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Government seeks to amend law governing International Business Companies

A third bill, the International Business Companies (Amendment) Bill was also tabled. Last year, Belize joined the Organization for Economic Cooperation and Development (OECD’s) “inclusive framework” on base erosion and profit shifting (BEPS). The Prime Minister said a review of Belize’s international business companies’ tax regime under this framework found quote, “tremendous fault”. The Prime Minister said according to the OECD, the IBC regime in Belize allows such companies to pay low tax rate creating a preferential regime as a class of company. It also found that it excludes resident tax payers from the benefits of that regime and also excludes the IBC access to the domestic market.

Rt. Honorable Dean Barrow, Prime Minister of Belize

Rt.Hon.Dean Barrow, Prime Minister: “Long story short Madam Speaker what they said to us is the way forward would involve correcting the ring fencing elements of our IBC regime by eliminating the discrimination between domestic tax payers and non residents which leads to distortions in economic behavior by for example ‘extending the IBC regime to Belize residents and permit the ownership of IBC by Belize residents, remove the restrictions that an IBC cannot carry on a business with Belize residence and subjecting this income to Belize taxation and allowing the Belize IBCs to purchase and own land.’ So as I said to some extent there is going to be a bit of windfall bonus for Belizeans who will take advantage of these IBC vehicles now to do various things including holding in local banks foreign currency accounts or being able to deal with the international banks, with our offshore banks. Belizeans will not be free to do that and I’m sure those Belizeans who will take advantage will find that a great boone but what it does to government’s tax base is something else. Again what these people , I mean we had two courses either levy some kind of taxation on the IBCs on the EPZs which are now DPAs or continue to make them tax free but so as to get away from what the OECD says is differentiation make all Belizeans the beneficiaries of those same tax breaks- well I don’t know how I would have run the country after that but those people abroad say ”that da no fi we business.” So of course we had to say we can’t just eliminate taxes for all onshore residents so we have to bring the IBCs and the EPZs and the DPAs into the local tax system, make them subject to the local tax regime. Fortunately because our system already allows differentiation, people pay taxes at different rates, we did not have to say ‘well the IBCs, the EPZs, must now pay rate at the level of the corporate tax rate we were not obliged as it were to pick the highest tax rate to apply for them, in fact we were allowed to pick the lowest tax rate that applied in this country and of course that was the tax rate to which they will now be subject. But the fact is they are going to have to start paying some taxes, albeit small and that represents for them a fundamental change so of course there’s been push back from the EPZ sector. As I said the IBCs now seem to be those lawyers in particular who have an IBC practice seem to be fine with where we have come out but there is no concealing the fact that what was not subject to tax before, certainly in terms of the exports sector will not have to pay tax however miniscule those taxes are.”

The bill was taken through all its stages.