Dear Weekender,
Right in the middle of the Summer Holiday season, I will touch base on a very attractive tax incentive for investors – the so-called Tax Holiday.
The Tax Holiday regime is a tax incentive that provides investors with a number of tax exemptions, provided that a certain amount is invested, certain requirements are met and the proposed investment falls within the scope of the Tax Holiday regulation.
According to the text of the applicable Tax Holiday legislation, only the Sint Maarten public limited company (in Dutch: “naamloze vennootschap; N.V.’’) can apply for a Tax Holiday. One can apply for the application of the Tax Holiday via a formal written request to the Minister of Finance, and it is granted by national decree (in Dutch: “Landsbesluit”).
A Tax Holiday may be granted to, amongst others, investors that will develop uncultivated land, building roads and constructing real estate, the construction of a place for leisure and entertainment, hotel exploitation, expansion or renovation.
The main conditions to qualify for the Tax Holiday for Property Development (in Dutch: “grondontwikkeling”) are basically that the project should contribute to the fostering of the Sint Maarten economy and employment, consisting of an initial investment of ANG 2,000,000 (approx. USD 1,124,000) and creating permanent jobs for a minimum of five local citizens.
For Hotel Exploitation (in Dutch: “hotelbouw”), the project should also contribute to the fostering of the Sint Maarten economy and additionally foreigners’ visit. The initial investing amount must consist of ANG 1,000,000 (approx. USD 562,000) and the project should also create permanent jobs for a minimum of five local citizens.
In case of a Hotel Renovation (in Dutch: “hotel renovatie”), the same conditions as above apply, except the investing amount must consist of at least ANG 50,000 (approx. USD 28,000) and the request should be submitted with the Governor of Sint Maarten.
In case the application of the Tax Holiday regime is approved, a Sint Maarten NV can enjoy, amongst others, a profit tax relief by means of a reduced rate of at least 2% on the realized profits with the sale of the developed uncultivated land or lease land and additionally profits realized with the hotel exploitation. Please note that that the regular profit tax rate is 34.5%, which makes this tax incentive very attractive.
The tax relief period may vary with a maximum of 15 years for property development and 11 years for hotel exploitation.
In addition, dividends and other profit distributions, made by the Sint Maarten NV that has obtained the tax holiday to its shareholders (individuals), are exempt from personal income tax, provided that the distribution took place within two years upon completion of the financial year in which the profit was made.
When applying for the Tax Holidays regime, it is highly recommended to have a tax professional assist with this process, since various support documentation and additional substantiation is required. #knowyourtaxes
Sincerely,
Nicole Echobardo | HBN Law & Tax
