Here is what has changed as of February 1^st, 2004 as to receipts from rental property, when rental receipts formed the only source of income of the taxpayer (such as for foreign-based owners of Belize condominiums, co-operative units, and homes).

    Previously, receipts from rental property were taxable when the monthly revenue exceeded an average of BZ$1,650 (US$825) per month during the taxable period. When that minimum revenue threshold amount was reached, rental receipts were taxed at the rate of 1.5%.   

    Now, receipts from rental property are taxable when the monthly revenue exceeds an average of BZ$800 (US$400) per month during the taxable period. When that minimum revenue threshold is reached, rental receipts are taxed at the rate of 3%.

    In summary, the average monthly revenue threshold was lowered more than half, from BZ$1,650 to $800, and the tax rate was doubled, from 1.5% to 3%. 

    When receipts from rental property form the only source of income of the taxpayer, business tax returns are filed semi-annually. This did not change with the recent amendments. Returns are still due (a) July 15^th for the six months January ñ June and (b) January 15^th for the six months July ñ December.

    Special Note for Returns due July 15^th, 2004 ñ Because the tax changes were effective February 1^st, 2004, the month of January falls under the former tax rules, while the months of February ñ June fall under the new tax rules. The amount of taxable revenue, tax rate, and tax should be shown individually for the month of January and the remaining five months when preparing the tax return. 

    Because of the highly cyclical tourism season, property owners previously may have been required to file a July 15^th return for the January ñ June period of higher rental receipts, but often did not need to file a January 15^th return for the July ñ December period of lower rental receipts. Because of the amendment on February 1^st lowering the average monthly revenue threshold, property owners will now most likely need to file tax returns for both six-month periods.  

    In addition, the lowered amount of average monthly revenue threshold, now at BZ$800 (US$400), will subject significantly more property owners to file business tax returns. For example, if a property owner's average monthly rental revenue was less than US$825 previously, no business tax return or payment of tax was required. But now tax returns and payment of tax are required when the average monthly rental revenue is US$400. Whether the property owner's property is rented under long-term lease arrangements, or as nightly accommodations in tourism hotel rental pools, it is probable that the monthly rental revenue exceeds US$400.

    WARNING ñ Owners of rental property in condominium or co-operative hotel rental pools should be particularly alert to the accounting and reporting provided by the property management company for their unit. Many of these reports are prepared using improper accounting and the result is that the monthly revenue is understated. Because of this understated revenue, a property owner will be filing an inaccurate business tax return and paying an incorrect amount of tax. Or, a property owner may believe that the average monthly revenue is less than BZ$800 and that he is therefore exempt from filing a return and paying tax, when in fact the average monthly revenue is more than $800 and he is required to file a return and pay tax. (The penalty and interest charge for failing to file a return and pay tax is 11.5% of the tax due, per month of delinquency.)  

    Improper Accounting - Units in a hotel rental pool are charged a management fee by the hotel management company, and these fees are customarily a percentage of the monthly revenue. Assume for this illustration that the management fee is 60%. The error committed by many management companies is allocating 40% of the revenue to the property owners and 60% to themselves as their fee. The result is that the property owner's report reflects revenue based on the 40% allocation. (Example ñ Revenue of BZ$1,500 will be shown as BZ$600 in the report and erroneously thought to be exempt from tax.)  

    Proper Accounting ñ The correct accounting is to allocate 100% of the revenue to the property owners (BZ$1,500 in the above example and subject to tax). The property owner's report now reflects the correct revenue for use in preparation of the business tax return and payment of the 3% tax. The 60% management fee should properly be shown as an expense, along with other expenses charged to the unit by the management company. 

    Further information about this subject can be obtained by contacting D. Michael Fox at 226-2622 or foxcpa@btl.net, or by visiting Fox Business Services, Island Plaza, Barrier Reef Drive.