Overview of Tax Compliance in Belize
Today when countries are becoming stricter on their tax laws, Belize stands out as a safe tax haven ensuring privacy and asset protection. Before drafting its tax legislation. Belize consulted with professionals from several top safe havens to enable Belize to achieve a similar status. Belize came to the forefront of international financial services with the enactment of the International Business Companies Act, the Trusts Act and the Offshore Banking Act. Belize has adopted the “qualified permanent residence law” for retirees from other countries to enjoy a tax-free life. The Belize government is committed to privacy and a no-tax system. Companies establishing themselves in Belize are finding it advantageous to do business in Belize.
Belize is a country that welcomes foreigners. It has established foreign residency as per this, foreign residents pay no tax in Belize on non-Belize income. Belize follows an indirect taxation system through three main sources of income. These sources of income include trade-related taxes, tax on sales, and rates. Further, the direct tax is levied in the form of Income and Business Tax. For companies, industries and International Commercial Companies operating in Free Trade Zones specific legislation has been formed.
Types of taxes in Belize
Income Tax on Natural Persons
The legislation is applicable to income tax on natural persons and is settled by the Income and Business Tax Act under the supervision of the Income Tax Department. Income tax is applicable at the rate of 25% along with a general deduction of USD 50 for all taxpayers. Apart from this, there is a possibility of deductions while calculating the tax base such as:
- Personal relief
- Charitable relief
- Education relief
The deadline for filing an income tax return is March 31st. Income less than USD 13000 per year is exempt from paying income tax.
Belize’s tax on sales is regulated by the General Sales Act. It is supervised by the Department of General Sales Tax. The value added to imports and other goods and services supplied by a company to another or to the end consumer is taxed at the rate of 12.5%. A taxable activity with annual business above USD 37,500 is obligated to obtain tax registration. The consumers pay tax solely on the final sale price even though the sales tax is calculated and charged on the transactions in the production and delivery chain. The tax paid by the registered person is compensated by the tax received from the end consumer. Where the amount of departure tax exceeds the entry tax, then the registered person has to use it for the purpose of future responsibilities. There are certain exemptions on taxes available.
Corporate tax is levied under the Income and Business Tax Act. Apart from income tax, self-employed workers and companies pay Commercial Tax. Employees are, however exempt from paying it. Companies pay taxes on economic activities. It is levied on incomes above the following: USD 37,500 arising from company or commercial activity and USD 10,000 for self-employed people. Tax on company depends upon the type of company and it ranges from 0.75% to 25%. The income tax return is filed by the company at the rate of 25% of the profits above Belize’s $20,000. However, if the income tax is higher than the tax on economic activities then the excess income tax is exempted. If the company incurs losses then they can be converted into tax credits for the purpose of tax on economic activities and the losses are carried forward to a new account for 5 years. The companies involved in petroleum products pay tax at the rate of 40% payable quarterly.
An environmental tax at the rate of 2% is levied on the CIF value of all imported goods. However, medicines and some food items are exempted.
Hotel Tax is levied at the rate of 9% on all accommodation charges and is paid monthly to the Belize Tourism Board.
A tax at the rate of 1% is levied on the value of land. Land Tax is paid to the Department of Lands.
Property tax is applicable at a rate depending upon the municipality in which the property is situated. In Belmopan a rate of 2% is applicable and in Belize City a rate of 2.5%.
Stamp Duty or Transfer Tax
Stamp duty or Transfer tax is applicable at the rate of 5% to transactions on property valued at more than USD 10,000.
Excise tax is imposed on domestically manufactured alcohol, beer, cigarettes, and soft drinks.
Import Duty and Revenue Replacement Duty
The tax rates vary from 0% to 40% depending upon the products being imported. Products that attract Revenue Replacement Duty have a 5% to 40% tax rate.
IRIS which stands for Integrated Revenue Information System is an online taxpayer portal for the Belize tax system. IRIS Belize is a government portal that provides Easy, Effortless and Efficient Tax Services for everyone. One has to register on this portal to file a tax return. The Tax Administration and Procedure Act empowers the Director General of the Belize Tax Services Department to specify the manner in which the tax return is required to be filed. From 1st April 2023 onwards the Director General requires all taxpayers to file tax returns and pay all taxes via the IRIS Belize online portal. The Belize Tax Services Department will no longer accept tax payments. It will only be accepted through the online portal.
Who files taxes in Belize?
Belize’s tax system is based on the territorial principle. Individuals are only taxed to the extent their income arises in Belize. Apart from this, there can be individuals who are required to file taxes in Belize. If you’re a resident of Belize and have a taxable income arising within the country, then such individuals are required to file a tax return if your income exceeds an annual threshold. Non-residents who earn income from employment or business activities or those who earn rental or investment income from Belizean sources in Belize are also required to file a tax return. Apart from this, certain other categories of individuals who are required to file taxes in Belize irrespective of their income level are:
- Directors or officers of Belizean company.
- Individuals who receive dividends or other contributions from Belizean companies.
- Individuals who own property in Belize.
- Individuals who are beneficiaries of trust established in Belize.
Further, the Belize government requires you to report certain information to the Belizean tax authorities even if you’re not required to file taxes.
How to register an account on IRIS Belize online portal?
Step 1: Click on “Register an account” on the IRIS Belize portal
Visit the IRIS Belize portal by clicking here. Then click on the “Register an account” option. An online form will appear.
Step 2: Fill out the online registration form
Start filling in the required details in the online registration form. After filling up the details a request for verification is done. After this, the application can create ID password and submit it. A confirmation email is sent to the email id. On confirming the same, the registration is complete.
Step 3: Contact Belize Tax Service
The next step is to contact Belize tax services to link your account to your online profile.
How to file a tax return on the online portal?
Step 1: Click Return Menu to file a return
After linking your account with the IRIS Belize Online portal. Login to the portal by entering the email id and password. Click on the return menu available to file a return. Select the type of business you operate in. Then click on the “Start Button” action link. Review the details of the return then press save and continue.
Step 2: Return Overview
To complete this section click on “Enter Revenue from Trade, Business or Profession”. On the form enter the correct details under the field that relates to your business type. The online form will automatically calculate the tax amount.
Step 3: Enter Return Details
Any monthly adjustment, if required should be done on this page. When there are no other adjustments to make, click on the “save and continue” button.
Step 4: Upload necessary papers
In this part, all the necessary papers which support detailed supply in your return have to be uploaded.
Step 5: Review and Submit
Check the summary of all details entered and check the details. If all the details are correct, then agree to the declaration and submit it. On submission, the tax return has been filed.
Step 6: Payment Overdue
After the tax return has been filed, the payment overdue appears on the screen along with any penalties, additional payment, etc. Then you have to click on the “Pay Now” button and make a payment using any online banking services of your choice. Payment status can be checked on the portal.