At a glance. This tax news applies to the BES islands.

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1 Tax news General expenditure tax For BES islands Highlights At a glance... 1 Introduction... 2 Business... 2 Operating an asset... 2 Tax rate... 2 Tax base... 3 Exemptions... 3 Deduction... 4 Construction... 4 At a glance This tax news applies to the BES islands. The islands of Bonaire, St. Eustatius and Saba, hereinafter referred to as the BES islands, but also sometimes called the Caribbean Netherlands, are public bodies of the Netherlands but have their own tax regime, in some ways substantially different from that of the Netherlands. For example, the islands do not have the value-added tax that is common in Europe, but instead have a general expenditure tax which is the subject of this news flash. The reason for the difference is that it was deemed more efficient for these smaller jurisdictions within the Netherlands to have a straightforward tax system with a taxable base that would be easier to determine. The general expenditure tax (in Dutch: the Algemene bestedingsbelasting or ABB) replaced the former sales tax (in Dutch: the Omzetbelasting or OB) and the turnover tax (in Dutch: Belasting op bedrijfsomzetten or BBO) in 2011 when the Netherlands Antilles had been dissolved and the BES islands had become public bodies of the Netherlands. The OB was applicable in Bonaire and the BBO was applicable in St. Eustatius and Saba. The ABB is not levied on turnover of all companies, but only on the turnover of service providers and producers.the ABB is also levied on imports. The OB in Bonaire was also levied on imports but the BBO in St. Eustatius and Saba was not levied on imports. 1

2 01 & 02 Introduction ABB is levied in respect of: a sale of goods by producers; b providing services on any of the three islands; c import of goods. In the situations mentioned under a and b, the producer or service provider must be an entrepreneur. An entrepreneur is anyone who: a. independently carries on a business or profession; or b. on more than an incidental base operates an asset with the intention to produce revenue. Someone who produces a new product or provides a service but does so only incidentally or only within his or her own circle of family and close friends or does not charge a fee or only a token fee will not be subject to ABB. Business To be considered carrying on a business, one should aim to obtain economic revenue from third parties. For example one is not carrying on a business if transactions only take place within the circle of one's own family or in case there is no fee or only a token fee is charged for the service. Operating an asset Everyone who operates an asset, for example renting out real estate, is considered an entrepreneur unless the rent is only incidental or there is no fee or only a token fee. Tax rate Tax rate Bonaire St. Eustatius / Saba Goods 8 6 Services 6 4 Insurance 7 5 In Bonaire, a rate of 25% applies to the import of cars. In St. Eustatius and Saba a rate of 18-30% applies. The rate will be nil if it concerns a very low energy car. 2

3 03 Tax base ABB is levied in respect of: - sale of goods by producers; - delivery of services on any of the three islands; - import of goods. Therefore, the sale of goods will only be subject to tax once; at the producer or at the time of import. The sale of certain basic necessities such as bread, grain, potatoes, and rice is exempt from ABB. Please note The general expenditure tax ('ABB') not only replaced the OB and BBO, but also the levy of import duties in Bonaire. In St. Eustatius and Saba no import duties were levied. Import duties in Bonaire ranged from 5% up to 27% for most goods. Exemptions There are several exemptions such as: Public transportation; Medical services and hospitals; Taking care and nursing of persons admitted to a nursing home or living in a retirement home; non-commercial education; Water and electricity; Fuels and other products, including supplies, for international transportation; Life insurance, health insurance and reinsurance; Renting of houses that are designated for and used as permanent residence; Hotels and appartments rented to tourists in case the rent is subject to tourist tax. An exemption for small businesses may apply if certain conditions are met. Furthermore, no ABB is levied from producers who proeduce goods but are not considered to be producers within the meaning of the ABB. Small business A business that will not generate more than US$ 20, in turnover may receive an exemption from paying ABB. The entrepreneur still has the obligation to charge ABB to his clients but if the exemption has been granted he does not have to pay the ABB to the tax collector. Producers An entrepreneur who sells his products mostly (that is, for more than 50%) to consumers, is not deemed to be a producer. In that case he is not subject to ABB and does not have to charge ABB to his clients. This may for example be the case for a baker who sells most of his baked products in his store to consumers. If however he sells more than 50% of his products to others than consumers, such as retail stores or restaurants, he will be deemed a producer and as such must charge ABB on his total amount of sales. 3

4 03 Deduction A producer may deduct the tax paid on his imported raw materials from his own ABB as well as the tax paid to other producers for goods that have been delivered to him. In some instances this may lead to a tax refund. Construction Contractors and subcontractors are deemed to be producers if they deliver a new building or a new part of a building. This means they can deduct the ABB they have paid to other contractors. An example may illustrate this. Client X has asked contractor A to build a house for him on land that belongs to client X. Contractor A imports goods from abroad and uses several subcontractors for specific jobs to build the house. Contractor A does not sell a house to client X but builds it on client Xs land which could be considered to be a service. Still, contractor A is considered to be a producer and as such he may deduct the ABB he pays to his subcontractors who are also considered to be producers. He may also deduct the ABB he paid at import for the materials used to build the house. When charging client X for the house, contractor A must also charge 8% ABB in Bonaire (6% in St. Eustatius and Saba). If contractor A had not been considered a producer, he would have been providing a service. In that case on Bonaire the rate of 6% (4% in St. Eustatius and Saba) for services would have applied and A would not have been allowed to deduct the ABB charged by the subcontractors and paid at import of the raw materials for the house. 4

5 How PwC can help To have more insight how the general expenditure tax may apply in your situation or if you have other questions that may rise with regard to this or other taxes, please contact one of the advisors of PwC Dutch Caribbean or send an to Tell us how you like Tax News and what topics you would like to hear more about. Just send an to PwC Curaçao P.O. Box 360 Julianaplein 38 Willemstad Curaçao T: +599 (9) F: +599 (9) PwC Aruba P.O. Box 307 L.G. Smith Boulevard 62 Oranjestad Aruba T: +(297) F: +(297) PwC St. Maarten P.O. Box 195 Emmaplein Building Philipsburg St. Maarten T: F: PwC Bonaire P.O. Box 383 Kaya Gobernador N. Debrot 36 Kralendijk Bonaire T: +(599) or +(599) F: +(599) Website: PricewaterhouseCoopers Curaçao. All rights reserved. PwC refers to the Dutch Caribbean member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.