Under
the legislation which applied until 2002, in
order to qualify for offshore status a Netherlands
Antilles entity had to be wholly owned by non-residents,
and its income had to arise outside the jurisdiction.
However, various business sectors had specially
favourable taxation regimes which reflect their
international nature. These special regimes
are described in this section along with the
tax treatment of offshore corporations as such.
In December 1999 the Netherlands Antilles adopted
new legislation under the heading of The New
Fiscal Framework (NFF). This legislation was
intended to avert inclusion on the OECD's threatened
'black-list' of errant offshore jurisdictions
in 2000. The NFF involved the abolition of the
distinction between offshore and onshore companies,
at least for new formations, the introduction
of a new company form named NABV (Nederlands
Antilliaanse Besloten Vennootschap) which can
be tax-exempt but which does not benefit from
tax treaties, the introduction of a 10% withholding
tax on dividends (not in fact being put into
effect), and the reduction of the profits tax
rate to 30% (plus 15% municipal surcharge).
See Forms of
Company for details of the conditions under
which an NABV can request exemption from profits
tax and withholding tax. Under the NFF, a 100%
participation exemption has been introduced
for profits derived from shareholdings in resident
companies and qualifying Dutch-resident companies.
The exemption is 95% for shareholdings in other
non-resident companies.
Other
provisions under the NFF and the revised 'BRK'
(tax treaty with the Netherlands) include:
-
dividends from a Dutch corporation to Netherlands
Antilles corporate shareholders, who own at
least 25% of the shares in the Dutch corporation,
will be exempted from Dutch dividend withholding
tax, provided that the dividend is subject
to Netherlands Antilles tax at a rate of at
least 8.3%.
-
the Dutch corporation will have to withhold
8.3% dividend withholding tax 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 will be exempted
from additional profit tax in the Netherlands
Antilles provided that the shareholding amounts
to at least 25% and that 8.3% Netherlands
Antilles tax is paid on the gross amount of
dividends received
- dividends
paid by Dutch corporations to Netherlands
Antilles corporations unable to take advantage
of the participation exemption will be subject
to 15% Dutch dividend withholding tax. Existing
Netherlands Antilles offshore corporations
may elect for the new dividend treatment.
- the
activities of an exempted company (NABV) will
be restricted to investments in debt instruments,
securities and deposits
- for
Netherlands Antilles coporations incorporated
before June 30, 1999, subject to profit tax
and having a book year which ends before 1st
January 2002, the grandfathering rules with
respect to the offshore regime will remain
applicable until 2019 as long as the company
continues to have substantial business.
In
December 2000 the OECD announced the Netherlands
Antilles' commitment to eliminate harmful tax
practices by 31 December 2005 which secured
the jurisdiction's deletion from the OECD list
of countries deemed to possess "harmful"
tax practices.
Netherlands
Antilles Legal Regime for Offshore Companies
Most offshore operations in the
Netherlands Antilles have hitherto taken the
form of a limited liability company (Naamloze
Venootschap, or NV). See Types
of Company for the basic legal consititution
of an NV.
The
formation process for an offshore NV follows
the normal pattern. Beneficial ownership does
not have to be disclosed, but the professional
firms involved apply a 'know-your-customer'
rule. Opening a bank account will require references
of some type. A registered office must be maintained
in the jurisdiction.
Offshore
companies do not have to be audited, other than
financial institutions, which are regulated
by the central bank (see Offshore
Business Sectors).
See Law of Offshore
for details of the legal regime applying to
particular business sectors.
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Netherlands Antilles Tax Treatment of Offshore
Operations
See Domestic
Corporate Taxes for the general principles
of Netherlands Antilles corporate taxation,
which also apply to offshore entities. The taxation
of Netherlands Antilles companies is generally
governed by the National Ordinance on Profit
Tax 1940; special taxation regimes have been
introduced for companies falling under articles
8A, 8B, 14 and 14A of the Ordinance, as follows
(NB the special regimes normally apply only
to non-treaty-related income - also note that
these articles have been repealed under the
New Fiscal Framework and will only continue
to apply to existing companies under the grandfathering
provisions of the NFF - see above). The following
rates were correct at the time of writing:
- Investment
and Holding companies
Income is taxed at 2.4% on the first ANG100,000
of net income and 3% on the balance. Municipal
surtax is not applied. Capital gains are
not taxed; but capital losses are not deductible.
- Mutual
Funds These are exempt from profits
tax if they have either minimum net assets
of $50m, at least fifty shareholders, and
four local employees, or if they have minimum
net assets of $300m and two local employees;
otherwise the fund will be taxed on its
net assets, giving a minimum charge to tax
of $1,000 rising to a maximum charge of
$10,000.
- Trading
companies
The normal applicable rates of tax are 24%
on the first ANG100,000 of net income and
30% thereafter; however it is usually possible
to obtain a ruling from the Inspector of
Taxes exempting 90% of income, which has
the effect of reducing the rates to the
usual offshore levels of 2.4% and 3%.
- Banks
Investment and interest income (which qualifies
under Article 14) is taxed on the usual
offshore basis at 2.4% and 3%; commission
and fee income will suffer 24% and 30% unless
a tax ruling can be obtained (normally possible).
- Intellectual
Property Holding companies
If a tax ruling can be obtained, the effective
tax rate for income from royalties, licenses,
patents, copyrights, trademarks etc will
be 1%.
- Insurance
companies
Foreign-owned captive and reinsurance companies
not in receipt of treaty-related income
benefit from a concession that deems their
income to be ANG100,000, giving them a fixed
tax rate of NAf 2,400 annually.
- Real
Estate Holding companies These
companies are not taxed on income derived
from real estate (or subsidiaries wholly
or predominantly engaged in owning real
estate) outside the Netherlands Antilles.
-
Ocean Shipping and Aviation companies
These companies are taxed at 7.73% on the
first NAf 100,000 of net income, and 9.66%
thereafter (including the 15% municipal
surcharge). They have the option of paying
tax at the rate of NAf 0.40 per gross registered
tonne (minimum tax ANG1,000 per vessel).
N.B. Legislation taken up by the Netherlands Antilles parliament in 2007 proposed to
change the tonnage tax system to one based
on net tonnage rather than gross tonnage.
Businesses
organised as Stichtings (Foundations) will be
treated as if they are companies from a tax
point of view. Partnerships are treated as fiscally
transparent, so that the individual partners
pay taxes, not the partnership (see Domestic
Personal Taxes).
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Netherlands Antilles E-Commerce
Taxation Regime
As
of April 1, 2001, special tax legislation for
international Internet companies on Curacao
came into force to act as an incentive to persuade
e-commerce companies to relocate their activities
to the island. The new law replaces the old
Free Zone law and governs 'E-Zones', which are
areas within the Netherlands Antilles where
international trade and supporting services
may be carried out by electronic communication
and electronic commerce.
Only
companies with capital divided into shares may
perform activities in the e-zones including
trading or providing services to companies located
outside the Netherlands Antilles.
A
company may be allowed to conduct business with
other firms located in an e-zone but the company
has to apply to the local authority before doing
so. If approved, the company must meet a certain
set of conditions relating to price setting,
quality of the goods and services on offer and
the distribution of goods. The turnover generated
through local business may not exceed 25% of
the total turnover.
In
terms of profit tax, the profit of companies
within the e-zones will be taxed at 2% - including
surtax - until January 1, 2026. This rate is
not applicable on the profit of an e-zone company
if it is generated by the sale of goods or services
to companies located in the Netherlands Antilles
or generated through the rendering of services
to affiliated companies located in the country.
In addition there is no import duty or turnover
tax charged on goods entering the e-zones.
Finally,
employees who have lived in excess of five years
outside the Netherlands Antilles before starting
work in an e-zone can qualify for expatriate
status, with certain tax-free benefits - providing
certain conditions are met. An e-zone company
can calculate the wage tax on the net salary
of the employee without being required to 'gross
up' the salary.
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Netherlands Antilles Taxation
of Foreign Employees of Offshore Operations
This section refers to the taxation
of foreign employees of offshore operations,
see Domestic Personal
Taxes for the general principles of individual
taxation in Netherlands Antilles, which also
apply to the resident employees of offshore
entities.
Since 1987 there has been a special tax regime
in the Netherlands Antilles for 'specialist
expatriate employees in the financial services
(offshore) sector or another important economic
business sector generating hard currency and
of significance to the community'. As will be
seen above, this definition has to be interpreted
in the context of each particular business sector.
Any individual business or employee therefore
needs to take professional advice regarding
their 'expatriate' status and the availability
of the special tax regime.
Resident
expatriates with access to the special regime
were, at the time of writing, allowed 35% tax
exemption on fringe benefits up to 40% of their
salary, with a maximum of ANG40,000; in addition,
the following benefits are exempt from tax altogether:
- foreign
social security contributions towards retirement
provision;
- educational
costs at the international or Dutch school
in Curacao, or an equivalent school abroad,
to a maximum of ANG25,000 per child per year;
- relocation
costs including hotel rooms for two months
on arrival;
- settling-in
and moving-out allowances, being the lower
of two months' salary or ANG12,000.
Non-residents (residential status depends on
location of permanent home, habitual residence,
and 'centre of economic and social interest')
are taxed only on certain types of Netherlands
Antilles income: see Domestic
Personal Taxes.
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Netherlands Antilles Exchange Control
Netherlands
Antilles companies owned by non-residents that
do not carry on business on the islands may
obtain a license from the Bank of Netherlands
Antilles (the central bank) which exempts them
from all exchange control regulations.
Many
transactions involving foreign exchange in the
Netherlands Antilles attract a 1% 'license'
tax which is payable by the bank concerned to
the central bank. The rules are complex, and
professional advice is needed if this tax is
likely to be a significant factor.
The
repatriation of income or capital from the Netherlands
Antilles requires a license, but these are granted
automatically on application.
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Netherlands Antilles Employment and Residence
A stay in the Netherlands Antilles for work
or residence requires residence and/or work
permits, unless you are Antillean, or already
a long-time resident (more than 10 years). Residence
permits have to be applied for in person at
the Governor's offices; a good deal of personal,
medical and financial information and documentation
is required. Work permits have to be applied
for by employers, after advertising a position
in local newspapers and failing to fill it.
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