Interesting New Low Tax Havens in Dutch Caribbean

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One offshore low tax zone we don’t hear much about is the Netherlands Antilles, a group of islands in the Caribbean that were colonised by the Dutch. However, they have long served as an attractive offshore base for European and other multi-nationals, as well as quite a number of offshore banks including First Caribbean International Bank and Maduro & Curiels. Interestingly, some major reforms are underway there that may be of interest to our readers.

Bucking the worldwide trend, and thankfully disproving the naysayers who would like to suggest that offshore havens have no future, the Netherlands could have a zero corporate tax zone and an attractive, better regulated offshore banking and asset protection system, as of October this year.

In that month, the current political entity known as the Netherlands Antilles will be broken up. The various Caribbean islands that currently make up the Antilles will get a new political status. Curaçao and St Maarten will become ‘autonomous territories’ within the Kingdom of the Netherlands, the same status that Aruba has right now.

The other three islands of the Netherlands Antilles – Bonaire, St Eustatius and Saba, together called the BES islands – will become special municipalities of the Netherlands. More details about the Netherlands Antilles and the political changes taking place can be found on Wikipedia.

The BES islands will get their own tax code, and the current proposal does not include a corporate income tax. (Distribution of dividends to shareholders will be subject to a ‘revenue tax’ of 5%)  With this special tax code, and highly privileged access to the European Union via their status as municipalities within the Netherlands, these islands will become very attractive offshore financial havens.

The Ministry in the Dutch capital writes: “The proposed system for corporate and dividend taxation for the BES islands strengthens the relative competitive position of the BES islands in the Caribbean region.”  The reference group studied for this purpose includes Bermuda and the British Virgin Islands, whose governments are reportedly none too happy about the proposal.

To qualify for the no-tax zone, companies do have to meet certain economic substance conditions. In other words, mere shell companies or IBCs will not be permitted. The companies must utilise at least half of their assets for business activities on the islands, and will be required to employ at least three locals. Still, considering that these islands are attractive places to live, comparing very favorably with the best of the Caribbean jurisdictions, I don’t think most people would consider these requirements unduly burdensome.

In practice, say local experts, the new tax code might not make big difference. Right now the BES islands have so-called e-zones ór free trade zones where the corporate tax rate is just 2% .  The greatest beneficiary of the current system is probably Valero Energy Corporation, a US oil trading giant, which maintains an oil terminal on St Eustatius.

So what will become of Curaçao and St Maarten? These two islands will maintain their fiscal autonomy, but they are bound by the EU code of conduct on business taxation.

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