NETHERLANDS ANTILLES: DOUBLE TAX TREATIES

The Netherlands Double Tax Treaty with Norway has been effective since 1990 and is based on the OECD model treaty. Withholding tax on dividends from a Norwegian company are reduced; there is anyway no Norwegian withholding tax on interest, and there are no Antillean withholding taxes at all. (However, the New Fiscal Framework applying from 2002 includes provision for a 10% withholding tax on profit distributions by Antillean companies, although this did not come into effect immediately).

There are some exceptions to the treaty withholding tax regime, with relief being unavailable to:

• Companies that do not have a genuine business purpose in the Netherlands Antilles and less than 50% of whose shares are held in the two countries;
• Companies claiming 'offshore' status under Articles 14 and 14A of the National Ordinance on Profit Tax 1940.

Articles 14 and 14A are being repealed for new formations, and companies incorporated as NABVs under the New Fiscal Framework will not have access to double taxation treaties.

• there is no withholding tax on interest and royalty payments by Netherlands companies;
• the Dutch withholding tax on dividends paid to Antillean companies is 15%; but if the Antillean company owns 25% or more of the Dutch paying company, the rate is reduced to 7.5% (5% if the Antillean company accepts some local taxation).

The New Fiscal Framework (NFF) came into force alongside a further revision of the BRK on January 1, 2002. Under the amendments and for the time being, the proposed Netherlands Antilles dividend withholding tax of 10% will not enter into force.

Futhermore, the dividend article in the current BRK has been amended so that dividends from a Dutch corporation to Netherlands Antilles corporate shareholders, owning at least 25% of the shares in the Dutch corporation, are exempted from dividend withholding tax provided that the dividend is subject to Netherlands Antilles tax at a rate of at least 8.3%.

The Dutch corporation has to withhold 8.3% dividend withholding tax (at the time of writing) from the gross dividend. The 8.3% which has been withheld upon the dividend distribution in the Netherlands can be credited against tax in the Netherlands Antilles.

Dividends and capital gains derived from shareholdings in a Netherlands corporation are fully exempted from profit tax in the Netherlands Antilles provided that the shareholding amounts to at least 25% and that the dividend is subject to the Netherlands Antilles tax of at least 8.3% on the gross amount of dividends received.

Dividends paid by Dutch corporations to Netherlands Antilles corporations which don't qualify under the participation exemption are subject to Dutch dividend withholding tax. Netherlands Antilles offshore corporations may elect for the new dividend article.

In April, 2003, the Netherlands Antilles authorities signed a tax information exchange agreement with the United States, allowing the US Internal Revenue Service to more easily detect tax evasion and money laundering activity conducted by American taxpayers in the Caribbean jurisdiction.

The agreement is similar in structure to those reached by the United States with other offshore havens in the region, including Antigua, the Bahamas, the British Virgin Islands, and the Cayman Islands.

In November 2006, Parliamentarians in the Netherlands Antilles agreed to a draft law that would bring into force the TIEA with the US.

The treaty is expected to allow the Netherlands Antilles to take advantage of the Caribbean Basin Trade Partnership Act, allowing goods to be imported into the US from the islands tariff-free.

The Dutch territory also came in for praise from the OECD, following the release of the multilateral group's updated 'blacklist' of uncooperative countries. Gabriel Makhlouf, the Chair of the OECD's Committee on Fiscal Affairs, cited the tax information exchange agreement reached with the jurisdiction's authorities as a 'success'.

Agreements on the taxation of savings between the UK, the Netherlands Antilles and Aruba all came into effect on 1 July 2005.

According to reports in the regional media in early 2007, the Netherlands Antilles authorities expressed interest in commencing DTA negotiations with Jamaica.

The Governments of Barbados, Trinidad & Tobago and the Netherlands Antilles have also agreed to commence negotiations on a Double Tax Agreement, and the Netherlands Antilles stated their intention to commence talks with Nordic countries in early 2007.

In March 2007, it emerged that New Zealand and the Netherlands Antilles had signed a bilateral agreement to exchange information for tax purposes. A similar agreement was also signed with Australia in March that year.

The tax treaty policy for Nethereland Antilles will change during 2008 to become focused more on treaties to avoid double taxation (Double Taxation Agreement: DTA) and less on tax information-exchange treaties (Tax Information Exchange Agreement: TIEA), the government announced in February.

In a statement, the Secretary of State for Finance, Alex Rosaria explained that:

"The importance of TIEAs is the positive positioning of the Netherlands Antilles. These agreements confirm the Netherlands Antilles’ commitment to high international standards and its stature as a responsible international financial center."

"Since 2000, the Netherlands Antilles has worked with the OECD countries to develop principles to improve transparency and exchange of information in tax matters."

The statement went on to add that:

"Although of vital importance, TIEAs are do not particularly bring about new economic activities for the international financial services sector."

"Furthermore there is a growing number of smaller countries that do question the benefits of TIEAs given the fact that there is no level playing field. It is hoped that this theme will shortly be discussed within the OECD."

"DTAs on the other hand do contribute to economic activity because they focus on stimulating investments."

Negotiations with nine more countries, namely: Sweden, Iceland, Denmark, Greenland, Finland, the Faroe Islands, Spain, Canada and Mexico, are expected to be concluded and possibly signed this year.

Rosaria went on to stress again that the Netherlands Antilles must concentrate more on the negotiating and entering into DTAs, concluding that:

“The sector also agrees with me that the ‘beef’ is to be had in DTA’s. I expect that we can this year negotiate DTA’s with Mexico, Spain, Surinam, the United Arabic Emirates and Colombia."

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