Accounting for Contract Withholding Tax
A presentation by the Income Tax Department
January 2014
Sections 112-113 of the Income & Business Tax Act provides
for a variety of withholding taxes including:
Withholding Tax on Gross Contract Payments
Withholding Tax on winnings, lotteries or prizes
Withholding Tax on payment of dividends
Withholding Tax on payment of professional fees, etc to a
non-resident
Withholding Tax on interest paid to a non-resident
Income Tax Department- Gross Contract Tax
Withholding
Section 112 of the IBTA Act provides as
follows:
•3% Withholding is to be made from
Gross Contract Payments, without
deductions
•This Withholding acts as a Credit
towards Monthly Business Tax Liability
•The threshold amount for application is
$3,000
•The payer of the Contract has an
obligation to withhold and, in default,
becomes liable for the amount
•In addition, failure to withhold
constitutes an offence, which will be
pursued separately
•Sums so withheld in any month are to be
paid in to ITD by the 15th day of the
following month
Income Tax Department- Withholding from
remittances to non-residents
Section 113 (3) and (4) of the
IBTA places a 25% withholding
tax on payments to a nonresident for:
•Management Fees
•Professional or technical fees
•Rental of plant or equipment
•Insurance premiums
•Interest on loans (15%)
•Exceptions on loans for
development industries and
projects specified by Order from
time to time.
•In the case of non-residents, the
tax is assessed on the service
element only.
Income Tax Department- Withholding from remittances to
non-residents
Special Treatment of payments to
recipients resident in Treaty Countries:
Special Treatment of payments to
recipients resident in Treaty Countries:
Austria
United Kingdom
Income Tax Department- Withholding from
remittances to non-residents
An individual who is a resident of the United Kingdom shall be exempt
from Belize tax on profits or remuneration in respect of personal
(including professional) services performed within Belize in any year
of assessment if:
(a) he is present within Belize for a period or periods not exceeding in
the aggregate 183 days during that year; and
(b) the services are performed for or on behalf of a person resident in
the United Kingdom; and
(c) the profits or remuneration are subject to United Kingdom tax.
Income Tax Department- Gross Contract Tax
Withholding- Jan. 2014
Income Tax Department- Gross Contract Tax
Withholding
“Contract” – agreement with any person, professional or entity for
carrying out of works or services or supply of labor or materials in
relation to the agreement.
•
Does not include “employment” arrangements
•
Can be written or oral
•
Does not include outright sales/purchases agreements (e.g. Do not apply to instances
where a supplier supplies stationery, etc)
•
Includes a wide variety of services or works including accounting, legal, management
services, plumbing, electrical, construction, brokerage, transportation, rent, etc
•
Not to be applied if the value of the agreement, or series of agreements within a year,
is less than $3,000.00
Income Tax Department- Gross Contract Tax
Withholding
Common Exclusions to Withholding Tax
Provisions
• Outright sale of products e.g.
equipment, stationery, groceries,
etc.
• Payments to utility companies
including BWS, BTL, SMART, BEL
and also including other internet
and cable suppliers
• Payment of insurance premiums
• Payments to Banks and Other
Financial Institutions
• Payments to the Government of
Belize including Statutory Bodies,
Local Authorities, etc of duties,
taxes, licences, etc
Common Exclusions to Withholding Tax
Provisions
•
•
•
•
Royalty & Commissions payments
to non-residents
Payment of any valued added tax
including general sales tax or
accommodation tax (computation
issue)
Contracts for the Sale of Real
Estate
Director’s Fees are remuneration
from employment and are to be
reported on TD4s
Income Tax Department- Gross Contract Tax
Withholding
The Issue of “Conduit Receipts”- What is a
Conduit Payment or Receipt?
A conduit receipt is one where the payer
has no contractual relationship with the
payee. The payment is being made on
behalf of a third party and the contractual
relationship exists between the payee and
the third party.
What are the implications for
my business or firm???
Income Tax Department- Gross
Contract Tax Withholding
Implications for BusinessesContract Tax presentation
Contract Withholding Tax becomes
accountable to ITD similar to PAYE
Where possible, customized
accounting software should be
amended to account for Contract
Tax
Persons engaged must supply a TIN
or some other form of Identification
including Social Security Number
Payments to Non-residents attract
25% withholding tax
Income Tax Auditors will be
performing compliance audits,
looking at accounts payable wef
April 2014
Failure to withhold makes the firm
liable for the tax and liable for legal
complaint, as an offender
Income Tax Department- Gross Contract Tax
Withholding
The following forms are widely used to comply
with Contract Tax Withholding requirements.
They are available electronically on the
Department’s website at
incometaxbelize.gov.bz
Form TD 25
Form TD 29
Contract information Request Letter
Income Tax Department- Gross Contract Tax Withholding- Jan. 2014
Income Tax Department- Gross Contract Tax Withholding
Income Tax Department- Gross Contract Tax
Withholding
Exceptions to the Withholding Provision:
• EPZ Businesses
• Any body representing a foreign country or having diplomatic
status
• All other persons or body of persons are liable
• In certain circumstances, the withholding tax of 3% may be
reduced by the Commissioner, after review of the case. In
other instances, the Commissioner may agree to an increase
of the withholding tax. Any such change should be evidenced
in writing
Income Tax Department- Gross Contract Tax
Withholding
The Income Tax Department is ready to
assist with answers to queries,
demonstrations and presentations, where
needed.
Please contact the following persons for
assistance:
sherlette.augustus@itx.gov.bz
Carol.baird@itx.gov.bz
Lisa.mayen@itx.gov.bz
Annisa.Perdomo@itx.gov.bz
Kareem.Patnett@itx.gov.bz
Income Tax Department- Withholding from
remittances to non-residents
Thank You.
Questions??