Tax news
General expenditure tax
For BES islands
Highlights
At a glance
At a glance ........................................................ 1
This tax news applies to the BES islands.
Introduction ..................................................... 2
Business ........................................................ 2
Operating an asset ........................................ 2
Tax rate ............................................................. 2
Tax base ............................................................ 3
Exemptions ................................................... 3
Deduction ..................................................... 4
Construction ................................................. 4
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
01 & 02
Introduction
Business
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.
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.
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.
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 1830% applies.
The rate will be nil if it concerns a very low
energy car.
2
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$ 20,000.00 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
03
Deduction
Construction
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.
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
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 email to [email protected]
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