Netherlands Antilles Introduces Tax Incentives For E-Commerce Businesses

Jason Gorringe, Tax-News.com, London

09 March 2001

we are grateful to Mr Guido H Jansen of PricewaterhouseCoopers for providing information for this story: guido.h.jansen@an.pwcglobal.com

As reported recently, the Netherlands Antilles government has been preparing special tax legislation for international internet companies on Curacao. The legislation has now been finalised and will come into force from 1st April 2001. The Government's companion 'Ordinance on E-zones' came into force as from 1st March 2001.

In addition to progress on the legislative front, Curacao has a semi-official E-commerce platform at www.e-curacao.com where representatives from business and governmental operate a public-private partnership. The platform consists of four task forces: logistic, financial, legal/ tax and technological. Each task force works on amendments and improvements in their respective fields and when necessary engage in cross- border activities that help fulfill the objective of improving the e-business infrastructure on Curacao.

Leading figures behind the Curaçao e-platform think that the jurisdiction's traditional strengths in distribution facilities, international financial services and a stable legal and political environment, underpinned by its relationship with the Kingdom of the Netherlands put it in an ideal position to provide a regional base for international e-businesses.

Here is the text of a report on the new tax legislation provided by PricewaterhouseCoopers in Curacao:

E-zone Tax Facilities

1. Introduction

As of April 1, 2001 the E-zone legislation will enter into force. The E-zone legislation should firstly be seen as an incentive for e-commerce companies to (re)locate their activities to the Netherlands Antilles. Secondly, the E-zone legislation replaces the old Free-zone legislation (tax facilities for companies engaged in a.o. trading goods).

This letter contains general information regarding the E-zone legislation and highlights the tax facilities for e-commerce companies that are located in one of the appointed E-zone areas.

The E-zone legislation provides (e-commerce) investors a variety of (tax saving) opportunities.

2. General information

What is an E-zone?

An E-zone is an area within the Netherlands Antilles in which, amongst other, international trade and trade supportive services may be performed supported by electronical communication and information equipment (e-commerce).

Who may perform activities in an E-zone?

Only legal entities with a capital divided into shares may perform activities in an E-zone. The activities of these companies must in principle be focused on trading or providing services to companies located outside the Netherlands Antilles.

However, conducting business with other companies also located in an E-zone is also allowed. If business is conducted with companies located in the Netherlands Antilles the company has to file a request with the competent authorities. If this request is granted the company will receive a list of conditions that will have to be met. The conditions can relate to price setting, quality of the goods and services and the distribution of the goods. The turnover generated through local business may not exceed 25% of the total turnover.

Procedure to enter into the E-zone

Legal entities with a capital divided into shares will be admitted to the E-zone only if they perform activities as described above (under "What is an e-zone") and furthermore, their business activities will contribute to the economical growth of the Netherlands Antilles either by generating foreign currency or employment.

A request should be filed with the local authorities in order to be admitted. The local authorities are entitled to impose special conditions and restrictions to the entrance permit.

3. Tax facilities

Profit tax

The profit of the e-zone companies will be taxed at 2% (surtax included) until January 1, 2026.

This 2% rate is not applicable on the profit of an E-zone company, which is generated through the sale of goods or services to companies located in the Netherlands Antilles or generated through rendering of services to affiliated companies located in the Netherlands Antilles.

Import duties and turnover tax

No import duties and turnover tax is due on goods entering the E-zone and services rendered by a Netherlands Antilles company to an E-zone company. Furthermore, no import duties and turnover tax is due on products delivered to or services rendered to other companies located in the E-zone or outside the Netherlands Antilles.

Wage tax

Employees who lived for more than 5 years outside the Netherlands Antilles before starting to work for an E-zone company, providing e-commerce services, could, if certain conditions are met, qualify for the so-called expatriate status. An E-zone company is then allowed to calculate the wage tax on the net salary of the employee without being required to gross up the salary. Furthermore, the E-zone company can grant certain tax free benefits to the employee.

4. Supervision

The local authorities will see to it that the E-zone companies meet the conditions as stated in the E-zone legislation. If it appears that a company is located in the E-zone, whilst not fulfilling the conditions, penalties can be imposed on the respective company or the entrance permit can be withdrawn.

5. Finally

The E-zone legislation provides great opportunities for companies doing business through electronical means.
At this moment it is known that two areas qualify as E-zone and a third will be added shortly. These areas have state of the art telecommunication facilities, which provide direct and reliable internet access. It may well be that in future other areas will be appointed.

The aforementioned information on E-zone legislation is designed to provide a general understanding of the principal features of the new Netherlands Antilles tax regime for the international financial services industry. The information provided should be used for guidance only. The summary is not intended to be comprehensive, and no specific action should be taken on the basis of this information without consultation of one of our tax lawyers/consultants.

For further information please contact directly one of the tax lawyers/consultants of PricewaterhouseCoopers Curaçao at (telephone) 5999 43 00000 or (facsimile) 5999 46 11119.

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