Tax Treaty
Tax Smart
When optimizing their tax strategy, individuals should consider a base in Belize.
Citizens of all countries have a legal – and some might argue moral – obligation to pay tax. Yet they also have the right to plan out a strategy, within the boundaries of the law, that optimizes their payments.
Some wealthy individuals are subject to high tax rates in their home country. Aruba, Sweden, Denmark, Netherlands, Belgium, Austria, Japan and the U.K. all have top tax rates of more than 50%, and Finland and Ireland are close behind. Individuals also might be subject to double taxation, meaning the same transaction or income source is subject to two or more taxing authorities. One taxing jurisdiction might tax income at its source, while others will tax income based on the residence or nationality of the recipient.
“One solution is to establish a tax base in Belize, says Mr. Filippo Alario, Eexcutive Director at Belize Bank International. “We have tax treaties in place with several countries, and it may be possible to leverage them in a prudent tax optimization strategy.”
In addition to having double tax agreements, Belize has Tax Information Exchange Agreements (TIEAs) in place with multiple jurisdictions. Developed by the OECD Global Forum Working Group on Effective Exchange of Information in 2002, TIEAs are model agreements on the exchange of information on tax matters. There are two models for bilateral agreements.[i]
Countries that have tax agreements with Belize
TIEAs: the U.K., Australia, the Netherlands, Ireland, France, Finland, Norway, Sweden, Iceland, Greenland, Denmark, the Faro Islands, Portugal, Mexico and Poland
Double tax agreements: Caribbean Community (CARICOM) countries – Antigua and Barbuda, Barbados, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago; the U.K., Sweden and Denmark.
Tax agreements vary depending on the country, but one might consider these two examples to get a flavor for the nuances.
Example #1: The agreement with the CARICOM countries covers taxes on income, profits or gains and capital gains. Generally the gains or profits are only taxed in the country in which they are sourced. Dividends, for example, are taxed in the country in which the company that paid them is resident.[ii]
Example #2: Belize residents subject to tax in Belize are exempt from U.K. tax on dividends paid by U.K. companies.[iii] That being said, dividend receivers who are entitled to a tax credit in Belize may be charged U.K. tax on the net amount of the dividend minus the tax credit at a rate not exceeding 15%. However, this does not apply in some circumstances including when:
- the dividend receiver controls at least 10% of the voting power in the company that paid the dividend
- the shares were acquired for bona fide commercial reasons
- a resident in one jurisdiction has a “permanent establishment” in the other jurisdiction, and the dividend arose from business carried out by the entity
There is also no tax liability on undistributed profits.
“Before doing anything, individuals should always seek tax advice from a qualified professional about how they can optimize their tax strategy while remaining compliant with the law,” says Mr. Alario. “They should ask their adviser about holding their money in a tax-free account at a bank that also offers corporate/investment accounts, merchant accounts, CDs, financing and multi-currency accounts.”
Finally, they should explore ways to take advantage of other benefits Belize has to offer. Belize is a stable country, so assets are safe and secure. Specifically for business owners, companies can establish a corporate structure in which they only require only one director and one shareholder. Moreover, privacy and confidentiality are embedded in the laws and culture, and registration information is not public.
Tax optimization makes sense. So does Belize.
The information contained in this document is for information purposes only and not for the purposes of providing legal advice. You must not rely on the information in this document as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.
(1) http://www.oecd.org/ctp/harmful/taxinformationexchangeagreementstieas.htm.
(11) Belize Income Tax (Avoidance of Double Taxation) (Caricom) Act, Chapter 56, Revised Edition 2000.
(111) HM Revenue & Customs. DT 3530 – DT: Belize: double taxation agreement, Article 6: Dividends.
