A: Belize, located on the eastern coast of Central America, is a tax haven in the purest sense, because it provides a simple incorporation process for offshore companies, which do not pay taxes on earnings from abroad. The tax code in Belize defines offshore income as dividends, capital gains, earned interest and revenues. Dividends paid by offshore companies incorporated in Belize to non-citizens of the country are also tax-free.
Belize as a Tax Haven
In the early 1990s, the government of Belize started the process of becoming a tax haven, following the lead and legislative practices of Guernsey and the Cayman Islands to create an environment that would attract offshore companies. The primary objective of the Belize government in this initiative was to eliminate taxes on a wide range of income sources, including dividends, interest, capital gains and revenues earned offshore. To create a pure tax-free environment, the country also eliminated its stamp duty, a tax charged to certify the veracity of documentation for the incorporation of companies, trusts and foundations.
To fast-track the incorporation of businesses, trusts and foundations, the country established the International Business Companies (IBC) Act, the Trusts Act, and the Offshore Banking Act in 1996. As a result of the formation of the IBC Act, Belize is considered to be one of the most corporate-friendly nations in the world. Features of the legislation include an incorporation process that can be completed within a few hours, tax-free status and no reporting requirements.
The key features of establishing a Belize International Trust under the provisions of the Trusts Act include a permanent exemption from personal and business taxes on earnings generated by assets in a trust. Estates also receive comprehensive exemptions from taxes related to inheritance, succession and gifting.
One of the key provisions in the Offshore Banking Act allows financial institutions with a minimum of $25 million in capital to apply for an unrestricted license, which allows for banking operations without local regulation. Smaller institutions can apply for a limited license by meeting a capital requirement of $15 million.
Financial Privacy in Belize
Privacy barriers have progressively weakened in traditional tax havens such as Switzerland and Luxembourg, opening the door for countries like Belize to establish their status as the next generation of tax havens. To secure the financial privacy of companies, foundations and trusts incorporated in the country, banking regulations mandate that names and account information can only be disclosed after the submission of documentation related to criminal investigations, followed by a court order.
To extend confidentiality for account holders, Belize places no restrictions on currency movements in and out of the country. The absence of an exchange control policy provides offshore businesses incorporated in the country with the ability to transfer unlimited amounts of currency without reporting requirements. Belize also has no tax treaties with other governments, which have been used to weaken financial privacy protections, particularly in Europe.