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  Tax Structure
 
Tax Structure and Social Security System

The 5 islands of the Netherlands Antilles have in principle the same tax laws, although the sales tax on Curaçao and Bonaire is different from the sales tax on St Maarten, Saba and St. Eustatius or Statia.
The income/profit tax of residents is levied on the income/profit generated world-wide, while foreign residents are subject to Netherlands Antilles tax if they generate income or profit from Netherlands Antilles sources. The tax system is a so called classical system, which means that a corporation must pay tax on its profit while the shareholder of such corporation must (again) pay tax on dividends received from the corporation. There are however certain facilities that reduce or eliminate this economic double tax effect.

Although Aruba and The Netherlands are part of the same Dutch Kingdom and the tax laws have been the same up to the period around the second world war, the tax laws of these three parts of the Kingdom have changed in different directions. The fact that the tax laws originate from the same system makes it possible to have the same judges decide on the tax law disputes. The judges from the Netherlands fly in at least twice a year to settle tax cases.

Each part of the Dutch Kingdom has its own right to tax which means that there is also the possibility of double taxation. Already in 1964 the Dutch Kingdom has one Tax Arrangement that solves double taxation issues and arranges for the possibilities to exchange information. This TAK (Tax Arrangement for the Dutch Kingdom) has been amended several times and is at this moment (June 2006) again in discussion on the subject of the dividends paid from the Netherlands to the Netherlands Antilles.

The social security system covers on the national level old age (AOV), widows and orphans (AWW) and exceptional medical expenses (AVBZ) and on the employer-level sickness (ZV) and accident insurance (OV).

The collection of the taxes and social security contributions is being divided between the Island Collector (EO), the Land Collector (LO) and the Social Security Bank (SVB).

Income tax

Capital gains generated through the sale of the source of income is in general not taxable unless it is generated in the course of a business or stems from the sale of shares in a company that form a so called substantial interest.
Residents are taxed on their income generated world-wide from the following sources:
Income from a business or profession as entrepreneur; the rules that apply here are in principle the same as the rules that apply to a corporation to calculate the profit generated;
Income from employment;
Income from property (real estate);
Income from capital;
Certain periodic receipts.

Residents are entitled to various deductions, up to specified limits, including:
Business expenses, such as moving and travel expenses;
Medical expenses;
Life insurance and pension plan contributions;
Charitable contributions;
Mortgage interest for the private home;
Interest up to ANG 2,500 annually
Alimony;
Social security contributions for the old age and widows and orphans (AOV/AWW)

Non-residents have to pay income tax as far as they generate income from Netherlands Antilles sources such as:
Income from property (real estate) situated within the Netherlands Antilles, including mortgage interest;
Income from a profession or business as far as it is personally exercised within the Netherlands Antilles or through a permanent representative or authorized agent;
Income of a managing or supervisory director(s) of a company established within the Netherlands Antilles also in the case of restriction of powers to parts of the enterprise of such entity situated outside the Netherlands Antilles;
Income from shares (including sale of shares) in a company established within the Netherlands Antilles as far as they represent a substantial participation (e.g in case 5% or more of the issued capital is held; the so called substantial participation holder);
Income from offices paid from the National or Island treasury, while the activities attaching to such offices were performed outside the Netherlands Antilles;
Non-residents can also claim certain deductions as far as they are related to the income sources in the Netherlands Antilles or they are, up to certain limits, charitable contributions and mortgage interest.

Tax rates

The income tax rate is progressive and starts in 2006 in Curaçao with 13% and runs up to 49.4%. There is a basic deduction in 2006 of ANG 1,548.30 and if applicable a sole earner allowance, pensioner's allowance and child allowance.
The substantial interest income is taxed at 19.5% while certain special amounts are taxed at a rate between 13% and 26%.

Special Income Tax Facilities

Penshonado
Expatriates

Penshonado
The income tax offers a favorable pensioners ("penshonado") tax regime. This regime is available on the following conditions:
The "penshonado" should be at least 50 years old on the date that he registers himself as a resident;
The pensioner should not have lived in the Netherlands Antilles in the five years before making the application for the "penshonado" status;
The pensioner must own a house in the Netherlands Antilles with a value of at least ANG 450,000 (US$ 253,000) for his personal use within 18 months after his registration as a resident;
The "penshonado" must have requested the penshonado status from the tax inspector within two months after registration in the municipality register;
The penshonado must be a legally admitted resident;
The "penshonado" and his wife may in general not generate income from activities within the Netherlands Antilles unless this income is generated from a company established in the Netherlands Antilles and in which the "penshonado" has a participation of at least 40% or the income is generated from being a supervisory director of a company.

The income tax rate applicable on the income of the "penshonado" is 10% and is solely applicable to income from foreign sources (or which is considered to be income from foreign sources according to the income tax law such as interest on bank accounts kept within the Netherlands Antilles). It is also possible to report a fixed income of ANG 500,000 (USD 281,000) at the progressive income tax rate as mentioned above.

Disclaimer

The aforementioned information on the Netherlands Antilles tax regime is designed to provide a general understanding of the principals of the Netherlands Antilles tax regime. The information provided should be used for guidance only. The summary is not intended to be comprehensive, and no specific action should be taken on the basis of this information without consultation of a tax lawyer. For further information please contact directly Xandra M. Kleine-van Dijk at Spigthoff Attorneys at Law & Tax Advisers in Curacao at (telephone) +5999-4618700 or through e-mail: xandra.kleine@spigthoff.com