacement duties;
- All fuel and goods including buildings materials, furniture, equipment, supplies and parts required for the proper functioning of a CFZ business is likewise are to be exempt from all duties and taxes;
- No quotas upon any article, item, or goods apply to imports or exports of a CFZ business;
- Imports or exports of a CFZ business do not require an import or export license.
- Imports and exports of a CFZ to or from whatever destination (other than the territory of Belize) shall be exempt from all custom duties, consumption taxes, excise taxes, and export duties.
See Offshore Legal and Tax Regime for details of low rates of income tax paid by CFZ businesses.
The Export Processing Zone Act 1990
Belize's legislation defines an EPZ as being "a geographic area in Belize designated outside national customs territory and duly restricted by controlled access, wherein the benefits created shall apply to a complex of industries." The legislation also makes allowances for single businesses and their facilities, referring to these as "Special Export Processing Zones".
An EPZ business is only allowed to sell, lease or transfer any article, item, goods or services in an EPZ or outside Belize to other EPZ businesses, to foreign businesses, or to foreign individuals. However, waivers to this regulation may be provided upon application to the EPZ Committee (EPZC) and the Ministry of Trade and Industry. The EPZC comprises representatives from various Government Ministries, The Chamber of Commerce, the small business sector, EPZ developers, EPZ businesses, and the industrial sector.
In the EPZ, facilities are provided for activities in manufacturing, processing, packaging, warehousing and the distribution of goods and services. In fact, amendments made to the legislation in 1994, provide investors with the added option of constructing their own facilities and developing infrastructure within an EPZ, including independent utility installations. This option enables an EPZ to enhance its economic development, since it does not necessarily have to use the electricity or telephone facilities provided by the two local monopolies, Belize Electricity Ltd and Belize Telecommunications Ltd respectively.
Three locations have been designated as EPZs. The San Andres EPZ is spread across 28.5 acres of land in the northern section of the country, only 8 miles away from the Mexican border, and ideally located next door to NAFTA. The other two Zones are both located approximately 9 miles from Belize City, the country's commercial capital. The EPZ adjacent to the Philip Goldson International Airport has an area of 4 acres; Price Barracks EPZ 14 acres.
A developer is responsible for the administration of an EPZ, and needs to own or have leased all the land within the Zone, as well as provide infrastructure and public services within the area.
One of the main incentives for establishing an EPZ business in Belize is that of receiving a guaranteed tax holiday of 20 years. Under the tax holiday period, an EPZ business is exempt from income tax, withholding tax, capital gains tax or any new corporate tax. This incentive also comes with the following benefits:
- the option to extend the tax holiday period;
- losses incurred during the tax holiday period may be carried forward and deducted against any future profits;
- and any dividend paid by an EPZ business is exempted from tax in perpetuity.
In addition an EPZ business is also exempt from:
- currency export taxes or foreign exchange taxes on all purchases or sales of foreign currency;
- customs duties, tariffs, consumption taxes, excise taxes, trade turnover taxes, or other taxes for all imports of an EPZ business into an EPZ;
- customs duties, value-added taxes, sales taxes, excise taxes, trade turnover taxes, tonnage taxes, consumption taxes or other taxes for all exports of an EPZ business out of an EPZ;
- capital gains tax on the sale of stock or other partial or complete ownership interest in an EPZ business, and property or land tax and property transfer tax. The Land Tax Act does not apply to EPZ property.
Bureaucracy is minimised for EPZ businesses:
- no import or export licences are required for any imports or exports into or out of an EPZ;
- no licenses are required for domestic suppliers who sell to EPZ businesses;
- no price controls for items sold by domestic suppliers to EPZ businesses;
- no regulatory restrictions on any exports (except of course for fire-arms, military equipment or material and illegal drugs under the Belizean law).
The Supplies (Control) Act and the Rent Restriction Act do not apply to an EPZ business either. In addition, an EPZ business will enjoy:
- negotiable factory space and energy rates;
- on-site customs facilities;
- no costs for work permits;
- competitive wages;
- satellite telecommunications and fibre-optic capability.
Preference is given to those businesses which will be located in an area designated by the EPZC as in most need of development, as well as to those businesses which will generate more jobs. Some of the most promising areas of interests are assembly plants, seafood processing, fruit processing, wood products, sporting goods, edible oils and fats, pharmaceuticals, canning and packaging materials, garments and yacht manufacturing.
In order to establish an EPZ business in Belize a completed application form along with the documents listed below must be submitted with a non- refundable application fee of US $500.00 (at the time of writing). This information will be reviewed by the EPZC within thirty working days of receipt.
- Physical master plan showing overall layout;
- proposed construction schedule;
- capital cost estimate;
- staff and management organisation;
- five year financial projections, including leasing or sale arrangements plan;
- copies of the company's Memorandum and Articles of Association, and Certificate of Incorporation;
- two bank references on the firm and its main partners;
- one commercial reference each on the firm and its main partners;
- and any other information which the EPZC may require.
The Certificate of Compliance, issued by the Ministry of Trade and Industry, allows a company to conduct business within an EPZ. This certificate also states what lines of businesses the EPZ enterprise may conduct within the Zone. Application forms must be submitted along with the documents listed below. No application fee is required, but at the time of writing, an annual fee of US$0.13 per sq. ft. of industrial roof is payable. And, for those firms requiring over 7,500 sq. ft. of industrial roof, the excess of 7,500 sq. ft. is assessed at 80% of the basic fee mentioned above. The Ministry of Trade and Industry will review the information provided within thirty working days of receipt.
By signing an Operations Contract with the Ministry of Trade and Industry, the owner(s) of an EPZ enterprise pledges "compliance with all applicable legal and regulatory requirements under the laws of Belize, and all rules and regulations of the established EPZ."