On October 10, 2010, Bonaire, St. Eustatius and Saba became part of the Netherlands as special municipalities. At that time a new tax regime was introduced for the BES-islands, also referred to as the Caribbean Netherlands. Over the years the tax system has remained broadly the same despite indications that amendments were required. The Dutch government intends to gradually improve the tax system for the Caribbean Netherlands. This bill is the first step in accomplishing this goal.

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The most important measures for citizens and businesses in the Caribbean Netherlands can be found in the 2024 Tax Plan Bill. Upon approval by the House of Representatives and the Senate, the measures will enter into force on January 1, 2024. In the following we provide an overview of the key aspects of these upcoming amendments..

Purpose

The bill has two main objectives:

1. Updating and simplifying the current tax system.
2. Increasing the spending capacity of low-income persons.

Laws affected by the Bill

Besides textual changes in the formal tax stipulations, the exchange of information regulations, and the Customs and Excise Act, a new chapter is introduced in the BES Tax Act. Furthermore, the most impactful changes can be found in:
– General expenditure tax – ABB
– Revenue tax – Opbrengstbelasting
– Property tax – Vastgoedbelasting
– Income tax – Inkomstenbelasting
– Payroll tax – Loonheffingen

Small Business Scheme

For ABB purposes the new threshold under the small business scheme will be increased from $20,000 to $30,000. This ensures that small entrepreneurs with a revenue of less than $30,000 per year remain exempted from ABB.

Integration levy

Following the example of the Netherlands, the ABB measure referred to as integration levy will be abolished, making the tax compliance obligations less complicated for entrepreneurs to rent out self-built homes.

Revenue tax (Opbrengstbelasting)

The conditions for obtaining an establishment order for Revenue tax purpose will be made easier and at the same time tightened to prevent abuse. The minimum shareholding will be decreased to 50% instead of 95% to allow collaborating parties to also qualify for this tax incentive, while the so-called asset and activity-tests will be applicable to the holding company as well.

However, the retroactive effect of the establishment order will now be extended from 6 months to 24 months.

Notification Requirement

For owners of real property (excluding properties that serve as their main residence) located in the Caribbean Netherlands, a new notification requirement will apply for Property tax purposes. In case the owner does not automatically receive a real property tax assessment, it will become mandatory to notify the tax authorities starting 2024 and request for the correct tax assessment. Non-compliance might lead to penalties.

Elimination of Dividend Exemption

The dividend exemption of $5,000, which is currently applicable for individual tax residents and certain non-tax residents, will be abolished.

Taxation of entitlements

For payroll tax calculation purposes, it can be difficult to determine at what point in time the financial benefit earned by an employee through fringe benefits and similar rights to financial perks maturing in the future should be included in the tax calculation. The new amendments provide more clarity on this matter and confirm that in general claims earned by an employee will not be subject to tax until maturity date.

Contractors’ liability

Currently the wage tax liability of the main contractor (who hires sub-contractors to complete a project) can be limited to its own taxes, provided that the tax authorities are notified within 1 week of the sub-contractors hired by the main contractor. The notification entails sending of the signed agreements, which should meet certain criteria. Since in practice the term of one week has proven to be too short and unworkable, it is now being proposed to allow the contractor 1 month to submit the relevant information. Furthermore, this regulation will also be expanded to cover social insurance premium levies and ABB.

Customary Wage Regulation (Gebruikelijk loonregeling)

The customary wage regulation applies to the significant interest shareholder that also works for the company. For income tax and payroll tax purposes a significant interest shareholder is someone who owns 5% of the issued shares, or more, of a company.
Pursuant to the customary wage scheme the significant shareholder is allocated a wage that is normal for the level and duration of his work for payroll tax calculation purposes.
The adjustments around this scheme are:
– Upon introduction of this scheme the comparable wages paid by an unrelated party would have been determined based on identical to similar employment agreements. As of 2024 it is allowed to use the most comparable employment agreement as a benchmark.
– For the partner of the employee with a significant interest in the company, the customary wage scheme also applies.
– In case there is only one employee, the turnover of the company is used as a benchmark for calculation of the customary wages.
– The standard amount of (minimal) deemed customary wage is being replaced. It shall be replaced by an amount set at twice the tax-free allowance.

Statute of limitations

Amendments in the formal tax legislation, will have impact on the statute of limitations for all tax assessments. The tax authorities can in certain cases extend the period for levying the automatic reduction tax assessments beyond 3 years. In situations where the source of income is abroad the statute of limitations can be extended to 12 years.

100% penalty

The possibility to impose a 100% penalty (offence fine) on the actual amount of tax underpayment is being introduced.

2024 BES Tax Plan