Foreign service providers subject to turnover tax

POSTED: 10/2/11 11:41 PM

Parliament approves adjustment to legislation

St. Maarten – Independent MP Frans Richardson missed the opportunity to show his true political colors yesterday morning when he was absent from a Parliament meeting about changes to the national ordinance on turnover tax. The five members of the National alliance voted against the changes, while UP, DP and independent Patrick Illidge voted in favor.

MPs Louie Laveist and William Marlin both noted that the proposed changes were apparently so complicated that even finance Minister Hiro Shigemoto did not understand them fully. The meeting was adjourned no less than six times to give the minister time to consult his staff about answering what seemed to be relatively simple questions.

The most important element in the mainly technical adjustments of the law concern turnover tax rules for service suppliers that are not based in St. Maarten. A company based on the French side or elsewhere outside of St. Maarten that provides services to a company on the Dutch side will be subject to paying 5 percent turnover tax.

If the company fails to do this, the tax inspectorate will hold the company that used the service responsible and collect the taxes there.

Minister Shigemoto made clear that no turnover tax is due over goods that are delivered from abroad. It is therefore not so that supplies for hardware stores or supermarkets will be hit with the 5 percent turnover tax upon arrival on the island. Only when companies start selling these goods will they be taxed.

The Minister said that local companies could make an arrangement with their suppliers to arrange their tax payments for them, and by doing so avoiding getting into trouble later on. How this will work in practice is unclear: it seems that companies that use service from foreign companies are given the option to collect taxes from these suppliers (for instance by deducting the amount from what is due) and to pass this on to the tax inspectorate.

MP Leroy de Weever asked the Minister why the legislation is written in Dutch and not in the language everybody on the island understands, English. He said that an announcement about the changes in local newspapers had been written in such complicated Dutch that nobody was able to understand it. “I gave that ad to Dutch people and even they did not understand,” De Weever said.

Minister Shigemoto said that he will set up an information campaign to make sure that business owners understand the implication of the changes. The changes will go into effect six weeks from now, on November 14.

The Minister said that the changes actually represent a relaxation of the existing law. “Companies can now be held directly responsible for turnover tax on services that has not been paid by their suppliers,” he said. “Under the new law, the tax inspectorate is obliged to go looking for these foreign businesses first. At the same time, local companies are free to arrange these matters with their suppliers.”

Minister Shigemoto said that the legislation includes three levels of late fees: 5 percent with a minimum of 50 and a maximum of 2,500 guilders for the first violation, 10 percent (100-5,000 guilders) for a second violation and 15 percent (150-10,000 guilders) for a third time.

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