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Belize

Belize Signs Landmark Tax Treaty

Belize recently signed on to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), a convention by the Organization for Economic Co-operation and Development (OECD) meant to prevent multinational enterprises from avoiding their tax obligations.

Belize is now the 86th jurisdiction to join the convention, which covers almost 1,500 bilateral tax treaties. The Convention is the first multilateral treaty of its kind, allowing jurisdictions to integrate results from the OECD/G20 BEPS Project into their existing networks of bilateral tax treaties. The convention delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to “disappear” or be artificially shifted to low or no tax environments, where companies have little or no economic activity.

Treaty shopping, as it is called, in particular, is estimated to reduce the effective withholding tax rate by more than 5 percentage points from nearly 8% to 3%, generating large revenue losses for developed and developing countries alike.

The convention, negotiated by more than 100 countries and jurisdictions under a mandate from the G20 Finance Ministers and Central Bank Governors, is one of the most prominent results of the OECD/G20 BEPS Project. It is the world’s leading instrument for updating bilateral tax treaties and reducing opportunities for tax avoidance by multinational enterprises.

Measures included in the convention address treaty abuse, strategies to avoid the creation of a “permanent establishment”, and hybrid mismatch arrangements. The Convention also enhances the dispute resolution mechanism, especially through the addition of an optional provision on mandatory binding arbitration, which has been taken up by 28 jurisdictions. The convention was signed on Belize’s behalf by Financial Secretary Joseph Waight.

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