The Private Fund Foundation (also known as the Sint Maarten Private Fund Foundation and abbreviated as PFF) is a special variant of a foundation with some notable differences that make it attractive for various purposes, including asset protection and investment.
Share this article
Share this article
The modified features make the PFF somewhat like a trust. However, the most important difference between a PFF and a trust is that a PFF is a completely independent legal entity. The PFF is a legal entity often used for estate planning to transfer assets to future generations or other successors with favorable tax treatment
Legal Observations
The Private Fund Foundation (in Dutch: “Stichting Particulier Fonds”) is a legal entity that must be established by deed executed before a civil law notary. The name of the PFF must contain the word “Foundation”. The object of the PFF and the manner of appointment of its directors are among the key items that should be included in the deed. The PFF’s object cannot include pursuing profits through business activities. The PPF is beneficial for asset protection purposes since it can hold valuable assets without attracting tax incidence. Additionally, the PFF is useful for estate planning purposes since assets owned by the PFF do not have to transfer ownership upon the passing of family members.
Profit tax
In general, Sint Maarten Private Foundations are exempt from profit tax due to their nonprofit nature. However, if the PFF engages in business activities to generate profit, it may be subject to profit tax at a rate of 34.5%. It’s important noting that, although the Civil Code prohibits PFF’s from pursuing profits through business activities, the actual activities of the PFF are decisive for tax purposes. If a PFF carries on a business for taxation purposes, it will lose its tax-exempt status and become subject to profit tax on its entire taxable profit. PFF’s are required to keep proper accounts under the General Ordinance on Taxation, which may be necessary to ascertain tax obligations of parties engaging in transactions with the PFF. If requested by the Inspector of Taxes, the PPF must provide the necessary information for verification purposes. Consequently, the PFF will have profit tax filing obligations. With careful planning a PFF would be able to reinvest and expand its portfolio, creating generational wealth, without profit tax incidence.
Succession Tax
If assets are inherited, received by legacy or gifted, a succession (inheritance) tax is due. The PFF is a suitable option for estate planning, as it significantly reduces succession tax incidence. Assets owned by the PFF will not be subject to transfer of ownership in case of inheritance, legacy or gift. When it comes to distributions to beneficiaries by the PFF, succession tax is due in Sint Maarten. However, if the beneficiaries resides outside of Sint Maarten, the distributions received from a PFF will not be subject to taxation in Sint Maarten. Kindly note that such distributions might be subject to tax in the recipient’s country of residence. If a tax resident of Sint Maarten transfers assets to a SPF through inheritance, legacy, or gift, the PFF is subject to a succession (inheritance) tax at a special rate of 25%. However, if assets are received from a non-resident through inheritance, legacy, or gift, the PFF is not subject to Sint Maarten succession (inheritance) tax
Personal Income Tax
If a tax resident of Sint Maarten receives distributions from a PFF, this income will be subject to income tax at progressive rates of up to 47.5%. However, if the beneficiaries are non-residents, they will not be liable for income tax in Sint Maarten on distributions received from the PFF. As mentioned above, this income might however be subject to taxation in the recipient’s country of residence.
Key Contact
Quincy Lont