Bonaire, an island municipality of The Netherlands, lies off Venezuela’s coast in the southern Caribbean. It is an acclaimed diving and snorkeling destination whose reef-lined coast is protected within the Bonaire National Marine Park.
As of 10 October 2010 The Netherlands Antilles has ceased to exist. In the new constitutional structure, Curaçao and Sint Maarten have acquired the status of countries within the Kingdom (like The Netherlands Antilles and Aruba before the changes). Aruba retains the separate country status it has had since 1986. Thus, as from 10 October 2010, the Kingdom consists of four, rather than three, equal countries: Aruba, Curaçao and Sint Maarten are not Dutch overseas dependencies, but full, autonomous partners within the Kingdom, alongside The Netherlands, and each enjoys a high degree of internal autonomy.
The three other islands, Bonaire, Sint Eustatius and Saba have voted for direct ties with The Netherlands and are now part of The Netherlands, thus constituting ‘the Caribbean part of The Netherlands’. The relationship’s legal form will be that each island has the status of public body within the meaning of article 134 of the Dutch Constitution. In broad terms, their position is now like that of Dutch municipalities, with adjustments for their small size, their distance from The Netherlands and their geographic situation in the Caribbean region. For the time being, Netherlands Antillean legislation will still be applicable in large part to the public bodies. Every resident of the three islands who has Dutch nationality now has the right to vote in elections to the Dutch House of Representatives alongside the existing right to vote in European Parliament elections. They are not, however, allowed to vote in Provincial Council elections because the public bodies are not part of any Dutch province.
Effective from 1 January 2011, a new tax regime applies in the BES-Islands. This tax regime does not include a profit tax. A yield tax and a real estate tax have been introduced in the BES-Islands to replace the profit tax.
The yield tax and real estate tax mentioned above are not automatically applicable as a result of a residency fiction. Under the new tax regime, in principle, all entities established on the BES-Islands are deemed to be established in The Netherlands for tax purposes and accordingly subject to Dutch corporate income tax (up to 25%) and Dutch dividend withholding tax (in principle, 15%). However, on request, entities that have sufficient nexus with the BES-Islands may be subject to the fiscal system of the BES Islands. In such case, no Dutch corporate income tax applies, but the yield tax and real estate tax apply. Entities are deemed to have sufficient nexus with the BES-Islands if any of the following circumstances exist:
The ruling referred to above is issued in the following cases:
The yield tax is levied on distributions (in whatever form) of profits by entities resident in the BES-Islands. The rate of the yield tax is 5%. The entity making the distribution acts as withholding agent.
The real estate tax is levied on gains derived from real estate located in the BES-Islands. The real estate tax is levied on a taxpayer (person or entity) that, at the beginning of the year, has the use of real estate by virtue of ownership, possession or a limited right. The profit is fixed at 4% of the fair market value of the real estate. The rate of the real estate tax is 25% of the fixed profit. Consequently, the effective annual tax rate is 1% of the fair market value of the real estate. The value of the real estate is determined by the Tax Inspector. The value is set at the beginning of the period for which the value is determined and is in principle determined for five consecutive calendar years. Real estate tax is not levied on owner-occupied homes, real estate included in the business assets of a privately run enterprise (that is not operating in the form of an entity) and real estate with a value of less than US$50,000, if the person having use of the real estate is a resident of the BES-Islands.
In addition, entities that are deemed to be residents of The Netherlands are exempt from real estate tax.
Interest and royalty payments are not subject to the yield tax. The yield tax is not levied on the remittances of profits by branches to their foreign head offices.
The Dutch treaty network does not apply to entities deemed to be residents of Bonaire. However, the Dutch standard treaty does not exclude entities deemed to be residents of The Netherlands (by the residency fiction) from the application of the treaty.
Provisions for double tax relief are included in the Tax Regulation for The Netherlands. Under a measure in the Tax Regulation for The Netherlands, dividend distributions by a qualifying Dutch subsidiary to its Bonaire based parent company are not subject to Dutch dividend withholding tax.