Tax System Bonaire
The following taxes are the most relevant for your business and you as a private person in Bonaire:
- Real Estate Tax
- Revenue Tax
- Expenditure Tax
- Tourist Tax
- Income Tax and Wage Tax
Please note that there is no profit tax in Bonaire.
Real Estate Tax (in Dutch ‘vastgoedbelasting’)
The Real Estate Tax is levied on benefits from real estate from the owner of real estate as per January 1 of any year. The Real Estate Tax is calculated by imposing a deemed income of 4% on the value of the real estate. The general tax rate is a fixed rate of 17.5% on this deemed income of 4%. A discounted tax rate of 10% on the deemed income applies for the real estate defined as a hotel that is not owned by private persons.
The real estate is valued by the tax office every 5 years (current period 2021 - 2025). However, in the event of a change to the real estate through construction, renovation, improvement, demolition or destruction in the year preceding the 5-year period or in the course of the 5-year period, the tax inspector will re-determine the value of the real estate. Note that the real estate tax provides a temporary exemption for the first ten (10 years) for the increase in value of a real estate, which results from the construction, renovation, improvement, extension or renovation of the property. The Real Estate Tax also has certain exemptions. The main exemptions are:
- A principal residence, provided that the owner is a resident of Bonaire.
- Real estate belonging to the business assets of a natural person.
Anyone investing in real estate in Bonaire should make sure the value of the real estate for Real Estate Tax purposes is correct, especially since the possibility to object against a valuation (‘in Dutch waardebeschikking’) only comes once every 5 years (the first year of the 5-year period). An objection should be filed within 2 months after receipt of the valuation from the tax office.
Revenue Tax (in Dutch ‘opbrengstbelasting’)
Revenue Tax is levied from those who have shares (directly or indirectly) in an incorporated entity that is established in Bonaire. An entity that is incorporated in Bonaire is deemed to be a resident of the European part of the Netherlands for the purpose of the Revenue Tax. The profits of this entity will therefore, in principle, be subject to the profit tax and the dividend tax in the Netherlands. An entity can obtain a ruling from the tax office that it is, in fact, a resident of Bonaire. The tax office will assess whether the entity complies with the relevant conditions. The conditions entail that the entity has enough physical “substance” in Bonaire. If an entity obtains a ruling (in Dutch: “vestigingsplaatsbeschikking”) and is considered as a resident of Bonaire, its profits will be subject to taxation in Bonaire. Since no profit tax exists in Bonaire, no profit tax is due in Bonaire. Revenue Tax will however be levied on distributions of the profits by the entity to the (indirect) shareholders against a fixed rate of 5%. Distributions to a holding entity established in Bonaire are not subject to Revenue Tax. Any entity incorporated in Bonaire should make sure to obtain a ruling from the tax office stating that it is a resident of Bonaire, to avoid having to pay profit tax and dividend tax as if established in the Netherlands.
Expenditure Tax (in Dutch ‘algemene bestedingsbelasting’)
In Bonaire, Expenditure Tax (ABB) is levied on the supply of goods by producers, delivery of services by entrepreneurs and importation of goods. A producer for Expenditure Tax purposes is any entrepreneur who produces goods using raw materials or semi-finished products. Entities selling goods from a retail establishment intended to be used mainly for the sale of goods to others than entrepreneurs, are not subject to the Expenditure Tax. For the last-mentioned entities, the Expenditure Tax is assumed to be paid at import. The general tax rate of the Expenditure Tax on the supply of goods is 8%. The tax rate of the Expenditure Tax for the rendering of services is 6%. Some special rates apply for specific goods and services. Some exemptions also apply for specific supplies of goods and services. For example, an exemption applies for the Expenditure Tax on the provision of hotel rooms and apartments if tourist tax is levied. One of the difficulties arising from the Expenditure Tax is when entrepreneurs provide a combination of a supply of goods and services. If the goods (8% or not taxable if provided by a retail company) and services (6%) are provided as a combined supply, entrepreneurs need to ensure the right amount of Expenditure Tax is calculated on the total price. If for example a retail store sells a new battery for a car for a total price of USD 110 which includes the installation of the battery, only the service part of the supply is taxable with 6% Expenditure Tax. The sale of the battery is not taxable with Expenditure Tax. The entrepreneur needs to determine which part of the total price relates to service and is taxable with 6% Expenditure Tax.
Producers have the right to deduct the Expenditure Tax paid at the moment of import and the Expenditure Tax paid to other producers (as to raw materials, ancillary materials or semi-finished products).
A producer has a right to deduct the Expenditure Tax paid when:
- buying goods from another producer and using these to manufacture own goods;
- importing goods which will be used to manufacture own goods.
Take note - construction sector
Previously the (sub)contractor providing construction services would generally not be able to deduct Expenditure Tax paid: the (sub)contractor renders a service for which the right of deduction does not apply.
Based on the Decree of the State Secretary of Finance of September 23, 2011:
- Entrepreneurs in the construction sector are (also) regarded as producers if they carry out actual construction work on behalf of a client, if real estate is constructed. The result is that Expenditure Tax is due on the received contract sum by the contractor. The contractor will also be entitled to deduct the Expenditure Tax paid for the material used to construct.
- A requirement for the deduction is that the 8% Expenditure Tax will be applied on the invoice for the services performed (and not 6%).
Expenditure Tax on import
Expenditure Tax is due on the import of goods in the BES-islands. The Expenditure Tax is due on the customs value. The customs value includes taxes, levies and dues, except the Expenditure Tax itself. Also insurance, packaging and transportation are included.
In Bonaire the Expenditure Tax on import is 8%. Cars have a rate of 25%, unless the cars are energy-efficient with certain characteristics. The rates in Saba and Sint Eustatius can be different.
The Tourist Tax is levied in Bonaire on the provision of a room to stay to anyone not resident in Bonaire. A room to stay is defined as an apartment, or hotel or other room, as long as the establishment provides rooms with hotel services to more than 4 people. The Tourist Tax in Bonaire is USD 5.45 per person per night.
Income and Wage Tax
Income from employment or (personal) business, interest and dividends and other income from investments, pension income and insurance installments are taxable with Income Tax, if enjoyed by a natural person resident of Bonaire or receiving source income from Bonaire.
Certain expenses are deductible from this income (depending on the type of income), as well as interest paid on a mortgage for the principal residence, certain life insurance premiums and donations to charities. Wage Tax is a withholding tax on income from employment. An employee is a natural person who has an employment relationship with a withholding agent or who receives wage from a former employment from him/herself or someone else (pension). One of the main characteristics of an employment for tax purposes is the existence of a relationship of authority between the employer and employee. The Wage Tax withheld can be offset with the Income Tax due.
Any entrepreneur who chooses not to incorporate an entity for his/ her business will incur taxable income for Income Tax purposes, whereas income generated by entities is not taxed since Bonaire does not have a profit tax. Furthermore, on any wages paid to employees, Wage Tax should be withheld. If an employee does not live in Bonaire and the employment does not last longer than 3 months, an exemption for the withholding of Wage Tax can be obtained. Anyone working for an entity in which they participate for at least 5% of the shares or profit shares (substantial interest), is deemed to be working in an employment relationship with this entity. In this case the Wage Tax legislation provides for a minimum income of USD 14,000 per year or at least as much as is considered as usual in a situation in which no substantial interest is held by the employee. The Income Tax and Wage Tax have a progressive tax rate and a tax-free amount of USD 12.575 (2021). The tax rates are 30.4% for any taxable amount under USD 290,640 and 35.4% of any income above USD 290.640 (2021).