Dutch Caribbean: Tax Changes
There have been some recent tax changes of note in Aruba, and the former Netherlands Antilles islands of Curacao, St. Maarten, Bonaire, St. Eustatius, and Saba, which we describe briefly in this Flash International Executive Alert.
The Netherlands Antilles effectively ceased to exist on October 10, 2010, and Curaçao became an autonomous country within the Kingdom of the Netherlands. Prior to that date, the Netherlands Antilles consisted of Curacao, St. Maarten, Bonaire, St. Eustatius, and Saba. Since October 10, 2010, Bonaire, St. Eustatius, and Saba, also referred to as the “BES Islands”, as public entities, have become part of the Netherlands. Aruba was already a separate country within the Kingdom of the Netherlands (since 1986).
After the dismantling of the Netherlands Antilles, Curacao largely maintained the former tax regulations of the Netherlands Antilles.
The Curacao Parliament approved legislation1 late in the summer of 2011 as part of the island’s tax reform process for the period 2011-2014, with a view to broadening the tax base, shifting from a reliance on direct to indirect taxation, and raising revenues.
Personal Income Tax Rates
As per January 1, 2012, the Curacao income tax rate was primarily reduced with regard to the lower tax brackets, while the percentage reduction in the higher brackets was minimal.
The island surcharge of 30 percent was abolished. The maximum personal income tax rate fell to 49 percent (from 49.4 percent, resulting from the top 38 percent rate and the 30 percent surcharge). A further reduction to 35 percent is anticipated by 2014.
A tax amnesty was introduced for persons who are willing to disclose previously undeclared and “still not traced” income. If taxpayers have not declared all their income in their personal income tax returns, they may be subject to an additional tax assessment. Penalties imposed as a result of an additional assessment could be as high as 100 percent of the amount of the additional personal income tax to be paid.
Under the amnesty, if an individual is willing to disclose previously undeclared income by filing a supplementary income tax return, he or she could avoid being hit by penalties as long as the declaration is made within one year of the voluntary disclosure rules coming into effect, that is, by 31 December 2012.
Furthermore, income declared under the tax amnesty will be taxed at the following rates (rather than the normal 2012 income tax rates of up to 49 percent):
• 10 percent if the income is declared during the first and second quarters of 2012;
• 20 percent if income is declared in the third quarter of 2012; and
• 25 percent if income is declared in the fourth quarter of 2012.
Taxpayers with income not declared under the voluntary disclosure rules will be subject to normal rules and provisions, including the 100-percent penalty and potential criminal charges.
The applicable income threshold for social security premiums were increased from ANG 82,184 to ANG 93,000.
Corporate Income Tax
The corporate income tax rate of 34.5 percent was reduced to 27.5 percent. The aim is to further reduce the rate to 15 percent in the near future, though no draft legislation has been presented at this point.
For the time being, the Netherlands Antillean Guilder is to remain in place for 2012. Plans are afoot, however, to replace it with the Dutch Caribbean Guilder.
Although the constitutional changes took place per October 10, 2010, the former Netherlands Antilles tax regime still applied during the period through December 31, 2010 due to transitional rules. From January 1, 2011, a new tax regime entered into force on the BES-islands, which is different from the tax regime that applied in the former Netherlands Antilles as well as the tax regime that applies in the European part of the Netherlands.2 However, for the time being, the current tax regulations of the Netherlands Antilles with regard to wage tax and income tax (including social premiums), barring a few changes (e.g., tax rates income tax including social insurance premiums), will remain intact.
It is the intention to adopt in the future a revised wage tax and income tax in the Tax Act BES, which contains a number of specific taxes, i.e., yield tax and general consumption tax.
Until new legislation is adopted, St. Maarten will largely maintain the former tax regulations of the Netherlands Antilles.
The Parliament of Aruba adopted a bill3 in which certain amendments were introduced regarding a mandatory pension plan. This bill entered into force on January 1, 2012. According to this bill, employers are obliged to set up a mandatory pension plan for their employees in case these employees are residents of Aruba.
The employers are required to withhold a premium in their salary administration. The employer and the employee are required to pay a 6-percent premium. This year, however, as a transition, the requirement is 2 percent, and next year the minimum will be 4 percent. The employer should pay at least half of this premium.
Based on the Income Tax Ordinance “(in Dutch:”Landsverordening inkomstenbelasting”) and the Ordinance of adjustments to the General Pension Ordinance (in Dutch: “Aanpassingsverordening Landsverordening Algemeen Pensioen”), contributions to the pension program are tax deductible provided that certain requirements are met.