Caribbean Netherlands - Income Tax

Caribbean Netherlands - Income Tax

Taxation of international executives

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Tax returns and compliance

When tax returns due? That is, what is the tax return due date?

The deadline for the filing the tax return is 2 months after receiving the tax return form. This term can be extended by the tax inspector for a maximum period of 18 months.

What is the tax year-end?

The calendar year applies, although a taxpayer may request a different tax year.

What are the compliance requirements for tax returns in the Caribbean Netherlands?

Residents

Resident taxpayers have to file an income tax return based on their worldwide income.

Non-residents

Non-resident taxpayers have to file an income tax return if they have domestic (within the Caribbean Netherlands) sources of income.

Tax rates

What are the current income tax rates for residents and non-residents in the Caribbean Netherlands?

Residents

Income tax table for 2017

Taxable income bracket   Total tax income below bracket Tax rate on income in bracket
From USD To USD USD
%
0 11,873 - 0
11,873 286,293 0 30.4 
286,293 Over 83.423 35.4

Note: the first bracket constitutes the tax free sum. Some exceptions apply. Some sources of income, such as income derived from a substantial shareholding, are taxed at a fixed rate of 5%.

Non-residents

The rates for resident taxpayers also apply to non-resident taxpayers.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of the Caribbean Netherlands?

Generally, whether or not a person is deemed to be a resident of the Caribbean Netherlands is judged by the relevant facts and circumstances. Relevant facts and circumstances include, but are not limited to:

  • The nature of the stay in the Caribbean Netherlands;
  • The duration of the stay;
  • The fact whether or not the taxpayer has a dwelling available to him in the Caribbean Netherlands;
  • The location of individual’s economic and social center of life/interests;
  • The location of the tax payer’s family;
  • Whether or not the individual is registered in a municipal register in the Caribbean Netherlands.

Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

N/A.

What if the assignee enters the country before their assignment begins?

The assignee might be regaded as a resident of the Caribbean Netherlands as of the date of entry.

Termination of residence

Are there any tax compliance requirements when entering or leaving the country?

When entering the country the taxpayer needs to register himself with the Tax Authorities in order to obtain a tax identification number. As of that moment the normal tax compliance rules are applicable to the taxpayer.
Before leaving the country an exit tax return has to be filed and all pending tax matters and taxes due should be settled. Thereafter the taxpayer could be deregistered from the database of the Tax Authorities.

Departure tax

Yes

What if the assignee comes back for a trip after residency has terminated?

The normal rules apply. If they are not deemed a resident taxpayer based on the relevant facts and circumstances, they will be not liable to income tax in the Caribbean Netherlands.

Communication between immigration and taxation authorities

Do the immigration authorities in the Caribbean Netherlands provide information to the local taxation authorities regarding when a person enters or leaves the Caribbean Netherlands?

This is generally the case.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

If the taxpayer has settled all taxes due and has been deregistered in the Caribbean Netherlands, he will not be subject a filing requirement.

Economic employer approach

Do the taxation authorities in The Caribbean Netherlands adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in The Caribbean Netherlands considering the adoption of this interpretation of economic employer in the future?

The Dutch Supreme Court has adopted an economic employer approach for the interpretation of the term employer. The Supreme Court has ruled that the host entity is considered as the employer for treaty purposes if the following conditions are met:

  • The host entity holds authority over the assignee.
  • The host country entity bears the costs, associated employment expenses have to be specifically and individually retraceable to the host entity.
  • The risks and benefits of the duties performed by the assignee are attributable to the host entity.

By virtue of the fact that the Caribbean Netherlands are part of the Kingdom of the Netherlands and the Dutch Supreme Court is the highest court of appeal Dutch case law generally also applies in the Caribbean Netherlands thereby, however, taking into account differences in laws, regulations and (tax) practice.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

N/A.

Types of taxable compensation

What categories are subject to income tax in general situations?

  • Income from movable capital (e.g. interest, dividends etc.);
  • Income from business or employment;
  • Income from periodic grants.

Tax-exempt income

Are there any areas of income that are exempt from taxation in your country? If so, please provide a general definition of these areas.

  • Periodic grants to certain relatives;
  • A profit share in the profit of cooperative associations, derived by the members in proportion to their participation if not related to their professions;
  • Speculative gains, not resulting from business activities;
  • Capital gains on the transfer of movable and immovable property not resulting from business activities;
  • Inheritances, legacies, gifts and lottery payments which do not constitute a periodical payment;
  • Some forms of capital contributions;
  • Qualifying company assets in case they are passed because of the death of another taxpayer, provided the additional requirements are met;
  • Certain social security premiums paid by the employer;
  • Dividends for up to USD 5,000 per year or interest on savings of up to USD 5,000 per year.

Expatriate concessions

Are there any concessions made for expatriates in your country?
Expatriate exemptions

The Caribbean Netherlands has regulations in place for expatriate income taxes. Expatriates in the Caribbean Netherlands are those employees who, prior to the employment, resided for a period of at least five years in a foreign country and are staying in the Caribbean Netherlands on a temporary basis. Under certain conditions, the provisions can be applied for two periods of five years.

In addition, the employee must:

  • have completed a study at an institution of higher education or an academic institution, and have at least five years' working experience
  • have a salary of at least USD 83,500, and
  • the 'specific expertise' should not, or not readily, be available in the local labour market.
  • The following salary elements are, among others, not included in the taxable salary:
  • Compensation for educational costs at a locally available school as well as comparable education abroad, up to a maximum of USD 13,967 per child annually.
  • Travel and moving expenses in relation to the immigration and repatriation of the employee and family, including hotel costs, with a certain maximum.
  • Settling-in allowance of the lesser of two months' salary or USD 6,704.
  • Car rental expenses during the first two months after the arrival, up to a maximum of USD 1,509 per month.
  • Fringe benefits (wages in kind) are tax exempt insofar as they are less than USD 8,380 per year.

Aside from these exempt elements, in case the employee enjoys a net wage, the tax due does not have to be grossed up.

Salary earned from working abroad

Is salary earned from working abroad taxed in The Caribbean Netherlands? If so, how?

Yes. If you are deemed a resident taxpayer in the Caribbean Netherlands, you are in principle taxable for your world income
 

Taxation of investment income and capital gains

Are investment income and capital gains taxed in your country? If so, how?

Capital gains and losses arising from the sale or exchange of private assets are exempt from taxation. If private assets are employed as capital of a business, the capital gains and losses form part of personal taxable income. Also, capital gains realised on the sale of shares are taxed if the seller has a 'substantial interest' (i.e. at least a 5% shareholding) in the company. Shares held by the spouse will be taken into consideration in determining whether the 5% shareholding criterion has been met. If the seller does not have a 'substantial interest' but one of their (grand) children or the (grand) parents have a 'substantial interest', the shares of the seller are considered to be a 'substantial interest'. The gain is subject to a reduced rate of tax applicable to non-recurring items of income. Liquidating dividends are taxable to the extent that they exceed paid-in capital.

If a person has a 'substantial interest' or is considered to have one, then a receivable on the company is also considered a substantial interest.

Dividends, interest, and rental income

Dividends and interest are subject to tax as income from movable property. Rent income is not taxed if the renting out of property does not constitute a company.

Gains from employee stock option exercises

The difference between the option price and the value of the shares at the moment the moment the option is exercised is subject to tax.

Foreign exchange gains and losses

Not taxable/deductable.

Principal residence gains and losses

Not taxable/deductable.

 

Gifts

There is no gift tax in the Caribbean Netherlands.

General deductions from income

What are the general deductions from income allowed in your country?

Employment expenses

With regard to employees, deductions of expenses are limited. If expenses are business-related and reimbursed by the employer, however, the reimbursement remains tax free.

Personal deductions

Subject to limitations, a resident taxpayer can deduct charitable contributions, medical expenses, life insurance premiums, and savings plan payments. In addition, a resident taxpayer can deduct interest (with certain limits), pension plan contributions, social security premiums, and alimony.

Personal allowances

Personal allowances exist in the following amounts for the year 2016:

Allowances USD
Basic allowance for every taxpayer 11,908
Additional allowance  
For aged 60 years and over 1,347

As of 2016, the former allowance for children no longer applies. Instead, residents are entitled to child support of USD 38 per month per child.

Business deductions

To the extent they are business-related and not reimbursed, an individual can deduct such items as moving expenses, travel expenses, entertainment expenses, and automobile expenses.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in your country?

Current year gross-up

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in your country? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Caribbean Netherlands employs the pay-as-you-earn (PAYE) system, so taxes, as well as social security premiums, are withheld from salaries. Payroll taxes

Employers must withhold wage tax from the wages of their employees and pay the wage tax to the Tax Department within 15 days after the end of the month

Relief for foreign taxes

Is there any Relief for Foreign Taxes in your country? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Foreign tax relief

Based on a decree, a reduction will be allowed for foreign-source tax. The allowance is a proportionate reduction. Foreign-source tax on dividends, interest, and royalties may be deducted. The deduction shall not, however, exceed that part of the income tax as computed before the deduction that is attributable to that foreign-source income in the Caribbean Netherlands.

Tax treaties

Although part of the Netherlands, the Dutch tax treaties do not apply to the Caribbean Netherlands. Instead, the tax treaties apply that the former Netherlands Antilles have negotiated. As a result, the Caribbean Netherlands currently has a tax treaty in effect with Norway. A double tax agreement (DTA) has been negotiated with Jamaica, but this has not entered into force yet.

Furthermore, tax information exchange agreements (TIEAs) have been signed with several countries, including Australia, Canada, Denmark, Mexico, New Zealand, Spain, Sweden, and the United States.

Tax Arrangement for the Kingdom of the Netherlands (TAK)

As part of the Kingdom of the Netherlands, the Caribbean Netherlands is party to a multilateral tax agreement with Aruba, Curaçao, and St. Maarten (TAK). Subject to this treaty, income from capital is, in general, taxed in the country of residence.

The Caribbean Netherlands is also party to the Tax Agreement for the Netherlands (TAN). Dividend paid by a Dutch company to an individual residing in the Caribbean Netherlands is subject to 15% withholding tax (WHT) in the Netherlands.

If an individual has emigrated from the Netherlands to the Caribbean Netherlands, the Netherlands may, up to a period of ten years after emigration, tax the dividend with Dutch individual income tax at a rate of currently 25%.

General tax credits

What are the general tax credits that may be claimed in your country? Please list below.

There are no other significant tax credits or incentives for individuals in the Caribbean Netherlands.

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