Belize

GENERAL INFORMATION

Belize, formerly known as the British Honduras, occupies the southeast side of the Yucatan peninsula on the western side of the Caribbean. Belize features everything from tropical rainforests to Mayan ruins to white sands beaches to some of the best diving in this hemisphere. The total population of Belize is close to 250,000. The capital of Belize is Belmopan, which has about 60,000 residents. English is the official language, but most Belizeans are bilingual and also speak Spanish.

Belize Government

Belize is an independent country. Belize became a British Crown Colony in 1862, and achieved complete self-rule in 1981. Belize is a member of the British Commonwealth, the United Nations, the Non-Aligned Movement, the IMF, the Organization of American States, the Association of Caribbean States, and the World Bank. Belize has applied for entry to NAFTA, and is presently constructing a large Free Trade Zone facility on its northern border with Mexico.

The Belizean government is based on the British model, and Queen Elizabeth II is represented by the Governor General, who is at least nominally the Head of State. The Prime Minister is the executive, and a legislative authority rests in an elected 29-member House of Representatives and an appointed 8-member Senate. Belize has a history of political stability.

Belize follows the English common law system, and its courts are also based on the British model.

Belize Currency

The local currency is Belize Dollar which is tied to the US Dollar with a fixed rate of BZ$2.00 = US$1.00.

Communications

From the central and western U.S., Belize is as equally accessible and conveniently located as the Cayman Islands. There are direct daily flights from the U.S. to Belize, including flights by American Airlines and Continental, and the flying time from Houston is under two hours. Unlike Mexico and most of Central America, Belize has an advanced, quality telecommunications system, anchored by a satellite earth station in Belmopan. Most international courier services have offices in Belize.

Confidentiality

Belize has confidentiality and secrecy laws which are strictly enforced by its courts. However, Belize does have agreements for the sharing of information with other nations including the United States which relates to tax evasion.

BELIZE TRUSTS

Belize adopted a modern Trust Act in 1992 which is largely based on the trust laws of the Cayman Islands and Bermuda.

Formation and Registration

Trusts may be formed either orally or by written declaration, with no mandatory declarations and only a few statutory requirements, with the exception of unit trusts or trusts which relate to Belize property (these must be formed by formal written documents).

The settlor (creator) may specify that the laws of another country will govern the trust; if not specified, the Belizean courts will apply Belize law by default. It is possible to draft the trust and specify that particular parts will be governed by the laws of other jurisdictions, and it is possible to specify that in the event of changes in a designated jurisdiction’s laws that yet another jurisdiction’s laws will apply. This provision can be important for "international" trusts insofar as a change of law in a designated jurisdiction may operate to void an important provision of the trust; in that case, the designation of the alternative jurisdiction will help ensure that the trust will be enforced according to the wishes of the settlor.

It is not required, but if the settlor desires the trust may be registered with the Belizean Registrar for a fee of US$100, in exchange for which the Registrar issues a Certificate of Registration to the settlor (or the settlor’s designee). The Register of Trusts cannot be revealed as to that trust without the specific, written consent of the Trustee.

Abolition of the Rule Against Perpetuities

Belize has abolished the Rule Against Perpetuities as it relates to Belizean trusts. A trust may be created for a maximum of 120 years without regard to whether proper beneficiaries have been identified or not. Charitable trusts, as defined under the statute, may be established with unlimited duration.

Asset Protection

Belizean courts cannot vary or set aside a Belizean trusts. Belizean courts also are prohibited from recognizing foreign judgments against a Belizean trust or against Belizean trust property, in respect to marriage or divorce, succession of heirs, or claims by creditors (including foreign bankruptcy courts). The Belizean trust companies claim that a Belizean trust has never been compromised, and that Belizean trust assets are completely insulated from all creditors, unhappy heirs, and mad ex-spouses which attempt to use fraudulent conveyance laws and bankruptcy orders to penetrate the trusts. The Belize Trust Act also provides that an asset transfer has protection from fraudulent conveyance allegations as of the date of the transfer.

Settlors, Beneficiaries and Purposes

The settlor (creator) of a trust may be any person having the capacity to own and transfer property. Because of the abolition of the Rule Against Perpetuities as to trusts, virtually any person, entity, or thing may be a beneficiary, and it is possible to create broad classes of potential beneficiaries or leave the designation of beneficiaries to the trustees (i.e., "discretionary" trusts are allowed).

Spendthrift trusts may be created, and the settlor of the trust may also be a beneficiary. Charitable trusts may be created for about any purpose, such as the future goodwill of mankind or the advancement of human freedom. The purpose can be carried out anywhere in the world, and does not have to limited to Belize or benefit the Belize community. Non-charitable "purpose" trusts may also be formed, although for these trusts the appointment of a trust "protector" is mandatory (if a protector is not appointed the trust is not voided; rather, the Attorney General becomes protector by default).

Both settlors and beneficiaries may give the trustees "Letters of Wishes" which are non-binding guidelines as to how the trust should be administered. The Trustees are not legally bound to recognize or follow these letters, but in practice they almost always do.

Trustees and Protectors

Belizean trusts must have at least one trustee and may not have more than four trustees, which the exception of charitable trusts which may have an unlimited number of trustees. A trustee may also be a settlor and a beneficiary of the trust.

All trustees are held to a very high standard of conduct and faithfulness to the trust. In addition to most typical trustee powers, a trustee of a Belizean trust is empowered by the Trust Act to advance moneys to potential beneficiaries of the trust even before their interests in the trust have vested. Trustees who are engaged in a profession or business which supplies services to a trust are entitled to have the reasonable fees and charges for such services paid by the trust.

The Belize Trust Act specifically allows for (and, for some types of trusts, requires) the appointment of a "Protector" who individually owes fiduciary duties to the trust beneficiaries. While the Protector has the power to remove and appoint trustees, the Protector is not considered to be a trustee. The Protector can also be the settlor, trustee, or beneficiary of the trust.

Breach of Trust

In the event of a breach of trust, trustees are personally liable for the loss or depreciation of the trust assets (but directors of a corporate trustee or trust company do not become personally liable). Further, any who receives trust property with knowledge of the breach of trust become constructive trustees of the trust. For a breach of trust, Belizean law allows for the "tracing" of assets and no Statute of Limitation will apply.

Variant Trusts

The Belize Trust Act allows for the formation of "variant" trusts, which are non-common law trusts (an example would be a trust formed according to Muslim law), upon approval by the Attorney General and publication of notice of the formation.

Exempt Trusts

The Belizean Trust Act provides that trusts may obtain tax-exempt status in any given year so long as: (1) neither the settlor nor the beneficiaries resided in Belize during the tax year; and (2) the trust not does not include any Belizean real estate. Trusts which obtain this tax-exempt status essentially do not pay any taxes, period.

BELIZE CORPORATIONS

Belize amended its corporation laws in 1990 with passage of its International Business Companies Act.

Purposes

A Belizean International Business Company ("IBC") can be used for numerous purposes, including:

• General commercial trading

• Financial management

• Holding investment securities offshore

• Ship ownership or real estate ownership

• Share ownership in other companies

• Leasing of assets

Incorporation and Administration

There are minimal filing requirements for a Belizean corporation. The basic required documents are a Certificate of Incorporation and a Memorandum and Articles of Association. These documents are not required to be in any particular form, and can (and should) be carefully tailored for the unique purposes of each new entity. A new corporation must also identify the name and address of the corporation’s registered agent and give the address of its registered office.

The corporation’s name must end with one of the following words, or abbreviations thereof - Limited, Corporation, Incorporated, Societe Anonyme, or Sociedad Anonima. The following words, and their associated activities, cannot be used: Assurance, Bank, Building Society, Chamber of Commerce, Chartered, Cooperative, Imperial, Insurance, Municipal and Royal.

A Belizean corporation is not required to file disclosures of its directors or shareholders. For exempt companies, no tax returns or financial statements of any kind are required to be filed.

A corporation may authorize share capital up to US$50,000 without incurring additional franchise fees.

Every Belizean corporation must maintain a registered office and a registered agent in Belize. However, no meetings (annual or otherwise ) of directors or shareholders is required. If any such meetings are held, they may be held anywhere in the world, and may be held by telephone, proxy, e-mail, etc.

A Belize IBC cannot carry on business with residents of Belize, own real estate in Belize, or act as Registered Agent for another Belize International Business Company, or else it will lose its tax exempt status. It cannot operate as a bank or an insurance company, or act as a registered agent, unless it has the necessary licenses.

Officers and Directors

The only required officer is a corporate secretary, and the corporation is only required to have one director. There is no maximum restriction on the number of directors. There is no requirement that an officer or a director also be a shareholder of the corporation. Officers and directors need not be Belizean citizens or reside in Belize. Other corporations are allowed to act as the officers and directors.

Shareholders

There are no minimum capitalization requirements. Shares can be issued with or without par value. Bearer shares and registered shares are permitted. Shares may be held by nominees.

A Belizean corporation must have at least one shareholder, which may be another corporation or trust (which need not be Belizean). The identities of shareholders does not have to be filed or otherwise disclosed. Where the shareholders are nominees, there is no requirement that the true beneficial owners be disclosed.

A register of shareholders must be kept at the registered office address of the corporation in Belize. This register may be inspected only by shareholders, with the consent of the corporation or by order of the Belize courts at the request of a shareholder.

Confidentiality

Belize does not have a specific statute relating to secrecy and confidentiality in the maintenance of a corporation’s records, but a common law duty is recognized which compel professionals to keep the affairs of their clients confidential. A Belize corporation is not subject to any tax treaties or exchange of information agreements with any country (including the U.S.), and is not required to file any reports of any activities which occur outside of Belize. For example, a Belize corporation which maintains a Bermuda bank account is not required to report account activity to the Belize government. Further, there are no statutory accounting or audit requirements.

Taxation

A Belize IBC is exempt from all forms of taxation, including corporate income taxes, capital gains taxes, and stamp and other duties, and is not subject to any currency or exchange restrictions. There is an annual government (franchise tax type) fee of US$100 (so long as the authorized share capital does not exceed US$50,000). There are no mandatory accounting, auditing or minimum capital requirements.

A Belize IBC cannot carry on business with residents of Belize, own real estate in Belize, or act as Registered Agent for another Belize International Business Company, or else it will lose its tax exempt status.

Private Label Company

A private label company is a separate species of a Belize IBC which bears a name which is similar or identical to that of its parent Company – i.e., Bill Gates could form a Microsoft (Belize), Ltd. if he so desired, and the company would be entitled to certain special benefits as if Microsoft had actually transferred its domicile to Belize.

BELIZE BANKS

Belize passed a new Offshore Bank Act in 1996, which is providing impetus to the development of Belize as an offshore financial center. It is not there yet, but if progress at the present pace continues, Belize will soon have the same quality of financial infrastructure as Bermuda, the Bahamas, and the Cayman Islands.

There are two classes of offshore banks: "A" and "B". A class "A" bank is a general bank, and can conduct any type of banking operations without restriction. The minimum capital required to form a class "A" bank is US$500,000. A class "B" bank cannot conduct business with the general public, but can act as a "captive" bank for an associated group of individuals or companies – in other words, a class "B" bank is a private bank. The minimum capital required to form a class "B" bank is US$200,000.

There must be at least two Belizean resident directors with prior banking experience, but only one shareholder is required and the identities of shareholders are not disclosed (although a register of shareholders must be kept at the registered office).

Belize offshore banks pay no taxes and are not subject to foreign exchange controls. Belizean offshore banks must file monthly returns, and an annual report in a standardized form must be submitted to the Belize Central Bank.

BELIZE CITIZENSHIPS

Among offshore jurisdictions, Belize is the leading jurisdiction in so-called "second citizenships".

Belize sells citizenships for, essentially, a US$50,000 fee. These citizenships are sold through the Belize Economic Citizenship Investment Program, which allows a grant of citizenship by registration to any person who makes a contribution to Belize’s economy.

The US$50,000 fee is composed of two elements: a refundable US$25,000 registration fee, which is paid at the time the application is made, and a non-refundable US$25,000 investment fee which is paid once the application is accepted. All applications must be made through a licensed investment consultant, which will charge additional fees depending on the "going rate."

This grant of citizenship includes the applicant’s spouse and children below the age of 18 (dependent children over the age of 18 may be included for an additional fee of US$15,000). All persons who obtain citizenship under this program enjoy all rights, privileges and diplomatic protection as full citizens of Belize. New Belize citizens are not required to give up their existing citizenship, but may maintain "dual citizenship". Successful applicants do not have to travel to Belize to become citizens, but may be sworn in at any Belize embassy or consulate (as exist in Washington, D.C., and New York City).

TAX WARNING FOR U.S. CITIZENS

U.S. citizens are taxed on their taxable income from wherever it is derived, anywhere in the world. U.S. citizens are also taxed on investments indirectly made through foreign trusts and foreign corporations, including offshore trusts and IBCs. Thus, the fact that an offshore jurisdiction may have low or no taxes does not mean that if a U.S. citizen does business there that he or she will enjoy only low or no taxes on the personal income made. There are simply NO personal income tax advantages, at all, for U.S. citizens to use offshore structures, and anyone who tells you differently is probably telling you a falsehood. Any discussion we make of an offshore jurisdiction's tax laws should be construed only according to the foregoing warning.

BEWARE OF OFFSHORE SERVICE PROVIDERS: There are some offshore service providers who will make wild claims about saving you personal income taxes, so as to convince you to set up an offshore structure. Most of these people don't know the first thing about U.S. tax law, and their representations to you will not help you, at all, if you are caught with an unreported trust, corporation, or bank account. All they really want is your money, and even if you commit tax evasion they are not subject to U.S. law, and so couldn't care less. See Hiding Money Offshore