The most well-known part of the tax system in Bonaire is the lack of taxation on profits for companies, however that does not mean no taxes are imposed in Bonaire. The tax framework includes amongst others the Revenue Tax, the Expenditure Tax, the Tourist Tax, the Income Tax, the Wage Tax, the Real Estate Tax and the Casino Tax. Please note that profits gained as an individual entrepreneur (not a legal entity) are subject to Income Tax.
A profitable company resident of Bonaire may want to distribute some of its profits to its shareholders. These distributions may be subject to the 5% Revenue Tax. Entities in Bonaire that only obtain passive income from investments and have insufficient substance may be considered under circumstances to be resident of the European part of the Netherlands and subject to amongst others Dutch Profit Tax. Any company registered in Bonaire should therefore ensure to obtain a ruling stating that the company is a resident of Bonaire to avoid having to pay (Profit) tax in the Netherlands.
Real Estate Tax
Furthermore, companies may be subject to Real Estate Tax. This is levied on income from real estate in Bonaire in principle from the owner of that real estate as per January 1 of that year (from individuals and legal entities). The effective rate amounts to 0.7% of the value of the real estate. Please note that the real estate is only valued every 5 years and therefore the possibility to appeal against any valuation also comes once every 5 years. The new valuation period starts in 2021. Any owner of real estate should ensure that the property is valued correctly or risk paying too much tax over the next 5 years.
The Real Estate Tax applies a discounted rate of 10% on hotels that are not owned by private persons. This discrepancy means that any entrepreneur owning a property that will be included in the definition of hotel should ensure to include this in the right legal structure to ensure they will save 7.5% tax on the deemed income from this property.
One of the most complicated aspects of the tax legislation in Bonaire regards the Expenditure Tax, which is levied on the import of goods, the supply of goods by producers and the delivery of services by entrepreneurs. All producers are entrepreneurs, but not all entrepreneurs are producers.
On top of that, the delivery of services is taxed against a tax rate of 6% and the import and supply of goods is taxed against a tax rate of 8%, with special rates applicable to specific goods and services. There are furthermore various exemptions applicable, amongst which the provision of lodging or hotel rooms in Bonaire when Tourist Tax is levied.
Most entrepreneurs provide a combination of supply of goods and services, that are taxable for the Expenditure Tax against different rates. Entrepreneurs may also provide exempt services or goods in combination with taxable transactions. The entrepreneur needs to ensure they calculate the right amount of Expenditure Tax on the total revenue, which process can become very complicated and will require a split on the invoice.
For instance, a company installs a kitchen in a property, this will be deemed to be a service, but the delivery of goods in this process will be considered the supply of goods and could be considered to be taxable supply of goods. They could also be considered to be part of the service, dependent on how the sale of goods and services provided is processed. This entrepreneur therefore has to decide whether the supply of goods in the process of installing a kitchen is taxed against a rate of 8% or 6%.
Even though the tax framework in Bonaire may appear as complicated and is very different from the regime in the European part of the Netherlands, it does offer great incentives for entrepreneurs willing to invest in Bonaire and in the economy. With right assistance and the correct way of setting up your business ventures, doing business in Bonaire can offer outstanding opportunities.
Grant Thornton Bonaire
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The BES islands are Bonaire, St. Eustatius and Saba, which islands form part of the Caribbean Netherlands as per October 10, 2010.