Is Belize Still Considered a Tax Haven?

For many, the term “tax haven” conjures images of jurisdictions offering minimal or no tax liabilities and a high degree of financial secrecy. These places historically attracted international businesses and individuals seeking to reduce their tax burdens. The global financial landscape has evolved, however, with increased pressure from international bodies for greater transparency and cooperation. This article explores whether Belize continues to fit the traditional definition of a tax haven by examining its current tax laws, regulatory framework, and compliance with international standards.

Defining a Tax Haven

A tax haven is a jurisdiction that provides favorable tax treatments to non-resident individuals and businesses, often characterized by low or zero tax rates on foreign-sourced income. These jurisdictions lack effective information exchange with other tax authorities and often have absent transparency in legal, regulatory, or administrative provisions, particularly regarding beneficial ownership disclosure. Historically, many tax havens imposed minimal or no requirements for substantial economic activity, allowing for “shell” companies without genuine presence. The Organisation for Economic Co-operation and Development (OECD) defines a tax haven by criteria such as nominal or no taxes, insufficient information exchange, lack of transparency, and absence of substantial activities.

Belize’s Current Tax Landscape

Belize’s offshore sector historically thrived on International Business Companies (IBCs), which were largely exempt from local taxes on foreign-sourced income. This framework offered significant tax planning advantages and privacy. However, the regulatory environment has undergone substantial changes since 2019. The Belize Companies Act of 2022 replaced previous statutes, introducing new compliance requirements for businesses.

Belize operates under a territorial tax system, meaning only income sourced within Belize is subject to taxation. For individuals, a flat personal income tax rate of 25% applies to earnings exceeding BZD 26,000 (approximately USD 13,000) per year, with income below this threshold being tax-exempt. There is no capital gains, inheritance, or estate tax in Belize.

Corporate taxation now involves a business tax applied to all company receipts, regardless of source, with rates varying by industry and revenue thresholds. For instance, the standard business tax rate for general trade is 1.75%, ranging up to 19% for specific sectors like telecommunications. This marked a significant shift from the previous zero-tax status for foreign-sourced IBC income. All IBCs must now obtain a Tax Identification Number (TIN) for regulatory and monitoring purposes.

Belize implemented the Economic Substance Act (ESA) in October 2019. This legislation mandates that certain “included entities” conducting “relevant activities” in Belize must demonstrate substantial economic presence. Such requirements include:
Having core income-generating activities carried out in Belize
Adequate numbers of qualified full-time employees
Sufficient annual operating expenditure
Appropriate physical offices

Entities tax resident in another jurisdiction and managed from outside Belize may be exempt from these substance requirements, provided they furnish proof of their tax residency elsewhere.

International Standards and Belize’s Compliance

Belize has engaged with global efforts to combat harmful tax practices, driven by organizations like the OECD and the Financial Action Task Force (FATF). These international bodies set standards for tax transparency, information exchange, and anti-money laundering for jurisdictions to adopt. The OECD’s initiatives, including the Common Reporting Standard (CRS) and Base Erosion and Profit Shifting (BEPS), aim to tax profits where economic activity and value creation occur.

Belize has taken steps to align its financial regulations with these international benchmarks. In 2017, Belize incorporated the CRS into its domestic law, requiring financial institutions to conduct due diligence and report financial account information to Belizean tax authorities, which is then automatically exchanged with partner jurisdictions. Belize also signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information in 2015, facilitating standardized information exchange.

Belize’s standing on international lists has fluctuated as it strives for compliance. In October 2023, Belize was temporarily placed on the European Union’s Annex I list of non-cooperative jurisdictions due to an OECD Global Forum assessment regarding its information exchange upon request. However, following regulatory amendments and a commitment to a supplementary review, Belize was removed from the EU’s “blacklist” on February 20, 2024, and moved to the “grey list” (Annex II). This indicates ongoing cooperation and a commitment to tax reform, demonstrating a significant departure from its historical reputation as a jurisdiction focused on financial secrecy.