Posted: Monday, November 4, 2019. 11:10 am CST.
By BBN Staff: As the European Union (EU) prepares to remove Belize from its blacklist for tax haven countries, the financial publication Investopedia has published an article explaining why Belize made it on the list in the first place.
The article, entitled “Why Belize is considered a tax haven,” explained that the classification follows a series of legislative decisions made by the Government of Belize (GOB) dating back to the 1990’s.
Investopedia said that Belize, “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.”
The first move towards earning the tax haven definition was to set up a legislative business climate similar to that of Guernsey and the Cayman Islands, which creates an attractive environment for offshore businesses. In 1996 GOB passed the International Business Companies (IBC) Act, the Trusts Act, and the Offshore Banking Act, which shortly after its passage, caused the country to be labeled as one of the most “corporate-friendly” nations in the world.
The act considered included an incorporation process that can be completed within a few hours, tax-free status and no reporting requirements, as well as 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.
GOB also eliminated taxes on a broad spectrum of income sources including dividends, interest, capital gains, and revenues earned offshore, with the goal of creating a pure tax-free environment. GOB also eliminated its stamp duties, which was usually charged to certify documents for the incorporation of companies, trusts, and foundations.
Investopedia also noted that Belize’s regulations on financial privacy also contributed to the designation.
“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,” Investopedia said.
As countries like the United States began cracking down on tax evasion, Belize ended up reforming many of its laws due to international pressure. That conformity to international standards has played a key role in the upcoming removal from the EU’s blacklist.
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