SIGNIFICANT DEVELOPMENTS
1. New Fiscal Framework:
On December 29, 1999, the Netherlands Antilles approved three tax bills, which are known as the New Fiscal Framework (NFF). The government’s objective is to part the Netherlands Antilles from its tax-haven image and to revitalize its services industries. The most important features of the NFF are:
a. Abolition of the offshore regime-The distinction between offshore and onshore taxpayers was in principle abolished as of January 1, 2000. The NFF provides for a 34.5% flat rate (consisting of a 30% profit tax and 15% island surtax), which is applicable to all taxpayers;
b. Transitional legislation-The NFF provides for transitional
legislation granting the advantages of the present offshore regime to qualifying offshore companies incorporated before January 1, 2000, provided certain conditions are met. These companies can benefit from the present regime until 2009 or 2019.
However, except for the grandfathering rules (see below) and the introduction of the flat profit tax rate, the provisions of the NFF would only become applicable for financial years to start on or after a date announced in a separate ordinance. The NFF is complementary to the Taxation Agreement for the Kingdom of the Netherlands (TAK) and would be introduced imultaneously. The elements of the NFF that would become applicable under separate ordinance are as follows:
a. Introduction of a tax-exempt company (NABV), that is, a company that is exempt from both the corporate income tax and the new dividend withholding tax;
b. Introduction of a participation exemption;
c. Extension of the loss carryforward period;
d. Introduction of a merger provisions;
e. Introduction of a fiscal unity treatment (consolidated tax group).
2. Introduction of a dividend withholding tax.
3. Reintroduction of the offshore regime: Because negotiations between the governments for a new TAK were pending, the N.A. government decided to temporarily reintroduce the pre-2000 offshore regime.According to a letter of the Minister of Finance, the government also intends to grant the offshore tax treatment until 2019 to qualifying companies incorporated after December 31, 1999. The companies that could obtain continued application of offshore status are those that meet the conditions of the transitional legislation within 12 months after the NFF enters into force.
4. Fiscal status as of January 1, 2000: The most important issues regarding the proposed amendments to the TAK and the NFF are as follows:
a. The NFF will enter into effect from January 1, 2001;
b. For the time being, the proposed dividend withholding tax will not enter into force;
c. The dividend article in the current TAK will be amended (see “Tax treaties” below).
5. Turnover tax: A new turnover tax will be introduced this year; it is believed that it will enter into force as of April 2001.
6. E-zone legislation: As of March 1, 2001, new e-zone legislation will enter into force. Its main purpose is to expand and strengthen the economic position of the Netherlands Antilles by providing potential e-commerce investors with a variety of tax-saving opportunities.
Territoriality and residence
An individual’s specific circumstances determine residence for tax purposes. These circumstances include permanent home, habitual stay, and center of economic and social interest. Residents are taxed on worldwide income, while nonresidents are taxed only on certain specified income generated within the Netherlands Antilles. Individuals are taxed from their date of arrival. Accordingly, there is no significance as to the
timing of arrival.
GROSS INCOME
Residents/Gross income of residents includes gains, profits, and income derived from the sources below.
1. A business or profession.
2. Employment.
3. Proceeds from immovable property.
4. Net income from capital.
5. Certain periodic receipts.
Retiree incentive/Legislation regarding the so-called pensionado arrangement has been enacted whereby (retired) individuals who meet certain requirements may opt to be taxed at low rates.The individuals should not have been an N.A. resident in the five years before taking up residence in the Netherlands Antilles and applying for this tax incentive. The qualifying pensioner/retiree must be at least 50 years of age. Furthermore, the pensioner must own and use a house in the
Netherlands Antilles with a value of at least Naf450,000.
There are at present two options for the retiree incentives: one that qualifies for applicability of the TAK, and one that does not. The pensioner/retiree may opt to pay one of the following.
1. A flat 10% tax rate on foreign income minus allowable deductions (TAK remains applicable); or
2. A fixed annual tax of approximatel
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