Tax update | Caribbean Netherlands

December 2023 | Legislative changes 2024

In our September 2023 Tax update, we informed you about the proposed legislative changes that followed from the BES Tax Plan. The bill has since been adopted – with some adjustments – and will (with a few exceptions) take effect on January 1, 2024. The most striking changes are explained below.

Tax Act BES

Revenue tax & holding regime

Companies established in the Caribbean Netherlands may face Dutch corporate income tax and dividend tax (the so-called “establishment fiction”). Under conditions, this fiction is set aside and a favorable regime applies without a profit tax, but with a revenue tax. In brief, this concerns local active entities or holding companies with a qualifying interest in such active entities. The regime for the latter category (the so-called “holding regime”) has been substantially modified. In this context, the following changes, among others, have been made:

  • The required participation in an active company has been reduced from 95% to 50%.
  • An assets test will now also apply with respect to holding companies. The other assets of the holding company, i.e., those in addition to the active local participation(s), may generally comprise a maximum of 50% of investments, non-qualifying participations, liquidities, assets whose use (right of use) is made available to persons residing or established outside the BES islands and other assets used to directly or indirectly finance persons residing or established outside the BES islands).

The latter change means that holding companies that no longer qualify for the local tax regime are deemed to have distributed their entire assets. This results in 5% revenue tax payable on the (deemed) distribution. In addition, the entity faces tax liability for Dutch corporate income tax and dividend withholding tax as a result of the establishment fiction.

Minimum tax

The Dutch Minimum Tax Act 2024 (codification of the Pillar II Directive) will become applicable in the Caribbean Netherlands through a switch provision, subject to a number of exceptions. The provision applies to entities established on the BES islands with a place of establishment ruling from the Tax Authorities (in Dutch: “vestigingsplaatsbeschikking”) and to permanent establishments located on the BES islands that are part of a multinational group with a turnover of EUR 750 million or more. A declaration-based payment is proposed for the top up tax.

Property tax notification requirement

A notification requirement has been introduced for the property tax. The notification requirement requires that if a property is acquired or substantially altered, notification must be made to the Inspector within 4 months of the event. Non-compliance can result in a fine of up to 100% of the assessment.

Additional filing requirement

The obligation to file financial statements with the Caribbean Netherlands Tax Authorities was previously only applicable to BES-based entities. From now on, this obligation also applies to foreign companies with a permanent establishment on the BES islands. In case of late filing, the inspector may impose a default fine of up to USD 14,000.

Wage Tax Act BES

Customary wage arrangement

The customary wage arrangement has been tightened. The customary wage is now set at the higher of the following amounts:

  • 90% of wages from the most comparable employment;
  • the highest salary of the employees employed by the entity or entities related to the entity, provided that if the entity or entities related to the entity have no employees other than the employee, such salary shall be set at 90% of the net turnover of the entity;
  • Twice the tax-free allowance (USD 20,424), so USD 40,848.

A rebuttal scheme is included. If it can be made plausible that the highest amount referred to above is higher than 90% of the salary from the most comparable employment, the salary is set at 90% of the salary from the most comparable employment.

The information provided in this update is intended solely for genera! information purposes and does not constitute advice. Rootz Tax Lawyers does not guarantee that the information is accurate, up-to-date and complete, nor its suitability for specific purposes. More information? Check