The Netherlands Antilles with new attractive Tax Planning Opportunities.

In September 2009 the parliament of the Netherlands Antilles approved a bill to amend the profit tax legislation. Under the new legislation the extent of tax exemptions will be broader. On the other hand some requirements will be added.

Participation Exemption The minimum cost price of participation to qualify for the participation exemption will be USD 500,000. Provided certain conditions are met, the 100% participation exemption will apply to all qualifying participations held by corporate tax payers in the Netherlands Antilles, regardless of the residence of the company in which the participation is held.

In order to qualify for the 100% participation exemption:
• at least 5% or minimum cost price USD 500,000 must be subject to a nominal profit tax rate of at least 10%
• or the gross income of the participation must consist for less than 50% of passive dividend, interest or royalty income (income other than out of an active enterprise).

The participation exemption will be 70% if these requirements are not met. This 70% exemption will result in an effective profit tax rate in the Netherlands Antilles of about 10%.

A 100% exemption will apply to dividends received from a company that exclusively or almost exclusively holds real estate.
Capital gains derived from qualifying participations will be 100% tax-exempt.

Dividends can be distributions of profits determined on basis of the annual accounts or distributions of retained earnings. The purchase price paid by a company for own shares, liquidation proceeds, repayment of paid-up capital and distributions of bonus shares are not considered dividends.

Exemption for foreign profits
Profits derived from a foreign permanent establishment, foreign permanent representative or real estate situated in a foreign country, are 100% tax-exempt under the new legislation.

There are no requirements with regard to the taxation of income or the type of income that the foreign permanent establishment receives.

The tax-exempt company 
The Netherlands Antilles private limited liability company (BV) can, under certain conditions, be 100% tax-exempt.
Under the old legislation the statutory and actual activities of the tax-exempt company must exclusively or almost exclusively consist of investments in debt instruments and/ or securities and/or deposits.
Under the new legislation the tax-exempt company may also provide licensing activities with regard to intellectual property rights.

Conclusion
New attractive opportunities for tax planning have been created in the new profit tax legislation of the Netherlands Antilles.
The extent of the existing tax exemptions has been significantly broadened