PWC advises Dutch Caribbean to act jointly in their tax affairs

Friday, 25 November 2011

PHILIPSBURG--Since the constitutional changes of October 10, 2010, fiscal relations between the Dutch countries have changed and it would be wise to join hands in the negotiations with "big brother" the Netherlands to arrive at an optimal new fiscal agreement, according to PricewaterhouseCooper PwC associates operating in the region.

Since the sixties, the fiscal relations between the Netherlands and the Antilles have been regulated in the so-called Tax Regulations for the Kingdom (BRK). With the dissolution of the Netherlands Antilles, word is out that these regulations are no longer regulated in one new BRK, but in individual mini BRKs, for instance between St. Maarten and Curaçao or Aruba and the Netherlands. "This seems logical, because in this way the specific characteristics of the tax systems of both countries can be taken into account, but it also presents a risk," according to the experts Roland Brandsma and Suniel Pancham of PwC in the Netherlands, Hans Ruiter PwC Aruba, Steve Vanenburg PwC Curaçao, and Paul van Vliet PwC St. Maarten.

The three Caribbean countries will each have to negotiate individually with the Netherlands; needless to say that the individual islands find themselves in the "underdog position. Consequently, we advocate that the islands intensively prepare jointly and act united.

"In this way they prevent unnecessary mutual differences and they can conclude an optimal BRK with the Netherlands. It is very well possible, for that matter, to still arrive at one new BRK. The Nordic Convention, a multilateral tax convention concluded between the Scandinavian countries, proves it. This Convention on the one hand observes uniformity as much as possible, and on the other hand makes room for the differences in the various tax systems."

The experts said that acting jointly is also wise, because the Netherlands announced that it wants to base the fiscal relations with Aruba, Curaçao and St. Maarten on the same foundation as the relations with other contracting countries outside the European Union. "A surprising point of view, given the centuries old Kingdom ties, but particularly also because Aruba, Curaçao and St. Maarten are consequently still not treated the same as EU member states such as Malta or Bulgaria."

A good example is the dividend tax. For years, European Union (EU) member states have not been allowed to levy dividend tax on dividends within groups of companies. Under the present BRK, the Netherlands already treats the islands worse by levying 8.3 per cent dividend tax.

"This certainly does not benefit the competitive position of the islands. The Netherlands already stated several years ago that it only wants to give up dividend tax if dividend tax is levied on the islands in the event of distribution (which is already the case in Aruba at present, for that matter). It is expected that the Netherlands will (continue to) demand this from Aruba, Curaçao and St. Maarten."

They added that the question arises "why members of our own countries within the Kingdom are treated worse in a fiscal sense than the member states of the European Union. By adhering to this dividend tax and concluding mini BRKs with probably a worse fiscal starting position for the islands than the European member states, the Netherlands does not seem to take its responsibility for the further, necessary economic development of the other countries of the Kingdom seriously. This should never be allowed, in our opinion, and therefore we say: Dutch Caribbean, watch your affairs!"