Until October 10, 2010, the Netherlands Antilles was one of the three countries of the Kingdom of the Netherlands (together with Aruba and the Netherlands). As part of a constitutional reform of the Kingdom, as of October 10, 2010 the Netherlands Antilles (the islands of Bonaire, Curaçao, Saba, St. Eustatius and St. Maarten) ceased to exist. Upon dissolution of the Netherlands Antilles, the island of Bonaire, St. Eustatius and Saba (the so-called BES-islands) became part of the country of the Netherlands as extraordinary overseas municipalities. Curaçao and St. Maarten are now autonomous countries within the Kingdom of the Netherlands (like currently the island of Aruba).

All current legislation of the Netherlands Antilles will remain in force, unless it is replaced by new legislation. It is expected that Curaçao and St. Maarten will for the time being apply the current tax system of the Netherlands Antilles. However, new (tax legislation is drafted for the BES islands.1

The Netherlands Antilles Guilder will disappear. The BES islands will adopt the US dollar as currency, whilst Curaçao and St. Maarten will introduce a new currency that is linked to the US dollar (likely named the Carribean Guilder).2

Also the court system will remain the same, with a court of first instance for Aruba, Curaçao and the BES islands, and one court of appeal in Curaçao. Judges and notaries will continue to be appointed by the Queen of the Kingdom of the Netherlands.

Below, we will describe the most important tax consequences of the state reform for taxpayers on Curaçao, St. Maarten and the BES islands.3

Curaçao and Saint Maarten

Curaçao and St. Maarten will become autonomous countries within the Kingdom of the Netherlands. These new countries will be the legal successor of the Netherlands Antilles. It is contemplated that these countries will for the time being apply the current Netherlands Antilles (tax) legislation and tax treaties. In this respect, Curaçao issued a decree that among others clarifies that concluded tax rulings with the Netherlands Antilles will remain applicable.

Although the constitutional reform should not have tax consequences for taxpayers on Curaçao and St. Maarten, it may be that for taxpayers that currently have a presence on different former Netherlands Antilles islands, or were involved in inter Netherlands Antilles transactions, adverse tax consequences may occur in respect of, inter alia, sales tax and/or import duties.

Taxpayers who live on the former Netherlands Antilles and who benefit from the so-called penshonado ruling, will at present not incur any adverse tax consequences. The foreign sourced income of these taxpayers will still be taxed at a rate of 10% following the dissolution as per October 10, 2010. However, a transitional provision foresees in the abolishment of the penshonado ruling over a period of 4 years.

From a legal point of view, in contracts and other legal documents reference may be made to Netherlands Antilles law and/or to the Netherlands Antilles Guilder. On an individual basis these contracts may need to be amended. It may also be necessary to replace existing choice of venue clauses that appoint Netherlands Antilles courts to resolve disputes. However, as long as Curaçao and St. Maarten apply Netherlands Antilles law, it is anticipated that courts will continue to accept authority or and apply these laws.

BES Islands

As of October 10, 2010, the BES islands are an extraordinary overseas municipality of the Netherlands, and therefore became part of the country of the Netherlands. Nevertheless, specific tax laws are drafted for the BES islands (that still need to be approved by Dutch parliament). It is envisaged that the new tax legislation will become effective as of January 1, 2011.4 As of this date, the US dollar will be the functional currency.

Highlights of the proposed tax legislation are:

  •  the abolishment of the profit tax
  •  the introduction of a real estate tax (a deemed 4% yield on the value of real estate held on the BES islands  taxed at 25%)
  •  the introduction of a withholding tax of 5% on outgoing profit distributions
  •  the introduction of so-called Handels- & dienstenentrepots (to replace the free zones)
  •  introduction of a fictive place of business rule: all BES entities are supposed to be a resident of the Netherlands, unless sufficient substance on the BES islands, or located in a Handels-& dienstenentrepot on the Bes islands
  •  introduction of a flat rate for wage and income tax

Please note that the BES tax legislation has not been approved by the Dutch parliament yet, although the Second Chamber of the Dutch parliament already approved the legislation on October 7, 2010.