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Belize: The Surprise Package of Central America
by Butterfield, Reimer & Associates S.A.

Introduction: Low-Tax Belize

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Located in the warm and windy tropics, Belize lies on the North East Coast of Central America just south of the Yucatan Peninsula. The Caribbean Sea washes the 174-mile long eastern coastline of this former British colony, which also boasts the longest barrier reef in the hemisphere. The country has an area of 8,867 square miles and a population of approximately 240,000. Though Belmopan is the capital Belize City is still the major commercial center, with almost a third of the population living there. Vigorously pursuing legislation to enhance its offshore financial status, Belize is one of the fastest growing offshore centers. Favorable banking regulations, a good legal system and political stability all contributes to it being an emerging destination for services and investment. In fact, Belize had to re-think its former economic policy and concentrate on developing its 'Services Sector' to go hand in hand with tourism and its traditional agricultural and fisheries produce.

Five international airline carriers link Belize to the US, Central America and the world. Excellent telephone, telex, E-mail communication and Internet links serve its global clientele. The mixed blessing of an IMF report made public in July of this year has indicated that the Belize 'Economic Train' accelerated to log 10.4% growth in GDP last year. However at same time the public sector's deficit widened from 8.2% to 9.7% of GDP. It's a paradox of having more and less at the same time. The government's aim is to reduce the public sector deficit to 1% of GDP over the next three years.

Several laws and investment incentives have been put in motion to stimulate sustained growth in the country's economy. The nation's investment policy welcomes foreign investment that creates new employment, increases production, uses local raw material as much as possible, introduces state-of-the-art technology and widens the economic base among other criteria. We will now look at some pieces of legislation and how they achieve their predetermined goals.


Trusts and Asset Protection

The emphasis in Belize trusts is clearly on asset protection. Belize offers immunity from court action by creditors challenging the settlor's disposition of funds to the trust. Belizean trust laws are considered the best in the world. The trust may be created for 120 years and income may be accumulated for a similar period.

The first pronouncement in a landmark decision back in 1995 came from the Supreme Court of Belize. The Court protected the files of Swiss Trade and Commerce Trust Ltd. from the Securities Exchange Commission. The ruling signaled the independence of the court and the "protection" the country seeks to guarantee its clients. The trust law states that a Belizean Court cannot vary or set aside a trust or recognize a claim against trust property, pursuant to the law of another country in respect of marriage, divorce, succession or claims of creditors.

The Supreme Court Building in Belize

Asset protection is extensive and several volumes could be written on this subject. Protecting your assets by intelligent planning cannot be over-emphasized and is the best defense you can have against creditors and hostile parties. If you have your assets unprotected, they are out there for the taking. Start putting your assets offshore, so they are safe and out of the reach of creditors. There is no limit to the layers of protection you can use. Think like an army and set up strong defenses, so even if they put a dent in your armour, it won't pierce through.

Just as the name suggests a trust agreement is one in which one party (a settlor) depends on another (trustee) to reliably carry out his or her wishes for the benefit of yet another (the beneficiary). That is really saying it in a nutshell but as you will see that basic formula holds through. The concept of a trust is well-known and well-established in common law countries such as the United Kingdom where it originally developed and the United States. A trust is a collection of legal rights brought into being by a legal process under English law. In legal terms, a trust is an equitable obligation, normally established by a written document, binding a person to deal with property over which control has been passed to him for the benefit of one or more beneficiaries. Although it can be an elaborate document, there is no convention that says it has to be in that form and can be hand written just on a piece of paper.

Trusts are created by a deed of trust (the trust deed) recording the creation of such a trust, which may or may not be signed by the settlor, but is signed by the trustees. The essence of a trust is a concept of separation of control from ownership, and in some cases, influence over the same assets to which rights were ceded. The person who establishes the trust no longer thereafter owns the assets, which he has put into the trust. A trustee is a separate legal entity and can be either an individual or a company, which accepts the responsibility of holding rights or property so that the value accrues to the beneficiaries. The obligations of the trustee concerning the property of the trust will be regulated according to the terms of the deed constituting the trust, and the law of the trust. The trustee is personally liable for his/her/its actions as a trustee and has the power and the duty (in respect of which he is accountable in law) to manage, employ or dispose of the assets in accordance with the terms of the trust document and the special duties imposed upon him by law. Trust property can include cash, securities, real estate, etc., situated anywhere in the world providing the trustee can obtain a legitimate title to the property. You can also make yourself a beneficiary of a trust and receive income from the trust without the consequence of an 'income producing' trust. Specialist trust providers can act as your trustees and for a yearly fee manage the affairs of the trust.

While a will can achieve some of the objectives one wishes, a trust involving the legal transfer of ownership of assets to trustees with defined objectives as to how and for whose benefit the assets are to be held and administered is probably the ideal medium. Where the death of a person, particularly a wealthy individual takes place in the absence of a trust, it will be necessary to obtain probate of any will or wills, or in the case of intestacy, a grant or grants of letters of administration. This is a bureaucratic process, which normally involves considerable delay, expense and publicity. The problems of obtaining a grant, or several grants, of either probate or letters of administration can be overcome by the use of a trust. The trust can therefore achieve continuity without the long public process of obtaining a grant and the expense so often associated with that procedure.

A trust is a sophisticated vehicle for long-term estate planning and preservation and protection of assets and wealth. It also protects one's assets from succession duties, inheritance taxes and estate tax. It can provide for the education of children by setting aside funds for their future benefit. A settlor may also desire to protect and preserve assets from threats of expropriation, regulation, exchange controls, creditors, taxation, former spouses, family members or forced-heirship laws. A discretionary trust can also be used as a means to control imprudent beneficiaries who may squander and waste assets.

It is prudent to invest in an offshore trust and so distance yourself from your assets. Some people though find the concept of "giving up" ownership of assets rather revolting. But, if it can be proven that as a settlor, you exercised control over a trust, a court of law may declare your trust null and void and all the tax liabilities will fall flat in your lap.


Trusts and IBCs

Offshore trusts often work hand in hand in association with offshore asset holding companies. A corporate structure can be used to give a settlor a measure of control over trust property without affecting the validity of the disposition. An underlying company is often utilized to hold trust assets. The settlor establishing a trust and an offshore company achieves this. The settlor then makes a disposition of assets to the trust, which in turn capitalizes the company with the assets in exchange for 100% of the shares of the company. The trustee thus becomes a 100% shareholder in the company and appoints the settlor as the sole director of the company. This maximizes flexibility and enables the settlor to exercise a greater degree of control over the administration of the assets and does not require the settlor to rely wholly upon the fiduciary duties of the trustee.

Funds can be drawn through the company through arm's length transactions such as salary or consulting fees. The use of a company and a trust together forms a powerful combination of flexibility, efficiency and financial privacy. A settlor can retain certain powers, including the power to revoke a trust. A discretionary trust can be accompanied by a letter of wishes from the settlor to the trustees which, while not binding upon the trustees, will guide them as to the settlor's wishes, and during the lifetime of the settlor may be reviewed or changed depending on circumstances. The advantage of the discretionary trust is that the settlor can be a potential beneficiary of the trust, without being legally entitled to the trust assets thus avoiding any tax attributable to the settlor.

To set up an offshore trust properly, the advisor - or service provider and client - the potential investor, must examine the present circumstances and the future goals. One also needs to ensure that the trust deed allows the types of investments contemplated for the trust. A trust, unlike a corporation, is not a separate and distinct legal entity. For that reason it is often in combination with other entities. An IBC held by a trust can easily set up a brokerage account in the jurisdiction of incorporation. Any business conducted onshore will have a permanent record there and sensitive information could fall into the wrong hands. There is increasing co-operation between the tax police in various high tax countries and authorities onshore. "Keep every thing offshore" is a good policy. Its better to deal with independent offshore brokers than the offshore affiliates of large onshore brokerage houses. Check out the broker's reputation, the size of the brokerage, whether the brokerage is insured, and if the broker is audited.

By using asset protection structures, it is possible to have definitive protection structures against creditors, third parties and nuisance claims. In light of the circumstances surrounding the U.S. 9th Circuit Court appeals case of June 1999, between FTC and Affordable Media, also known as the Anderson case, the Court showed its strong dislike for asset protection as a shield from actual creditors when there is clearly 'trouble on the horizon'. As upsetting as that decision may have been, it was a blessing in disguise. The message it signaled was that providers of offshore services would have to prudent and meticulous in structuring clients' strategies. The misuse of trusts, companies or other structures for questionable use would not be tolerated. Think ahead and act in advance.

The conventional wisdom with asset protection is that it is not only what is secured but also where - asset allocation. Deciding how to invest a pool of resources among a broad array of assets is considered the single most important aspect of managing a portfolio. Assets can be divided into cash, income and equities. It is around these that your strategies, short, medium or long term must be built. The amount of money you invest in stocks or bonds should be entirely up to you. Keep in mind that indeed you may want to put some away for your heirs and some you will spend on yourself. Be discreet and act wisely.

Offshore investing, especially when mixed with proper estate planning and wealth transfer considerations is integral to wealth preservation or maximization. Assets encompass many aspects of things and cannot be seen from a limited perspective. Even after placing assets into trusts or a combination of structures, you could still take advantage of the many opportunities available to increase growth and maximize profits. If you have a modest investment strategy, financial growth may be incremental at first but gradually the wealth accumulates. If you have a more elaborate financial strategy with high risk, high yield stocks or bonds for example, then of course your results will be greater. Investing is not like a soccer match that is over in 90 minutes; it's like gardening or planting. It takes time, planning, planting, revising the plan and playing till you reach the goal.


Mutual Funds

It's not what you earn, but what you keep. The adage is taking on new meaning and investors in Belize are taking advantage of the country's Mutual Funds Act. Capital, the lifeblood of investment companies and courage to take the risk of putting your own money on the line, is the creative process that drives economies, produce growth and propels a nation forward.

The records have also shown over the last three decades, that nations that have created a good investment climate have grown and prospered while countries that set up barriers have withered.
Governments play a vital role in helping investors make a path of prosperity by implementing policies and laws that create the right environment and support programs. For countries newly embarking upon the path of market oriented reforms, the task is the same. The right elements must be in place before sustained growth can be achieved.

The Government of Belize, in a continuing policy to expand the offshore finance industry, even amidst tightening regulations of the OECD countries, passed its Mutual Fund bill into law. It's a move that will make investing for long term capital appreciation more tax-advantaged than investing for interest, dividends and short-term profits.

Industry specialists, who were calling for this move for several years now and government officials alike are optimistic that this new initiative will stimulate new growth in another sector of the Belizean economy. A mutual fund is a company that invests most of its money in publicly traded securities - stocks and bonds of business corporations. It obtains capital by issuing and selling its shares (common stock) to investors, who are the company shareholders. Mutual funds are also called open-end investment companies, because they offer shares for sale each day. These companies are not restricted to a fixed number of shares. The shares are not traded through stock exchanges or over the counter markets; instead the fund itself sells shares whenever investors want to buy them and repurchases shares at any time at their current market value. The market value of a mutual fund usually is based on the overall value of the fund's portfolio of securities and fluctuates as the value of the securities fluctuate.

Some funds are designed primarily to provide growth of capital or income, while others are designed to preserve capital. Often the same company has a family of funds, allowing the investor to switch from one to another as his investment goal changes. In the 70's and 80's the money-market mutual funds became the most widely used and most popular form of investment vehicles. A money-market fund uses its shareholders' money to purchase short-term high-yield money-market instruments, such as bank certificates of deposits, treasury bills and government securities.

Individual investors own mutual fund shares for several reasons. First, professional managers manage their money on a continuous basis. Second, the investments are spread out over many different corporations and industries, thereby spreading the risk of loss. Third, mutual funds provide several services to their shareholders, including managing records of securities transactions and collecting and disbursing investment income. Mutual funds are one of the most important forms of investment in the capital market. Because they are new in Belize, fund managers need to work hard to make them a more widely accepted form of investment. The number of investors the regulatory commission envisions is not known, but, as these bits of information become available, it will create ingenious new ways of achieving one's goals. Investors will also have to be educated on the benefits and risks of these instruments. The banking industry may also have to join in the process as some of their customers who want to invest in the capital market, may choose to use mutual funds. The potential for mutual funds is very good as license fees are low and investors will not need a huge amount of capital for investments.

There are three fund categories: private, professional and public. A private fund is a mutual fund, which has less than fifty investors and a constitutional document prohibiting the offering of its shares to the public, whereas a professional fund is a mutual fund offered only to professional investors, with the initial investment of each investor not less than US$100,000 or its equivalent in any other currency. A public fund is a mutual fund, which offers shares for subscription or purchase to any member of the public and is not considered a private fund or a professional fund under the Act.

After deduction of expenses for management services, interest and dividend income is declared as an income dividend and paid to shareholders, usually four times a year or within a specified period after demand is made. When a fund sells its investment at appreciated prices, the profit is declared as capital gain dividend and paid, usually once a year, to shareholders.

A Registrar of Mutual Funds is appointed whose duty is to supervise the mutual funds, managers and administrators in accordance with the Act and prepare and deliver a yearly report (on or before the 30th of March). This report is primarily a summary of the nature and number of filings made under the Act, the registrations, recognition and licenses granted under the Act, as well as any enforcement proceedings or disciplinary measures taken under the Act and the development of the industry up to that time.

A public fund is not allowed to carry on its business, manage or administer its affairs in or from within Belize unless it is registered under the Act. It may apply to the Registrar in the prescribed form as specified in the Mutual Fund Act. It must be accompanied by a "consent" of the Minister under whose portfolio the Act falls as well as a statement setting out the nature and scope of the business to be carried out.

Like all good companies, every public fund must maintain adequate accounting records and financial statements in respect of each financial year, in accordance with generally accepted principles of accounting. These records or copies thereof should be kept at the principal place of business or registered office in Belize.

Even if a company is registered to operate in Belize, before it can offer shares to the public it must still publish in writing a prospectus. This must be signed by or on behalf of its board of directors of the fund, stating it has approved the contents of the prospectus, authorized its publication and filed a copy with the Registrar. Every prospectus provides full and accurate disclosure of all information investors would reasonably need and expect to find for making an informed investment decision. It must also include a statement of the investor's rights and a reference as to the availability of the financial statements and the auditor's report of the last financial year (if the fund has completed a financial year in operation). The prospectus should be in the English language.

A mutual fund can be set up at a cost of US$15,000 and a prospectus can be prepared at costs ranging between US$1,500 and US$2,000. Consultants are available to advise you on the most prudent ways you can go about structuring a fund.

A public fund registered under the provisions of the Act or a private or a professional fund recognized under the Act, and investors in any registered public fund or recognized private or professional fund who are not residents in Belize are in all respects EXEMPT from all the provisions of the Income and Business Tax Act, Stamp Duties Act and the Exchange Control Regulation Act, with respect to investment in any such fund. A companies incorporated outside Belize but which establishes a place of business within Belize in accordance with the provisions of the Act as public fund, recognized private or professional fund or manager or administrator is also exempt from the paying of taxes as mentioned before.

New Banking Institutions

New banking institutions are opening up for service in the country. Besides The Provident Bank and Trust of Belize Limited, The Alliance Bank now serves the public. The Caribbean Building Society (CBS) and St. James Building Society are two of the newest building societies in operation. These command a fair share of the local financial market. Building societies can also facilitate certain types of investment and operate as effective offshore investment tools. Building societies may be somewhat similar to banks but don't offer the wide range of services a bank does. The one product they offer that all clients or investors really want is higher rates of interest than offshore banks. Their main business is in deposit accounts, either in instant access or notice accounts. The latter offer a better rate of interest but demands you give a notice period before you can access your cash, generally 60 or 90 days.


Insurance

In spite of the Internet revolution, not all businesses were swift to get on line. Insurance companies fall in that category. This is a traditional industry and it did little to be more efficient in recent years. The pressure from new dot-com competitors is forcing the industry to search itself from within in order to better utilize Internet technologies. What is not traditional is that in January of 1999 Belize joined the privileged offshore jurisdictions that have enacted international insurance laws. Like its trust laws seven years earlier, the insurance law is very flexible, offering the investor much room to work in. The captive insurance company makes for an awesome investment tool with huge benefits.

The captive insurance concept is one that has stood the test of time. It has grown to over 10,000 captive insurance companies worldwide.

The insurance industry is heavily regulated in most of the developed nations, by high minimum capital and surplus requirements, solvency margins, specific ratios of premiums written to net assets and in most cases, restrictions on investments. In addition, many multinational businesses often experience difficulties in the international transfer of funds through dividend payments due to national exchange control restrictions.

An offshore location for a captive insurance company can provide a smoother regulatory environment, expand investment opportunities, and facilitate legitimate international movement of funds.

The Edwards Report resulted in the re-examining and re-formulation of financial policies in British Dependent Territories particularly, in Bermuda, Anguilla, the Cayman Islands, Montserrat, Turks & Caicos, British Virgin Islands and Gibraltar. It was the green light for Belize to enter the insurance arena. Being an independent nation and not subject to the regulations of the BDTs, investors began to reconsider making Belize the domicile for their Insurance operations. The most enduring things Belize had to offer were the essence of what offshore structuring entails: confidentiality and tax exemption.

The insurance company has traditionally relied upon high investment income to supplement modest or even negative underwriting results. Such investment income is generated primarily from funds represented by unearned premiums and unpaid losses, since premiums are usually paid in advance, often annually, while claims tend to be paid out over a much longer period, depending on the type of business insured. The captive and its parent company, rather than the conventional insurer can therefore derive the benefit from investment income, which can be substantial. Moreover, for an offshore captive established in Belize, there may be the added advantage of generating untaxed investment income.

Captive insurance companies were initially incorporated to underwrite the risks of their parent or affiliated companies; the industry has since grown in scope, and includes but is not limited to the following:

  • Single-parent captives, underwriting risks only of related-group companies.
  • Senior or diversified captives, underwriting risks of unrelated companies in addition to group business.
  • Association captives, formed by members of a common industry or trade association in order to share the risks of that industry or association among its members.
  • Agent captives, sponsored by one or more independent agents to write high-quality risks that they control. These programs may be both agent-responsive and insured-responsive; that is, both the agents and the insured may benefit from profits based on their contribution.
  • Captive pools, formed for the exchange of insurance business among captives in order to spread their risks and enhance their participation in non-related business.
  • Excess of loss or maxi-captives, formed to provide capacity where insurance cover is unavailable or no longer available, in the commercial insurance market at a reasonable price. These captives are providing mainly excess cover and are strongly capitalized.

The cost factor should also be considered. The incorporation of a captive in Belize can be achieved with US$15,000 plus a paid up capital of US$100,000. The costs in certain British Dependent Territories can be as high as US$80,000 and the paid up capital required in the region of US$600,000.

Another possibility is to incorporate the company in Belize and have a physical office somewhere else. This immediately reduces your overhead costs.

The fact that most captives are based in BDTs and Great Britain is indicative of the rule of Common Law as the legal basis for captives. Belize's judicial system is based on British Common Law; therefore, captives incorporated there have the same legal structuring as those more expensive jurisdictions.

Tax advantages are a potentially significant benefit. The benefits may vary depending upon the form, operation and ownership of the company. Some of the potential tax advantages are:

  • In an offshore captive, depending on the source of the underwriting income and the residence of all or some of the shareholders of the captive, the underwriting and investment income may be accumulated free of income tax.
  • The premium paid to the captive may be tax deductible as an expense by the insured.
  • Offshore captive may avoid paying U.S. State premium taxes.
  • A captive may establish tax deductible loss reserves.

The tax considerations in a decision to form a captive depend on the domicile of both the parent company and the captive. Therefore, if we consider the irrevocable threat by the White Paper review as well as the Edwards Report, there are no doubts that Belize fits in as one of the best options for the domicile of such entities. For instance, a UK company may be subject to taxation on the undistributed profits of certain UK-controlled, but non-resident companies in which it has a 10% or greater interest. This rule generally applies to captive insurance companies that are UK-controlled (BDTs), unless the captive pays a dividend to U.K. residents of 90% of the profits available. Therefore, moving a BDTs captive to Belize is prudent.

Integration of a captive as part of an international tax planning strategy is a complex subject. Therefore, companies considering formation of a captive should obtain professional legal and tax advice in both the parent and the captive companies.

To sum up, here are the points that favour Belize:

  • Less stringent regulatory requirements.
  • Possible tax benefits.
  • Less onerous capital requirements.
  • Freedom of investment management.
  • Freedom from various state regulations.
  • Political and economic stability.
  • An established and flexible legal and regulatory system.
  • The absence of exchange controls, and the opportunity to transact business in a major currency (US$).
  • Local availability of competent insurance managers, lawyers, bankers and accountants.
  • Absence of income or other taxes.
  • Good communication and frequent air service.

With all these aspects in mind, Belize is destined to become the best option for the domicile of any type of offshore structure. Especially with this newly implemented act supporting the captives as a sophisticated offshore tool, ready to by utilized by those who are astute.


Belize Economic Citizenship Investment Policy (BECIP)

Economic citizenship programs offer a new concept to achieve financial independence and freedom for people around the world. There are several programs to choose from. These include citizenship, permanent residency, and non-resident passports.

Their benefits include:

  • An insurance policy - A second citizenship (immigration program) can be an insurance policy against negative political or economic developments and future unpleasant scenarios in any hot spot in the world.
  • Visa-free travel - For many nationals, it is extremely difficult to travel to another country; their nation has almost no visa free treaties and the application for and issuance of a visa can take months. For those people, it is more convenient to adopt a second passport, which entitles them to visa free entry or easier issuance of visas.
  • Tax break feature - Many countries have become areas of high taxation, therefore, an increasing amount of high-income earners look for an alternative citizenship low tax centers.
  • New horizons - In many countries the prospect of wealth and peace seems more and more limited. The possibility of exploring new business opportunities in a friendly climate is probably the biggest advantage a citizenship program can offer.
The Belize Passport is an excellent travel document allowing visa free entry to over 80 destinations including Bolivia, Chile, Denmark, Ecuador, Egypt, Finland, Hong Kong, Norway, Panama, Singapore, South Africa, Sweden, Thailand, Turkey, Uruguay, United Kingdom and Venezuela. Under the Schengen program from the European Union, a visa now permits travel within Belgium, France, Germany, Luxembourg, Netherlands, Portugal and Spain, Austria, Italy and Scandinavia. A visa for countries like the United States can be obtained within a few days.

After an amendment to the Country's Constitution, it was possible for citizenship to be granted to newcomers who made a "substantial contribution to the economy and or well-being of Belize". In January of 1995 the Government of Belize, led by the then Prime Minister Rt. Hon. Dr. Manuel Esquivel published a document entitled "Policy on Economic Citizenship Program" in an attempt to stimulate foreign investment into the country.

Applicants who qualify in terms of good character, good health and financial standing could apply for Belizean Citizenship, and subsequently, upon acceptance, contribute to the Belize Economic Citizenship Investment Fund.

Both the applicable registration fees and contribution to the fund are used in the following ways:

  • 40% of all money collected is transferred by the Central Bank into a consolidated fund. This fund is used exclusively by the Ministry of Finance to service the Government's external debt.
  • 30% of the sum raised is transferred by the Central Bank into a special Economic Development Fund. This money is used solely to finance Capital Projects in the country.
  • The remaining 30% of the money collected is transferred by the Central Bank to an account administered by the Reconstruction and Development Corporation. This is then used to provide low interest financing to entrepreneurs in the Agriculture, Tourism, Construction and other productive sectors of the Economy, to support the work of Religious, Charitable, Benevolent and non governmental organizations.

A fee of US$10,000 is charged for processing an application for Belizean citizenship regardless of the family status of the applicant. In addition, the applicant is required to make a total investment of US$50,000.

The completed application form must be accompanied with a battery of documents:

  • A certified copy of birth certificate or passport of the applicant and each family member;
  • A certified/official police or criminal record from country of residence for the applicant and each family member over 18 years, and eight passport size photo of each family member of the family duly endorsed by a Justice of the Peace;
  • A Belize Passport application form duly filled out and signed;
  • A certified copy of a medical report including HIV test result of applicant and each family member and a VDRL for each member of the family as well;
  • A cashier's cheque for the appropriate sum payable to the "Central Bank of Belize" and two character reference letters.

All documents in a language other than English must be accompanied by a duly certified English translation. Assuming all documentation and forms are in order the estimated time of processing is approximately 30 to 90 days.

The Permanent Residency program is a much swifter process but unlike BECIP requires applicants to have spent at least one year in the country. A Security Deposit (varying according to nationality) is necessary along with a work permit.

Another class of 'residents' bringing foreign capital into the Belize is offered tax exemptions and other incentives: "Qualified Retired Persons" (QRP). Like your usual immigration program, it has an air of flamboyance and is being run by the Ministry of Tourism targeting European and North American nationals. It is hoped that they would maintain residence and spend their money in Belize.

To attract people to the program, certain incentives are offered. Provision for a one-time allowance of a QRP to import a car and personal household effects duty-free. Five years later, another vehicle can be imported as long as the first one is sold, re-exported or disposed of in some approved manner. The program allows the importation of light aircraft, boats and other forms of transportation without duty as well.

Similar to the tax-exempt status of International Business Companies, QRPs pay no taxes or levies on all income or receipts that accrue to them from sources outside Belize. It does not matter if such income is earned or passive income and whether or not such income is remitted to the QRP in Belize. Just like an offshore entity, QRP cannot do business in the local economy with Belizean nationals, but can direct foreign business activities from within Belize and still maintain their tax-free status. It is good to note here that if your assets and ongoing business activities are placed under proper corporate structures, it may minimize your US taxes when you live a requisite number of days outside the United States.

Far from being limited to just retired persons the law caters for those who are Qualified as Retired Persons and wish to lead a tax-free life. If you are a perpetual traveler who spends the year in several locations Belize's retiree law is ideal. You need not make large investments as in other permanent residence programs or buy expensive condos. The United States for example, only grants the green card status to foreigners who invest $1,000,000 into a US business that creates 10 jobs. As a QRP in Belize, you must show a monthly income of US$2,000 or make arrangements to deposit US$24,000 on or before April 1 deadline each year. This figure is coverage reflecting your general maintenance and support.

Couples should be at least 45 years old and you should plan to set up an address in Belize. (All children under the age of 18 years automatically qualify). There is no legislation stipulating a minimum time retirees must stay in the country each year, but it is generally believed that a two-week stay is good.

Your virtual presence in Belize is necessary. If you are not ready to drive down pegs in the soil, you can still have a "virtual address" for as low as US$150 a month. Your application can be processed and since the law to date does not stipulate a minimum number of days a 'retiree' must spend in Belize to keep the QRP status, it makes for easier sailing. You could seek professional help in completing the application and finding other helpful tips about your new tax status. Your virtual residence can have all the services you need including phone fax, e-mail and mail forwarding.


Commercial Free Zone (CFZ) Act 1994

Though Belize's free zone is not nearly as large as others in the region, it has steadily grown in recent years and what once seemed like a little parking lot is now a sprawling 50-acre business center. The CFZ Act established a commercial free zone in Corozal again to attract foreign investment/capital. In the zone facilities are provided for manufacturing, processing, packaging activities, as well as warehousing and distribution of goods and services. Several benefits and incentives including duty exemptions and tax holidays are available to investors in the Zone as mentioned.

Duty Exemptions

  • All merchandise, article, or goods entering a CFZ for commercial purposes shall be exempt from import duties, stamps 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 shall likewise be exempt form all duties and taxes.
  • No quotas upon any article, item, or goods shall apply to imports or exports license.
  • Imports or exports of a CFZ business shall not require an import or export license.

Notwithstanding anything contained in the Income Tax Act, there shall be levied on the chargeable income of every developer and CFZ business within a CFZ, an income tax at the following rates:

  • Up to BZ$15,000.00 of total income...2%;
  • Over BZ$15,000.00 up to BZ$30,000 of total chargeable income...4%;
  • Over BZ$30,000 and up to $100,000 of total chargeable income...6%; and
  • Over BZ100,000.00 of total chargeable income...8%.

In the computation of income tax under this section, there shall be given tax credits in accordance with the number of Belizean workers employed on a continuing basis to every CVZ developer or business in accordance with the following scale:

  • From 10 to 30 Belizean workers employed ...1% of taxable income;
  • Over 30 and up to 50 Belizean workers employed ...1.5% of taxable income;
  • Over 50 Belizean workers employed ...2% of taxable income.

During the first five years of its operation, a CFZ business shall be exempt from income tax or capital gains tax or any new corporate tax levied by the Government of Belize after the commencement of the Act. Any dividends paid by a CFZ business shall exempt from such tax for the first twenty years of its operation.

Where a CFZ business incurs a total net loss over the five years tax holiday, that loss may be carried forward and deducted against profits in the three years following the tax holiday period.

Any proceeds from the sale of stocks or other partial or complete ownership interest in a CFZ business shall be exempt from tax.

A CFZ fee equal to the sum of five percent of the tax collected by the Commissioner of Income Tax in any year of assessment shall be placed to the credit of the CFZMA.

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 docks at ports in Belize and are detained for other foreign port.
  • Sales for direct export whether by sea, air or land, provided that such merchandise arrive at port of exit under customs control.
  • Entry to 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 CFZ from one business to another, provided 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 business; there are no Government charges and taxes on the use of foreign currency within a CFZ.

CFZ businesses are allowed to open an account in any currency with a duly registered bank of its choice, which is located in the CFZ.

The Rent Restriction Act does not apply to a CFZ business or rental of property within a CFZ.


Export Processing Zones (EPZ)

The Export Processing Zone (EPZ) Program is also intended to attract investment both local and foreign to boost exports of non-traditional manufactured goods. An EPZ is a designated area outside national customs territory and restricted by controlled access to the advantage of a complex of industries. Besides promoting new exports, the program is designed to facilitate technology transfer, high quality production, and improvement of managerial technical skills and generation of employment opportunities in the country.

The EPZ program has been considered advantageous to investors as Belize has a preferential market in CARICOM under the treaty of Chaguaramas, in the European Union under the Lome convention, in Canada under the CARIBCAN and in the USA under the Caribbean Basin Initiative (CBI) and the Generalized System of Preferences (GSP).

The rules and regulations governing the EPZ Program are contained in the EPZ Act 1990 and Export Processing Zone Regulations 1992. An EPZ business is only allowed to sell, lease or transfer articles, goods or services in an EPZ or outside Belize to other EPZ businesses, foreign individuals or foreign businesses. Facilities are provided for activities in manufacturing, processing, packaging, warehousing and distribution of goods and services. The EPZ Committee consists of representatives of various Government ministries, the Chamber of Commerce, small businesses, EPZ developers and the Industrial sector. In special cases the committee grants waivers to the regulations for businesses applying for same.

The San Andres EPZ, covering just over 28 acres in northern Belize is 8 miles away from the Belize /Mexico border and adjacent to the largest free zone in the hemisphere - NAFTA. Two more EPZs are located near Belize City.

Various incentives to investors under the EPZ Act are ensured. These include:

  • Full import and export duty exemptions. Import duty exemptions extend to capital, equipment, intermediate goods, spare parts and service vehicles utilized inside the EPZ.
  • Exemptions from capital gains, property and land tax, excise sales and consumption tax, trade turnover, foreign exchange and transfer taxes.
  • A guaranteed income tax holiday of 20 years with an option to extend and deduct losses from profits following the tax holiday period.
  • Dividend tax exemption in perpetuity.
  • Opportunity to open foreign currency bank accounts in Belize and abroad.
  • Opportunity to sell, lease or transfer items, goods and services within an EPZ.
  • Customs inspection at the Zone for expediency.
  • Work permits at no cost for all professionals and technical staff.
  • No raw materials import restrictions.
  • No foreign exchange restrictions.
  • No import or export-licensing requirements.
  • No trade licensing for business to operate.
  • No licensing requirement for domestic suppliers who sell to EPZ business.


E-Commerce and Free Zone Solutions

In the arena of international financial transactions it is now the given that for any business institution or offshore service provider to survive and prosper, it must have a viable e-commerce strategy. In June of 2000 the United States Congress approved a bill that allowed consumers and businesses in the US to sign contracts electronically over the Internet. The law came into effect in October 2000 and since then many more digital doors and windows have opened. What are the implications of these new legislations? What are the risks associated with these businesses? How secure can transactions be? These and many other issues will be answered in the future as society's needs and expectations along with the development of technology and the decisions of courts help forge this new dimension in the business world.

Belize has secure servers with industrial standard telecommunications and a tax-favorable atmosphere. Additionally there is a comprehensive support service including website design, software and hardware suppliers' e-commerce solution suppliers, internet payment gateway facilities and international legal and tax advisors. The country is now getting much more technologically intensive and the government has ordered a large number of computers to be installed in the nation's schools, to ensure that new students are computer literate and Internet trained.

The Internet revolution being initially a tool for breaking border limitations and expanding personal freedom, is being controlled and regulated somewhat by various governments. Certain types of activities are now restricted on the Internet. Because the technology is new and not many legal precedents are on file, many experiments are taking place, testing the boundaries and limitations of cyberspace.

One such successful venture is the export processing zone (epz) located at the Datapro compound 13 ½ miles north of Belize City. This zone provides clients with the following:
  • Tax free environment
  • Full privacy
  • Flexible terms for hosting
  • Wide list of activities permitted
  • Obtaining a license for special activities fast and simple
  • Lowest rates among offshore e-com zones
  • Wide range of bandwidths available from one channel up to T3 with satellite access

To set up an e-business structure an action plan as set out below should be followed:

  • Study the project: You must decide what type of e-business you wish to pursue, the character of operations and location of the main target. Once that is clear projections should be made for the anticipated volume per one transaction and the anticipated turnover per month or year. This should also incorporate an anticipated number of visitors to of the web pager at once per month.
  • Set up the legal and financial background: The draft and registration of a Trust or Foundation in consort with an IBC can then be effected. Open a bank account, a merchant account with credit cards if needed and a license if necessary.
  • Setting up on the technical side: The registration of the domain name and your trademark should be done at this stage. Your web page should be designed and constructed, and your server installed in the Free Zone. Once you choose the bandwidth and get the server connected and you are ready to roll.

The aggregated fee for the second stage will be in area of US$8, 000 but can be less or higher depending to the structure: certain items can be added as well as excluded. License when required costs extra depending to the type of web page.

The third stage requires preliminary study as well. Clients can design their own web-site or have professional designers do it for them. The bandwidth available begins at US$950/month for a line of 64kbps but can be upgraded, at an extra charge. It is recommended to start with a general drafting according to your needs and then finalize it later. Costs range between US$7,000 and US$10,000 to set up.
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Choosing the right location for a server is of great importance to the structure of the whole E-business.
Belize's trust legislation as stated elsewhere in this article, gives this jurisdiction immunity from court actions of creditors challenging the settlor's disposition of funds to a trust. Tax planning, licensing special types of activity (casino, wagering, adult entertainment), and protecting IP and other assets from any legal pursuit are especially well-protected.

Related Materials:

Nevada and Belize: A Tale of Two Offshores

 

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