Sint Maarten - Income Tax | KPMG | GLOBAL

Sint Maarten - Income Tax

Sint Maarten - Income Tax

Taxation of international executives

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Tax returns and compliance

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

May 31st 2017, the extended filing deadline is June 30th 2018.

What is the tax year-end?

The calendar year applies.

What are the compliance requirements for tax returns in Sint Maarten?

Residents

Residents are taxed based on their worldwide income.
 

Non-residents

Non-resident taxpayers need to file an income tax return for certain Sint Maarten source income (e.g. income related to real estate in Sint Maarten, income generated through employment in Sint Maarten, etc.)
 

Tax rates

What are the current income tax rates for residents and non-residents in Sint Maarten?
 

Residents

Tax rates effective for the year 2016 are as follows.

Taxable income (ANG*) Tax on column 1 (ANG) Tax on excess (%)
Over (column 1) Not over
0 31,489 - 12.50
31,489 47,235 3,936.18 20.00
47,235 65,604 7,085.10 26.25
65,604 98,403 11,906.83 33.75
98,403 139,076 22,976.88 40.00
139,076   39,246.15 47.50

Non-residents

The same tax rates apply to residents and non-residents.
 

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Sint Maarten?

Residence is determined based on several factors such as a permanent home, the place where the spouse and children live and the place of personal and economic relations

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 Sint Maarten for more than 10 days after their assignment is over and they repatriate.

No

What if the assignee enters the Sint Maarten before their assignment begins?

The assignee might be regaded as a resident of Sint Maarten as of the date of entry.

Termination of residence

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

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

No specific departure tax applies. A final settlement of all (Income) tax matters is required before deregistration. Kindly note that Income tax is levied from January 1 up to the date of emigration of that year.

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

If the assignee vistis Sint Maarten as a tourist this should have no adverse income tax consequences in Sint Maarten. Please note that non-residents could be subject to income tax in Sint Maarten for certain types of Sint Maarten source income (see our previous remarks).

Communication between immigration and taxation authorities

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

That is in principle the case

Filing requirements

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

If the taxpayer is deregistered in Sint Maarten and will repatriate in Sint Maarten, the taxpayer has register himself again with the Tax Authorities when entering the country.

Economic employer approach

Do the taxation authorities in Sint Maarten adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Sint Maarten 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 a position of authority over the assignee.
  • The host country entity bears the costs; associated employment expenses are specifically and individually traceable recharged to the host entity.
  • The risks and benefits of the duties performed by the assignee are attributable to the host entity.

Due to the fact that Sint Maarten is part of the Kingdom of the Netherlands and does not have a Supreme Court Dutch case law is also applied in Sint Maarten.

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?

No de minimus number of days apply, the economic employer approach is in principle applicable as of day 1.

Types of taxable compensation

What categories are subject to income tax in general situations?

Gross income of residents includes gains, profits, and income derived from the following sources:

  • A business or profession.
  • Employment.
  • Proceeds from immovable property.
  • Net income from capital.
  • Certain periodic receipts.

Tax-exempt income

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

Some areas of income are exempt from taxation.

Expatriate concessions

Are there any concessions made for expatriates in your Sint Maarten?

Expatriate exemptions

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

In addition, the employee must either:

  • have completed studies at an institution of higher education or an academic institution and have at least three years' working experience.
  • have at least five years of working experience and a salary of at least ANG 100,000, or
  • have employment with the government of St. Maarten in a position with a salary based on scale 11 or higher. This regulation only still applies to government employees insofar as they already received expatriate status before the end of July 2015.

Note that the 'specific expertise' may not be, 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 ANG 25,000 per child annually.
  • Social security premiums paid abroad if they are intended as an old-age provision.
  • Travel and moving expenses in relation to the immigration and repatriation of the employee and family, including hotel room costs, with a certain maximum.
  • Settling-in allowance of the lesser of two months' salary or ANG 12,000.
  • Car rental expenses during the first two months after arrival, up to a maximum of ANG 2,700.
  • Fringe benefits (wages in kind) are tax exempt insofar as they are less than ANG 25,000 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 Sint Maarten? If so, how?

Residents, including resident individuals with the expatriate concession, are subject to Sint Maarten income tax on their worldwide income. Relief of double taxation may be (partly) available in Sint Maarten depending on the fact whether or not a tax treaty is in place with the country in which the services are performed or based on the national rules concerning international tax relief.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in your Sint Maarten? 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.

Deemed income

For individual income tax purposes, a resident taxpayer can be taxed on deemed annual income from capital if one owns shares in a St. Maarten exempt company or shares, membership rights, or an interest in a non-resident company ('foreign investment company'), the activities of which, on a consolidated basis, mainly consist of lending, portfolio investments, and similar activities.

Resident taxpayers are obligated to include the fair market value (FMV) of such an exempt company or foreign investment company in their annual taxable income. An amount equal to 4% of the FMV of the shares, membership rights, or interest at the beginning of the year will be considered as taxable income each year.

In cases where the actual income received exceeds the deemed amount, the income actually received does not have to be included in the taxable income rather than the amount of the deemed income.

The deemed income provision will also apply to the value of receivables on, profit sharing certificates in, and rights in an exempt company or in a foreign investment company.

Dividends, interest, and rental income

Although a dividend WHT was approved in 1999, it has been decided that for the foreseeable future this tax will not enter into force. In case it is decided the tax will come into force, there is a mandatory transitional period during which the tax will then not be applicable to legal entities resident at that time on St. Maarten.

Gifts

Gifts and receipts from an estate of a St. Maarten resident are taxable. Non-residents owning real estate on St. Maarten are also subject to these taxes. The rates (from 2% up to 24%) depend on the amounts received and the relationship of the beneficiary to the deceased or the donor. Gifts and receipts from estates of a non-resident shareholder of a St. Maarten company are not subject to St. Maarten estate and gift taxes.

Note that this tax is currently not levied by the government of St. Maarten

Additional capital gains tax (CGT) issues and exceptions

Are there capital gains tax exceptions in your Sint Maarten? If so, please discuss.

Pre-CGT assets

NA
 

Deemed disposal and acquisition

NA
 

General deductions from income

What are the general deductions from income allowed in your Sint Maarten?

Employment expenses

With regard to employees, deductions of expenses are limited. In cases where these 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 ANG
Basic allowance for every taxpayer 2,049
Additional allowances:  
For married taxpayer with non-working spouse 1,368
For aged 60 years and over 1,033
For children, depending on age, study, and place of residence 74 to 729

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 Sint Maarten?

Current year gross-up

Calculation of estimates/prepayments/withholding

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

St. Maarten employs the pay-as-you-earn (PAYE) system, so taxes, as well as social security premiums, are withheld from salaries. Wage tax and premiums withheld must be paid within 15 days after the end of the month.

Relief for foreign taxes

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

Foreign tax relief

Tax credits are generally not allowed unless provided for by a specific tax treaty. Foreign taxes can be deducted from gross income.

Tax treaties

St. Maarten currently has tax treaties in effect with Aruba, Curaçao, the Netherlands, and 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. As a result, St. Maarten, as part of the former Netherlands Antilles, has been moved to the white list of the Organisation for Economic Co-operation and Development (OECD) Global Forum.

General tax credits

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

See deductions.

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