The European Union (EU) on March 12th, 2019 issued its list of “non-cooperative jurisdictions for tax purposes,” which includes Belize among the ten new black listed countries. The Government of Belize (GOB) in a press release on that same day expressed its significant concerns about the erroneous conclusions drawn about Belize’s commitment to work with its global partners in establishing a modern fair international tax framework under which profits are taxed where economic activity and value creation occur, as well as the process by which the EU concluded that Belize should be placed on this list.
According to the Government Administration, in December 2018, the National Assembly adopted the International Business Companies (Amendment) Act, 2018, and the Designated Processing Areas Act, 2018, which respectively sought to remove the “harmful features” identified by the OECD and/or the EU in these regimes. Consequential amendments were introduced via the Income and Business Tax (Amendment) Act, 2018, and the Stamp Duties (Amendment) Act, 2018 to bring IBCs and entities operating in EPZs into Belize’s income and business tax regime. The measures that Belize adopted with these legislative changes were first reviewed and discussed by the FHTP at its 51st Meeting held at the OECD Headquarters in Paris, France from 9-11 January 2019. The FHTP reached new conclusions on 57 regimes reviewed at that meeting; but most importantly on Belize’s IBC regime, the FHTP concluded, based on the measures Belize adopted that the non-IP part of the Belize IBC regime is “Not Harmful (Amended)” and the IP part of the regime “Abolished”.
The European Union Code of Conduct Group (COCG) for its part reviewed the changes adopted by Belize at its meeting on 30th January, 2019. On 1st February 2019, the Chair of the COCG wrote to Belize charging that Belize, in exercising its sovereign right to implement a tax regime, consistent with Belize’s existing income and business tax regime, had introduced a “new regime” with similar harmful effects as the regimes that Belize abolished at the end of 2018.
The COCG invited Belize to supply another high-level political commitment that it would amend or abolish this so-called “new regime” by 31st December 2019, without any grandfathering mechanism. The COCG made it clear that not providing such a commitment could lead to Belize being placed on the EU list of non-cooperative jurisdictions for tax purposes. Via letter dated 12th February 2019, Belize acquiesced and provided the new undertaking demanded by the EU.
The release further states that the GOB continued to engage positively and actively with the EU to address all other outstanding technical issues with respect to Belize’s regime. However, the technical issues did not find favor with the EU, so the government wrote to the Chair of the COCG on 26th February 2019 and made a further high-level and time-bound political commitment to introduce additional amendments with consequential secondary amendments to other relevant legislation, where necessary, to address these other technical concerns. The undertaking included a commitment to submit the necessary draft legislation to Parliament later this month with a view to having the amended legislation take effect from 1st April 2019. These amendments were introduced in Parliament on 15th March 2019.
The GOB, in its official statement, finds itself unfairly and erroneously labeled by the European Union as a “non-cooperative tax jurisdiction”, although they believe they acted in good faith. The government believes the EU process was indeed rushed and can be characterized as non- consultative, inflexible and insensitive to the circumstances of small, highly vulnerable states such as Belize. Furthermore, the EU has failed to provide Belize with any meaningful opportunity to challenge its inclusion on its list.
The government release ends by stating that Belize remains committed to working positively and actively over the coming days and weeks, with the EU on the basis of a fair, transparent, and inclusive dialogue, to address all legitimate concerns and to ensure that Belize is promptly removed from the list of “non-cooperative jurisdictions for tax purposes”. The Government of Belize also reaffirms its commitment to work with its global partners in establishing a modern fair international tax framework under which profits are taxed where economic activity and value creation occur.
For further information, please feel free to contact Anju Gidwani, Director of the Belize Office (firstname.lastname@example.org)