Q&As on adjustments to the tax system of the Caribbean Netherlands - Speech from the Throne 2024 (Prinsjesdag)

• The Cabinet wants to make the tax system of the Caribbean Netherlands more straightforward and more in line with the Dutch system. 

• People earning the minimum wage will no longer need to pay income tax with effect from 2025. This ensures that they retain a higher net amount. To achieve this, the tax-free allowance is linked to the statutory minimum wage in the Caribbean Netherlands.

• The Cabinet proposes to reduce the entry amount of the 2nd tax bracket from USD 322,769 to USD 50,000 with effect from the 1st of January 2025. This will put residents earning at least USD 70,728 in the 2nd bracket in 2025. They will then be paying a higher tax rate on the taxable income exceeding USD 70,728. With this proposal, the Cabinet wants to distribute income tax more fairly and tax higher incomes more.

The Cabinet proposes some changes that will affect entrepreneurs:

• The reduced property tax rate for hotels is increased from 10% to 11% effective from 2025.
• The yield tax and substantial interest rate is increased from 5% to 7.5%. This ensures that entrepreneurs with a private limited company (BV) will be paying more tax on their profits, bringing the tax rate closer to the Dutch and international levels.
• Effective from 2026, the threshold for the small business scheme (KOR) is adjusted annually based on the inflation.

• The small business scheme (KOR) offers tax benefits to small entrepreneurs with limited revenue. Effective from 2026, the Cabinet intends to adjust the KOR annually in line with the inflation, so that even if their revenue increases due to inflation, small entrepreneurs remain eligible for this scheme.

• The Cabinet proposes to introduce an identification requirement for employees with effect from the 1st of January 2025. Entrepreneurs will then be required to ask for a copy of the identity document of the employee. And keep the copy in the payroll administration. With this, the Cabinet wants to prevent employees from working undeclared. And prevent employers and employees from not paying taxes as a result.

• The plans are part of the Tax Plan 2025 and are addressed in the Tax Plan (BES Islands) Bill 2025. The approval of the House of Representatives and the Senate is still required before these reforms can be introduced. The relevant vote is expected in November and December 2024.