As an International Financial Center (IFC), the notion of imminent doom was not an option for Belize a few years ago. Like many other IFCs, Belize withstood the effects of external pressure from the EU, OECD and the G20. After focusing on the benefits of its IBC regime for almost thirty years (when Belize launched its offshore financial industry with the passage of the International Business Companies Act (the IBC Act)), the modus operandi had to change for the better. Like many other IFCs facing significant disruption exacerbated by the pandemic, Belize made decisive and calculated changes to laws and key products to reinvigorate the financial services industry and restore Belize’s reputation as a professional, highly respected, and business-friendly jurisdiction.

Implementing A Digital Registry

In 2020, Belize undertook the monumental task of acquiring and installing a digital company registry. This was one of the first major steps in the Belize Government’s push to process and deliver more of its services electronically. The electronic registry was launched in 2022, and all company filings now take place online through the Belize Companies and Corporate Affairs Registry’s (BCCAR) internet portal, the Online Business Registry System (OBRS). The OBRS portal facilitates new company registrations, changes in shareholder and director information, and offers several digital services such as E-filing, available 24 hours online. The modern features of the OBRS portal, coupled with the new Belize Companies Act, provide for the highest security and confidentiality of information. Additionally, any company with a non-Belizean shareholder [or director] must appoint a registered agent. The registered agent, who requires a licence from the Financial Services Commission (FSC), must carry out all OBRS transactions on behalf of the company.

A New Belize Companies Act

In July, the Belize Companies Act (2022 Act) was passed into law. The IBC Act, the Companies Act, and the Protected Cell Companies Act have all been repealed and replaced by the 2022 Act.
Prior to the passage of the 2022 Act, the Belize Government had conducted a piecemeal reform of the IBC Act to broaden its scope and follow Belize’s international obligations. IBCs initially served as a vehicle for international investments only, and only non-residents were able to use them. Between 2017 and 2021, the IBC Act was amended several times, which allowed IBCs to carry on business in Belize and allowed Belizean residents to use them. The piecemeal approach resulted in inconsistencies with the original Companies Act. Those inconsistencies have now been resolved by the 2022 Act.

Investors considering Belize as part of their corporate structuring should be pleased to know that the 2022 Act is a modern piece of company legislation on par with jurisdictions such as the British Virgin Islands (BVI) and other Eastern Caribbean countries. A Belize company may be used for both domestic and international investments. Though the companies are subject to taxes in Belize, there are significant exceptions which make Belize companies a desirable vehicle for international investment. Notably, a Belize company classified as a pure equity holding company or a holding company not engaged in relevant activities or an active trade or business, will not have to pay any business tax on its income. Companies engaged in other activities will pay business tax on their revenues at rates determined by the type of activity. A Belize company, regardless of its activities, does not have to withhold any taxes from dividends paid to a related party subject to conditions. Dividends paid to non-related parties will incur a 15 per cent withholding tax.

Under the 2022 Act, in addition to ordinary companies limited by shares, investors may also choose to incorporate companies limited by guarantee, unlimited companies, companies with or without par value, segregated portfolio companies or private trust companies. The impetus for these changes was key to attracting foreign direct investment into Belize and supporting modern financial vehicles with tax benefits to stimulate growth as an IFC.

Diverse Corporate Structures Available

International investors should also consider other legal entities available in Belize for asset protection, estate planning and efficient corporate administration. One such entity is the international foundation, which allows non-residents to establish a foundation for charitable or non-charitable purposes, or for no purpose other than the benefit of the founder or beneficiary or both. The foundation is a separate legal entity, and property transferred to and accepted by the foundation becomes the exclusive property of the foundation as its endowment.

There is also the recently amended Limited Liability Companies Act (LLC Act). An LLC incorporated under the amended LLC Act is deemed to be a disregarded entity whose income and receipts shall be deemed the income and receipts of its members unless such limited liability company elects, in the manner prescribed, to be taxed as a company.

Legal System Reform

During the pandemic, many jurisdictions were faced with the challenge of business continuity, and an opportunity arose to be more technologically inclusive. As a result, Belize passed into law the Electronic Transactions Act of 2021 (ETA), which repealed and replaced the previous Act and implemented the provisions of the UN’s Model Law on Electronic Commerce and the Convention on the use of Electronic Communications in International Contracts. Banks, commercial organisations, consumers and the business community on the whole greatly benefited from the implementation of e-Government services. The ETA essentially gave legal effect to all electronic documents, records and signatures, allowing for most business services to be conducted electronically. Corporate electronic filing via the Companies Registry’s OBRS portal is seamless and e-Certificates produced by the system contain QR codes for online authentication. The Data Protection Act of 2021 and other consequential law amendments enacted during 2021 further strengthen personal data privacy and security.

Another important development has been recently implemented legal reform. The Senior Courts Act of 2022 consolidates the administration of Belize’s judiciary in order to make it more efficient. The new law creates additional judicial and administrative roles that will improve judicial services, and there are legally mandated time limits on the delivery of judgments by High Court judges.

An insolvency and bankruptcy bill has been drafted and consultation with stakeholders is underway. The bill will provide a modern insolvency regime for Belize, which was previously operating under English common law rules from the early 1900’s.

Belize has also adopted global best practices regarding anti-money laundering, counter terrorism and proliferation financing, all of which are monitored and enforced by Belize’s Financial Intelligence Unit and Financial Services Commission. As a result, Belize does not appear on any adverse list.

Tax System

External pressure on Belize’s tax system to implement minimum taxation standards as required by its membership with the OECD BEPS initiative was transformative for the jurisdiction. As noted earlier, these initiatives removed the harmful tax features from the IBC Act and expanded the country’s tax base as a result. Substance requirements were also implemented with the passage of the Economic Substance Act of 2019 (ESA), which closely follows the requirements of mature jurisdictions such as the BVI, Cayman Islands and the Eastern Caribbean. Numerous tax law amendments followed thereafter to help level the playing field among Belize’s peers. These amendments have served to benefit the jurisdiction by enabling a friendlier business environment while being cognizant of the international business needs of the modern-day investor.

As described above, Belize’s tax regime was transformed to include features allowing for cross-border investments to occur in a tax-efficient manner and on par with international guidelines. Even though Belize’s treaty system is limited, recent tax amendments make it possible for multinationals operating in Belize to benefit from tax credits and exemptions, among other benefits that were not available prior to 2021.

Securities Industry

The Securities Industry Act of 2022 (SIA) was passed into law with its administrative parts currently in force. The substantive parts of the SIA will come into force in 2024 when its accompanying regulations become law. Historically, Belize has never had a capital market per se, and was dominated by domestic banks, institutional investors, and to some degree, the international banking sector. With the full rollout of the SIA legislation, Belize is at the cusp of creating an untapped and virgin capital market in which Belize will be able to attract the type of investments it needs to expand both public and private enterprises at home and globally. It will also expand employment in the financial services sector and create highly sophisticated financial products and services, further bolstering the status of the jurisdiction as an innovative IFC.

A Promising Future

In addition to the recent steps taken by Belize to support businesses, investors should also consider some of Belize’s other attributes. It is politically stable and as a former British colony, it inherited a robust legal system based on English common law. The country is the only English-speaking jurisdiction in Central America, but at least half of the population is also fluent in Spanish. The economy, based primarily on agriculture and tourism, experienced a strong recovery after the pandemic and, according to the IMF, real GDP is projected to grow by 2.3 per cent in 2023. In contrast, the Statistical Institute of Belize reports GDP growth for the first quarter of 2023 at 11.5 per cent, with financial services and BPO sectors boasting a 17 per cent and 20 per cent growth respectively for the same period. Notably, Belize also took part in an innovative ‘debt for marine protection’ swap with The Nature Conservancy in 2022 which significantly reduced Belize’s public debt from 101 per cent of GDP in 2020 to 64 per cent of GDP in 2022.

Belize is also passionate about protecting its environmental resources, so the Government is receptive to sustainable development projects. Aggressive fiscal incentives are also available to investors for industrial, agricultural and tourism development. Belize certainly deserves serious consideration by those persons weighing their options for an investment-friendly jurisdiction.

Coupled with progressive tax law changes, new companies laws, the online registry system, modern e-Governance initiative, an untapped capital market, and Finance Belize – the country’s marketing and promotion arm – Belize is returning to a competitive IFC on par with the best!