An Overview of Accounting and Audit Compliance in Belize
As per the Accounting Records Act in Belize, the main issues to consider for accounting purposes include the preparation of documents, storing the documents, making the records available as and when required, and retaining the records. The legal source for accounting and reporting matters in Belize is the Belize Accounting Records (Maintenance) Act. The Act aims to improve the regulatory framework but it does not obstruct foreign investors who intend to open an anonymous company. This Act applies to International Business Companies and the Belize International Trust. As per this Act, all companies in Belize are supposed to keep their accounting records at their registered office or at the Registered Agent’s office. The accounting records can also be kept at any other location in or outside Belize if the director of the company deems fit. The accounting records include documents such as the assets and liabilities record, the sale and purchase record, and all financial transactions.
International Financial Reporting Standard in Belize
Overall the accounting reporting regime is light in Belize and the financial accounting information is not accessible to the general public. The Belize IBC does not have accounting standards. The Investors in Belize benefit from it. As Belize does not follow any specific accounting standard or accounting framework, the companies can prepare their accounting records and financial statements as per the International Financial Reporting Standard (IFRS). As no stock exchange exists in Belize, the standards are merely required for domestic banks. IFRS for SMEs is also allowed. The distinction between IFRS and IFRS for SMEs is that the latter is a simplified policy as the general accounting principles are simpler. Such legal entities are subject to lesser disclosure requirements.
As per IFRS the following financial statements are required to be filed i.e., the balance sheet, the statement of comprehensive income, the changes in equity statements, the cash flow statement, the description of accounting policies, and the notes to financial statements. One of the most important statements is the balance sheet as it reflects the company’s financial situation at a given point in time. Let’s discuss each financial statement in detail:
- Balance sheet
The data regarding the assets, the equity, the liabilities, and the assets and liabilities for sale should be provided in a Balance sheet. So far as intangible assets are concerned, the IFRS defines them as “non-monetary without physical substance”.
2. The statement of comprehensive income
It reflects the information about the profits and losses. It includes items such as gains and losses, revenue, impairment losses, tax expenses any other information as is relevant to the overall financial situation of the company.
3. The Cash flow statement
A cash flow statement is one of the main types of statements of the financial reporting principles after the balance sheet and statement of comprehensive income. It shows the manner in which the cash and cash equivalents are used as per relevant categories such as operating, investing, and financing.
4. Statement on changes in equity
This statement shows the total comprehensive income for a given period. It also reflects the reconciliation between carrying amounts at the start and at the end of the periods for each element of equity.
Other areas in which IFRS provides guidelines are the change of accounting policies. Segment reporting, separate financial statements, related party disclosures, presentation of current assets and liabilities, employee benefits, borrowing costs, provisions for consolidated and other topics.
Belize substantially amended its legislation on 1st January 2019. The amendment related to International Business Companies (IBCs). The Economic Substance Act was adopted and major amendments were made to the Income and Business Tax Act to set out obligations to pay tax. As per Belize Accounting Records (Maintenance) Act, all the source documents and accounting records must be stored in the place of the company’s registration or in the agent’s office in Belize or outside Belize after passing a resolution of the company's director or with any other competent party. All documents and accounting standards must be stored for minimum of 5 years after making the transaction. Belize does not follow any accounting standards so companies maintain their financial statements as per the IFRS or US GAAP. The amendment brought in a requirement to obtain a tax identification number (TIN), to annually file a tax return for all IBCs, and to file financial statements.
Audit of accounts
IBCs are not required to conduct an audit of their financial statements unless the annual income exceeds USD 6,000,000 and the minimum of the below criteria are met:
- The company’s shares are traded on an exchange;
- The company is reorganizing or liquidating or selling all its property at a public auction;
- The company’s activity is regulated by the International Financial Services Commission;
- The company prepares consolidated financial statements.
Financial Statements requirement
The Annual Tax Return, financial statements, and an auditor’s opinion must be filed by 31st March of every year succeeding the reporting period. Apart from financial statements, companies are also required to file economic substance reports. As per the Economic Substance Act, the annual filing of reports should be done within 9 months succeeding the reporting period. Reports should be filed through the registered agent and its form depends upon the result of activity qualification. Like Form B is filed for included entities and holding companies, Form C is filed purely for holding companies and Form D is filed for non-included entities.
Late filing or failure to file tax returns and financial statements
In the case where any company fails to comply with the provisions of the Belize Accounting Records (Maintenance) Act or not fulfilling the obligations to keep accounting records and source documents, a penalty not exceeding USD 10,000 is levied and the license to conduct activity and certificate of incorporation of the company is revoked. Late filing or evasion of filing a tax return and financial statement attracts a fine of 10% of the amount of tax payable but it should not be less than USD 10. A fine may be charged for a delay of 24 months.
Consolidated Financial Statement
Where the parent company of a group of companies is resident in Belize, a consolidated financial statement has to be filed following the IFRS.