Netherlands Antilles — June 12, 2013 at 11:33 pm

Netherlands Antilles, Bonaire and Curacao Tax Rates 49.4%

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Netherlands Antilles Bonaire and Curacao personal Income Tax

Individual income tax rates in the Netherlands Antilles are progressive up to 38%. A surtax of 25% or 30% also applies.

Taxable income (ANG)      Tax on lowest amount (ANG)      Tax Rate on excess
up to 25,514                     –                                             10%
25,514 to 38,271              2,551.40                                  16%
38,271 to 53,154              4,592.50                                  21%
53,154 to 79,730              7,717.90                                  27%
79,730 to 112,685            14,893.40                                32%
Over 112,685                   25,439.00                                38%

The tax is increased by an island surcharge which for Curaçao is 30% and for all other islands 25%. The social security contribution rate is 9.35%.

Certain types of income may benefit from special rates of 5% (savings income) or 15% (substantial interest income).

Employment income is subject to wage tax and social security contributions (levied by withholding). Several deductions and allowances may be available.

Qualifying pensioners (penshonado) may benefit from a special regime. An individual of at least 50 years of age who was a resident of a foreign country for at least 60 consecutive months prior to taking up residence in the Netherlands Antilles may qualify as penshonado after requesting a residence permit. The individual is also required to purchase a residence in the Netherlands Antilles with a value of at least ANG 450,000 within 18 months after registration with the civil register. In addition, the individual’s income must be derived from foreign sources, such as pensions or dividends and capital gains derived from investments made primarily outside the Netherlands Antilles, interest on funds held in Netherlands Antilles bank accounts, or, from another foreign source such as an annuity. The penshonado may choose between being taxed at the rate of 10% on worldwide foreign-source income or on a fixed amount of ANG 500,000 at the normal rates. In the latter case, he will not be entitled to the benefits of the Tax Regulation for the Kingdom of the Netherlands. Once the individual has made an election, it will apply for at least three years.

Individuals resident in The Netherlands Antilles are subject to personal income tax on their worldwide income. Non-residents are liable for personal income tax only on Antillean source income. The residence of an individual is determined by actual circumstances in respect of the centre of his vital interests. One of the most relevant considerations is whether the individual has permanent personal or economic ties with the Netherlands Antilles.

The tax year equals the calendar year. With the exception of employment income, business income and certain periodical payments, the net income of married persons is considered to be joint income for tax purposes from the first tax year commencing after the date of marriage.

Individual income tax is levied on the total net annual income derived in the Netherlands Antilles or abroad. The tax is assessed each year on the aggregate of the net amounts from each category of income realised during the preceding year.

There are four categories of income, namely:
(1) income from real estate (an exemption is available for capital gains)
(2) income from movable capital (an exemption is available for capital gains)
(3) business and employment income; and
(4) rights on periodical payments.

The Inheritance Tax Act provides for two forms of taxes, gift tax and inheritance tax. In general, these taxes are payable by the person receiving a donation or an inheritance. There are several exemptions for both gift tax and inheritance tax depending on the circumstances. The rates are the same for both taxes and depend on the value of what is received and the degree of the relationship. There is a minimum rate of 2% and a maximum rate of 24%.

Basis – Netherlands Antilles residents are taxed on their worldwide income. Nonresidents are taxed only on Netherlands Antilles source income.

Residence – An individual is resident if he/she spends more than 3 months of the tax year in the Netherlands Antilles.

Tax Filing status – Joint filing is not permitted. Each individual must file a separate tax return.

Taxable income – Income is taxed under a schedular system. Employment income, including most employment benefits, and profits derived from the carrying on of a business by an individual, are taxable.

Capital gains – Capital gains are included in profits and taxed at the normal rates.

Tax Deductions and tax allowances – Subject to certain restrictions, deductions are granted for medical expenses and insurance, retirement annuities, mortgage interest, etc. Personal allowances are available to the taxpayer and his/her spouse, children and other dependents.

Netherlands Antilles Tax Rates – Tax rates in Netherlands Antilles are progressive up to 38%, and exclusive local surcharges of up to 30%.

Other taxes on individuals:

Capital duty – No
Stamp duty – No
Capital acquisitions tax – No
Net wealth/net worth tax – No

Real property tax – A real estate tax is levied on property on the Leeward Islands, but not on the Windward Islands. A 4% transfer tax is levied on the purchase of real estate. The buyer is responsible for the tax.

Inheritance/estate tax – Both an inheritance and gift tax apply.

Social security – Employed and self-employed individuals are required to make social insurance payments, with the amount based on the individual’s salary.

Administration and compliance:

Netherlands Antilles Tax year – Netherlands Antilles tax year is the calendar year.

Tax Filing and tax payment – A self-assessment regime applies in the Netherlands Antilles. The tax return must be filed within 3 months after the year end.

Penalties – The Inspectorate of Taxes will levy a fine if the tax return is filed too late.

Netherlands Antilles Corporate Tax

The standard rate of corporation tax in the Netherlands Antilles is 30%, increased to 34.5% by a 15% island surcharge, which applies to all types of companies.

Lower tax rates of 2% to 3% apply to offshore companies (like international holding companies) and certain types of onshore companies. For certain types of financial activities, a tax exempt status can be obtained.

Corporations resident in The Netherlands Antilles are subject to corporate income tax on their worldwide income. Corporations not established in The Netherlands Antilles are subject to corporate income tax in so far as they receive Antillean source income (non-resident taxpayers). The term ‘corporation’ includes companies whose capital consists of shares, co-operatives and other legal entities which conduct business. The main type of corporation is the joint stock company with limited liability (NV).

A corporation is resident in The Netherlands Antilles if it is incorporated under Antillean law or its place of effective corporate management is situated in the Netherlands Antilles.

The taxable period in principle is the calendar year, unless the company has chosen a different period in its bylaws. Taxpayers are generally obliged to file a tax return every year, within six months following the end of the year concerned. Upon request, the tax inspector may grant an extension for filing the tax return until 18 months after the end of the financial year. Tax is payable when filing the tax return. A provisional tax return may be filed for the current year.

CAPITAL GAINS TAX

There is no special tax rate for capital gains, but gains and losses are included in the company’s general taxable income. Income from qualifying participations is 95% or 100% exempt under the participation exemption.

BRANCH PROFITS TAX

Antillean sourced income of non-resident companies is taxed at the same rates as applicable to resident companies. There is no additional branch profit tax.

FRINGE BENEFITS TAX (FBT)

Benefits in kind are fully taxable on the basis of their real value. Fringe benefits include free housing, free cost and lodging. Certain fringe benefits are not taxed. For expatriates, a beneficial tax treatment towards certain fringe benefits is available.

LOCAL TAXES

In the Netherlands Antilles real estate tax is levied on a national level at a flat rate of 0.3% on the value of the real property. The local authority may levy an island surcharge of 15% to the amount of tax payable.

OTHER TAXES

A 4% property transfer tax is levied on the acquisition of real estate situated in The Netherlands Antilles. The Netherlands Antilles do not levy capital duty on the issued share capital of a NV. No net worth tax is levied in the Netherlands Antilles.

DETERMINATION OF TAXABLE INCOME

The taxable base is computed on an accrual basis and is determined on the basis of the total profit after deduction of all expenses and charges necessary to the realisation of that profit. Taxable profits can be offset against losses from the ten preceding years (loss carry-forward). There is no loss carry-back. The taxable profit is also reduced by certain exemptions and extra allowances such as investment allowances.

INVESTMENT ALLOWANCE

An investment allowance is granted in addition to depreciation of assets. This allowance is granted where an amount of more than ANG 5,000 is invested in the acquisition or improvement of capital assets to be used by the taxpayer within the Netherlands Antilles. Under the allowance, 8% of the invested amount may be deducted from the profits of that year and the following year. The allowance is increased to 12% when the investment is made for the construction of new buildings or for the improvement of existing buildings. The investment allowance does not reduce the costs of the assets for tax depreciation purposes. If the asset is transferred within six years (or 15 years for buildings), the investment allowance is recaptured by adding 8% (12% in the case of new buildings) to the profits of the year in which the asset was sold and the following year, subject to a maximum, however, of the amount previously deducted as investment allowance. It should be noted that investment in assets such as land, residential buildings, yachts, securities, claims and goodwill do not qualify for the investment allowance.

DEPRECIATION

Depreciation of assets is calculated by taxpayers according to accepted commercial practice. It is acceptable commercial practice that depreciation is calculated according to the useful life of the asset. The straight-line method is usually applied, though the declining-balance method is also permitted. However, the method chosen must be applied with consistency. Depreciation is not allowed for land.

STOCK / INVENTORY

Inventory is valued for tax purposes according to Netherlands Antilles accounting standards. The cost price is equal to the acquisition price or production cost. Stock (inventory) is valued according to the LIFO method though the FIFO is also accepted. Obsolete stock may be written off.

CAPITAL GAINS AND LOSSES

Capital gains or losses are assessed as normal corporate income and taxed accordingly. There is no special tax rate for capital gains. Capital gains realised on the disposal of shares derived by a Netherlands Antilles company are for 95% or 100% exempt if the requirements of the participation exemption are met.

DIVIDENDS

The Netherlands Antilles do not levy withholding tax on dividends. A Dividend Withholding Tax Act has been introduced and will enter into force on a date to be set by Decree.

INTEREST DEDUCTIONS

Interest is generally deductible but certain limitations apply:

– interest paid on borrowings from related parties to increase a company’s capital or to make distributions to shareholders or to purchase the shares of a related company, unless the transaction is entered into for business purposes or the entity to whom the interest is paid is subject to profit tax at a rate, which is considered to be reasonable by Netherlands Antilles standards;

– offshore corporations may only deduct interest paid to related parties on capital raised or borrowed from persons other than banks, if an advance ruling is obtained from the tax authorities in order to ensure that the interest payments qualify for deduction;

– interest paid to an exempt private company belonging to the same group is not deductible if the average amount of the loan during a year exceeds three times the equity of the borrowing company.

LOSSES

Losses may be offset against the taxable profits of the following ten years. There is no loss carry-back.

FOREIGN SOURCE INCOME

Foreign-sourced income is included in the worldwide income of Netherlands Antilles residents. However, in most cases, foreign-sourced income is wholly or partially exempt from taxation on the Netherlands Antilles, unilaterally or under double tax treaties. The Netherlands Antilles do not apply CFC rules.

TAX INCENTIVES

Tax incentives are widely offered to various onshore and offshore companies. For onshore companies the Netherlands Antilles offers Free Zones and special tax incentives for the manufacturing industry, hotels, land development corporations, shipping and airlines companies. In addition, the Netherlands Antilles offers a tax exempt status for certain financial companies and special incentives for financial services companies, captive insurance companies, international holding companies, royalty companies and mutual funds.

PARTICIPATION EXEMPTION

The participation exemption generally applies for shareholdings of at least 5% of the paid-up capital of a company with a capital dividend into shares, or if the interest represents an investment of at least ANG 890,000. If the participation exemption is available, dividends and capital gains arising in respect of a foreign shareholding owned by a company are for 100% exempt from corporate income tax. For certain participations which earn passive investment income and are subject to tax at a rate below 10%, the participation exemption is reduced to 70%, which will result in an effective tax rate of just over 10%.

FOREIGN TAX RELIEF

Under the participation exemption, companies are taxed on the net amount of dividends received from overseas, i.e. dividends less withholding tax paid in the country from which the dividends are distributed. There is no compensation or credit for corporate tax on the profits out of which the dividend is distributed. Foreign royalties and interest are also subject to tax on the net amount received. Unilateral relief is given by a deduction of foreign tax from the gross foreign income or under the participation exemption. Bilateral relief is provided under the Tax Regulation for the Kingdom with Aruba and the Netherlands.

CORPORATE GROUPS

Groups may not elect to be taxed on a consolidated basis or to transfer losses among their members.

RELATED PARTY TRANSACTIONS

The Netherlands Antilles do not provide for transfer pricing adjustments with regard to transactions which do not meet the arm’s length principle.

WITHHOLDING TAX

The Netherlands Antilles do not levy withholding taxes on dividends, interests, royalties and rentals nor on personal services. A Dividend Withholding Tax Act has been introduced, and will enter into force on a date to be set by Decree.

EXCHANGE CONTROL

There are no currency restrictions on the settlement of foreign currency obligations by non-residents or residents with non-resident status, such as Netherlands Antilles subsidiaries and branches, other than a requirement for a licence in certain cases. Licences are usually granted on application, subject to verification of the facts.

Non-residents can convert local currency that has been acquired. Approval is readily given to foreign investors for repatriation of local investments. A 1.3% duty is levied on all foreign exchange transactions. However, by governmental decree, payments made by certain entities and enterprises, among others, international companies and pension funds, are exempted from payments of the foreign exchange tax.

The foreign exchange regulations in the Netherlands Antilles are quite flexible. Whereas current transactions are free, capital transactions are prohibited unless a licence is granted by the bank. This negative system with regard to capital transactions, is compensated, however, by a liberal licensing system. Offshore corporations are required to obtain a foreign exchange licence or ‘permit’ from the central bank. The licence releases the licensee from all exchange control regulations, and exempts the offshore company from the payment of the foreign exchange tax on remittances in foreign currency.

Netherlands Antilles turnover tax (OB)

Netherlands Antilles has a Turnover Tax at the rate of 5% in the Leeward
Islands and at the rate of 3% in the Windward Islands.

In 1999, the Netherlands Antilles introduced a turnover tax in the Leeward Islands (Bonaire and Curaçao).

Turnover tax is levied on the revenue from the sale of goods or the rendering of services, provided that the seller or service provider is an entrepreneur who is established in the relevant territory. In the Windward Islands a turnover tax is levied on the turnover of businesses (including services) established in the islands.

The turnover tax both in the Leeward and Windward Islands is a cumulative tax. There is no credit for input turnover tax when goods or services are delivered at a subsequent level of the transactional chain. The turnover tax, however, is deductible for the calculation of the taxable profit for profit tax purposes. In the Windward Island the deduction is limited to 90% of the turnover tax paid. The tax is levied from entrepreneurs established in the Netherlands Antilles. The turnover tax is generally paid monthly.

Turnover tax is levied at the rate of 5% in the Leeward Islands and at the rate of 3% in the Windward Islands.

Curaçao and Bonaire levy excise duties on beer, cigarettes, liquor and petrol. The other islands do not levy excise duties except for petrol.

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