The real estate tax (in Dutch: vastgoedbelasting) is a state tax levied on the deemed income from immovable property located in the Caribbean Netherlands (also referred to as the BES islands, being Bonaire, Sint Eustatius and Saba).
Taxpayer for the real estate tax is the person who, at the beginning of the calendar year, has the enjoyment of the immovable property by virtue of ownership, possession or limited right. As a rule, the person who is registered as such at the land registry is considered such a beneficiary.
The tax is 17.5% of the benefits from the immovable property. Similar to the wealth tax in the Dutch Income Tax Act 2001, the real estate tax is levied on the basis of a presumed return. By fiction, the benefits from a property are set at 4% of the value of the property. The effective rate is therefore 0.7% of the value of the immovable property. For residential properties – other than owner-occupied properties – there is a de facto exemption in the amount of USD 70,000. In respect of these (mostly holiday) homes, the standard return is calculated on the value of the home to the extent that it exceeds USD 70,000.
In case of time-sharing, the fixed return is allocated on a time-proportional basis to the different owners. Here, in addition to a utilisation factor, a vacancy factor is also taken into account.
A different tax rate of 10% applies to hotels. The effective rate for this category is thus 0.4%. An immovable property – or a complex of immovable properties – which is operated commercially by a non-natural person, is aimed entirely or almost entirely at short-term stays of tourists and has fully-fledged communal hotel facilities is considered a hotel. Therefore, the rate reduction does not only apply to the hotel sector, but also to apartment complexes if they are operated commercially and have full-fledged communal hotel facilities, such as a reception, a restaurant and a cleaning service.
Individual BES islands may choose to levy surcharges on the real estate tax. In this context, Bonaire has introduced the Bonaire property tax surcharge island ordinance. Under this island ordinance, surcharges on the principal of the real estate tax are due at a rate of 30%. This brings the effective real estate tax rate including surcharges for Bonaire to 0.91% of the value of the immovable good. For hotels on Bonaire, this is 0.52%. On Saba and Sint Eustatius, no surcharges are calculated on the real estate tax for the time being.
The Tax Authorities/Caribisch Nederland fixes the value by a decision open to objection. In principle, this value applies for a period of five years. If changes are made to the immovable property by construction or renovation, the property is improved, demolished or destroyed, the changed value is taken into account as of the beginning of the calendar year following the year in which the changes occurred. In this regard, an investment facility is included in the BES Tax Act. If the aforementioned changes result in an increase in value resulting from construction, reconstruction, improvement, expansion or renovation of the immovable property, this increase in value only has to be taken into account at the beginning of the eleventh calendar year following the year in which the increase in value occurred. The taxpayer wishing to avail of the investment facility should provide timely notification of the change in the immovable property and the amount for which the temporary exemption is sought.
The application for the application of the investment facility must be made no later than one year, after the calendar year in which the investment was made. It is crucial that an application is submitted in time. For example, if in the year 2022, an increase in the value of an immovable property has been realised through construction, rebuilding, improvement, extension or renovation of the relevant immovable property, the investment exemption should be applied for by 31 December 2023.
Finally, several exemptions are included in the BES Tax Act. Important exemptions are those for the own home available to the taxpayer as his main residence and the exemption for real estate belonging to the business assets of an entrepreneur that falls within the scope of the Personal Income Tax Act BES. Other exemptions relate, for example, to:
- immovable property intended for public worship such as church buildings;
- certain water defence and water control works;
- water distribution works;
- immovable property managed by public authorities, provided it is not used in connection with a business or other economic activity;
- immovable property, other than independent dwellings, belonging to and used by charitable, cultural, charitable institutions and certain other non-profit organisations;
- immovable property owned by an entity deemed to be established in the European Netherlands under the BES Tax Act;
- immovable property whose value is (almost) exclusively determined by the value of the undeveloped land forming part thereof, provided that the beneficiary is a natural person and a resident of the Caribbean Netherlands.
If you wish to receive more information about the real estate tax, please feel free to contact Rootz Tax Lawyers at info@rootz.tax.
December 2023
