After the introduction of the International Business Companies Act in 1990, Belize has become one of the most competitive centres for the incorporation of International Business Companies (IBC’s) which offer unparalleled advantages in terms of tax and investment planning, business management and cost-effectiveness.
An IBC can be used for a wide range of purposes, such as:
Estate and Financial Planning
Offshore companies are widely used in estate and financial planning – particularly in conjunction with foreign trusts – as vehicles to hold assets to replace individual personal ownership.
Traditionally, this has been the most popular use for an offshore company. By establishing an offshore company to purchase goods from one country and then sell them to another country, the profits from the transaction can be held in the offshore company in a completely tax-fee free environment. The goods, however, are typically shipped directly from the country of origin to the destination country. An offshore company can also be used to achieve economies of scale and reduced administrative costs by combining the purchasing activities of a group of related or unrelated companies.
Investment Holdings and Share Ownership
Offshore companies are often used effectively by individuals and corporations alike as vehicles for the management of investment funds. Offshore companies can maintain brokerage accounts and hold stocks, bonds, cash and a wide variety of investment products. As a foreign corporation, an IBC will usually be treated differently to a resident individual or company and can therefore achieve significant tax savings and accumulate all profits in a tax-free environment.
Corporations with worldwide interests face a range of fiscal regimes, exchange controls, currency and political risks, and accounting policies. BOSL can assist corporations in establishing a variety of holding and operating companies in a range of different jurisdictions, thereby allowing them to structure their affairs for maximum efficiency.
Ship and Property Ownership
Offshore companies can be used to own ships and manage shipping operations thereby enabling ship owners and operators to reduce both direct and indirect taxes on their shipping operations and allow the increased profits to be accumulated for optimum growth in a tax-free environment.
It is also possible to use an offshore company to hold real estate and other types of properties all over the world. Such companies are used as a means to avoid or reduce capital gains taxes, inheritance taxes and property transfer taxes, and the sale of such property can be achieved easily by transferring the shares in the company with significant reductions in the acquisition costs to be borne by the purchaser.
For rental property, by properly structuring the financing through a back-to-back loan facility, an offshore company can be used to effectively control the level of any withholding taxes applied to any rental income.
Intellectual Property (patents, copyrights, royalties)
An offshore company can be formed to be the international sub-licensee for important intellectual property rights such as patents, copyrights and royalties. This offshore company can then enter into sublicensing or franchise arrangements with companies around the world interested in the exploitation of such rights. The income will then accrue to the offshore company in a tax-free environment.
Consultancy and Professional Services
Individuals who receive significant payments for their services (such as consultants, writers, designers, directors, composers, entertainers, athletes, engineers, etc.) may contract themselves through an offshore company that pays the individual an agreed upon fee. This is structured so as to minimise their tax liability and to invest the profits in a tax-free environment, thus generating optimum returns. Payments to the individual can then be structured in such a way to minimise personal income tax.
A corporation with a number of foreign subsidiaries often needs a facility to balance various currency risks, capital flows and income variations resulting from inter-group operations. To establish such a facility in one’s home country could have tax or legal consequences. Establishing an offshore treasury management company can serve to consolidate all of the various activities in one place and provide the flexibility to cope with different legal and fiscal regimes. In particular, the treasury management company can hold profits for the foreign subsidiaries, control the foreign exchange positions, and use accumulated cash positions for future investment in whichever location is deemed appropriate.
Offshore companies can be used in a variety of situations to purchase capital equipment and then lease the equipment to a company in a high-tax country. In this way, it is possible to accumulate the funds offshore in a tax-free environment and the lease payment will typically be considered a deductible expense in the high-tax country.
Many organisations employ staff outside their home country. In doing so, they may encounter complications concerning such matters as exchange controls and taxation. The use of an offshore company to employ the staff and pay their salaries can resolve such difficulties and reduce the costs associated with payroll, travel expenses and administration. This may also provide tax and social security benefits for the employees.
Factoring and Transfer Pricing
By factoring the trading debts of a company in a high-tax country through an offshore company, it is possible to accumulate the discounted portion of the factored debt offshore in a tax-free environment. In this way, it should be possible to treat the factoring charge as a deductible expense in the high-tax country.
Although there are several offshore centres in which IBC’s can be incorporated, Belize ranks highly when applying all of the relevant criteria:
The Belize legislation offers some of the most flexible features available today with very minimum requirements for incorporation. These include:
There are very few restrictions on the activities of a Belize IBC. At present, an IBC may not:
i) All IBC’s must maintain a Registered Agent and a Registered Office in Belize.
ii) The name of an IBC must contain one of the following words: Limited, Corporation, Incorporated, Society Anonyme, Sociedad Anonima or Aktiengesellschaft; or their usual abbreviations: Ltd., Corp., Inc., S.A., A.S. or A.G.
iii) The name of an IBC cannot include any of the following words: Assurance, Bank, Building Society, Chamber of Commerce, Chartered, Cooperative, Imperial, Insurance, Municipal, Royal or Trust or any word conveying a similar meaning or which suggests the patronage of Her Majesty (or that of any member of the Royal Family) or a connection with the Government of Belize – except with the written approval of the Registrar.
If required, BOSL can also provide ongoing nominee and management services for an offshore company. As the beneficial owner of a managed company, the client typically retains ultimate control over the composition of the board of directors, which in turn manages the underlying assets. Alternatively, ownership may be placed into an offshore trust arrangement.
The main advantages of a managed company are confidentiality and tax planning. Worldwide assets may be registered in, or held to the order of the company, with your beneficial ownership of the shares of the company held strictly as a private matter through the use of nominees or Trustees.
Once a company has been established, it is important to manage it properly so as to maintain its corporate integrity. BOSL can provide a full range of management services, such as:
If you would like to proceed or have any additional questions, please contact us for a free confidential, no-obligation consultation.