In this Tax Update we would like to inform you about suggested amendments by the Dutch State Secretary of Finance related to various aspects of the Caribbean Netherlands’ tax system. Please find below an overview of the most important topics that are expected to be included in the Tax Plan Caribbean Netherlands 2024 and the 2023 year-end regulation / Decree. Disclaimer: please note that the proposed amendments do concern proposed measures and are not yet adopted in draft legislation.
A general preliminary remark: the Caribbean Netherlands (also referred to as the BES islands) consists of the islands of Bonaire, Sint Eustatius and Saba and has been part of the country of the Netherlands since late 2010. Partly because of its geographical location and small scale, the legislator did not choose at the time to declare European Netherlands tax legislation applicable in the Caribbean Netherlands, but instead introduced an entirely new tax system for these three islands.
The proposed amendments consist of correcting various spelling errors and incorrect references in the Tax Act BES, the Personal Income Tax Act BES, the Wage Tax Act BES, the Customs and Excise Act BES and various lower-level laws and regulations. Further, a number of changes are suggested with regard to formal law rules, including an expanded possibility to mitigate chain liability (“ketenaansprakelijkheid”). Below we mention several more important intended changes.
Distribution tax (“Opbrengstbelasting”)
- Adjustment of the tax rate | The current rate of 5% will be increased to 10%, mainly to finance the increase in the tax-free allowance in wage and income tax, which has already been increased from 1/1/2023;
- A further relaxation of the holding test | The current 95% shareholding test for holding companies with local operating participations is reduced to 50%;
- A tightening of the activity test for obtaining a decision on the place of fiscal establishment (“vestigingsplaatsbeschikking”) and a relaxation of the possibility to obtain such decision with retroactive effect | No further details are provided. The current scheme allows for retroactive effect of up to six months as of the moment a formal request has been filed with the Tax Authorities Caribbean Netherlands.
Real estate tax (“Vastgoedbelasting”)
- Adjustment of the tax rate for hotels | The current rate of 10% will be increased to 12.5%;
- Introduction of a notification requirement for property owners | No further details are provided.
General expenditure tax (“Algemene bestedingsbelasting”)
- Introduction of a fiscal unity | Mainly to prevent cumulation of general expenditure tax on transactions between group companies;
- Elimination of the integration levy (“integratielevering”) | A complex provision taken from Dutch VAT legislation for the construction of real estate on own land will be abolished;
- Changes to invoicing requirements | No further details are provided.
Personal income tax and wage tax
- Increase of the substantial interest tax from 5% to 10% | In parallel with the distribution tax;
- Amendments to the customary pay scheme for director-major shareholders (“gebruikelijk loonregeling”) | Extension of this scheme and increase of the standard amount. No further details are provided;
- Abolishment of the dividend exemption in the personal income tax | Dividends up to USD 5,000 are currently not included in the taxable income. This exemption will be abolished.