$ & $en$e
Penalties for Filing Corporation Annual Returns Late
By D. Michael Fox, CPA, CFE, FCPA, CBM
(Written with assistance from Alberto Villanueva of Belize Caye Investment Limited.)
This article applies to every Chapter 250 (formerly called Chapter 206 before the year 2000 revision of the Laws) corporation incorporated in Belize. If you own one of these corporations and the corporation owns your home, condominium, or land in Belize, this applies to you.
For many years, real estate agents and attorneys advised purchasers of real estate in Belize to organize a Belize corporation and for the corporation, not the individual, to be the purchaser of the Belize real estate. The individual would then own the corporation. One purpose was to incur a lesser amount of Belize stamp duty on the purchase. This was at a time when the stamp duty was higher for non-resident purchasers than for resident purchasers. At present, the stamp duty percentage is the same for both residents and non-residents, 5%, so there is no longer a financial incentive for this technique. A second reason was that, upon later sale, the sale of ownership of the corporation instead of ownership of the real estate would significantly lessen the closing and ownership costs to the purchaser, if the purchaser chose this option and the corporation was “clean”. (In reality, the structure was often simply a duty-avoidance deception The law says that a Belize corporation is a non-resident if majority-owned by non-residents, but that technicality was overlooked, or deceived by the corporation organizers in Belize [usually attorneys] listing themselves as the company’s initial nominee shareholders instead of their non-resident clients. The deception was that the nominees were never intended to be the owners of the corporation, and thus the entity should have been recognized as non-resident from inception, incurring the higher stamp duty.)
Often, non-resident purchasers forget that a legal entity exists as the actual titleholder to their Belize property, and no attention is paid to the necessity for meeting the requirements for filing an Annual Return by each corporation. And although law firms in Belize were the organizers of hundreds of these corporations for their clients, and usually the law firm holds possession of the corporation’s official seal and its incorporation papers and serves as the corporation’s registered address, they nonetheless often disclaim any professional responsibility to their clients for properly administering that corporation’s lawful compliance requirements. Therefore, if the client himself does not act, or direct the attorney to act, nothing gets done to keep the corporation in compliance.
The Annual Return required for filing by every Belize Chapter 250 corporation (not an IBC entity) is not a financial return. It is a listing of the corporation’s shareholders and directors, plus any changes from the last filing (usually there are no changes). It is a short, simple filing which, once prepared in the required format and saved in a computer file, is revised each year by assuring that any changes made during the year are incorporated and by changing some dates.
The Annual Return is due each year 7 days after the anniversary date of the incorporation of the company. There are techniques for postponing the filing date, but an annual filing is nonetheless required for each year since the incorporation of the company.
Historically, companies have gone years without updating their filings and many companies owned solely for the stamp duty savings in real estate purchase transactions have never filed an Annual Return since their incorporation. (Recall that some attorneys here disclaim any professional responsibility for monitoring and ensuring a client’s compliance.)
In June 2008 the Companies Registry announced its enforcement of provisions in the law assessing penalties for filing an Annual Return late. Although the law mandates a penalty of BZ$25 per day, the Registry opted for a fee of BZ$1 per day. Because of such short notice to the public practitioners in this area, the Registry granted a longer timeframe in which to bring delinquent filings current before assessing the penalty. That timeframe expired in September.
ATTENTION READERS: Do you own a Belize corporation, which in turn owns your Belize property? Has your Belize attorney (or other practitioner holding your corporation’s file) kept your corporation’s filings current? Has your Belize attorney (or other) notified you of these penalties now being imposed for filing delinquent returns?
If you don’t know the current status of your Belize corporation’s filings, you need to act immediately. If your Belize corporation is delinquent in filing its Annual Returns for many years, you are facing substantial penalties for these Annual Return filings to be brought current. If your Belize corporation’s filings are not brought current, the corporation risks being struck from the registry. If it is struck, you have multiple and serious problems over ownership of your Belize property (meaning, no one owns it and you cannot lay legal claim to it.) It takes an action of the Supreme Court to resurrect a corporation which has been struck.
No Belize corporation can conduct any transaction if it is not in “good standing” with the Companies Registry. So nothing can be done with your Belize property if the corporation cannot obtain a “Certificate of Good Standing”, which can only be delivered by the Companies Registry if the corporation is current with its Annual Return filings.
If you are reading this as a non-resident of Belize who has a corporation owning your Belize property, and if you are not positive about the status of its Annual Return filings, you need to act quickly and decisively – now.
Further information about this subject can be obtained by contacting D. Michael Fox at 226-2622or email@example.com, or by visiting Fox Business Services, Island Plaza, Barrier Reef Drive.