St. Maarten finance minister asserts ability to collect from condo owners

POSTED: 02/28/12 1:43 PM

St. Maarten – Finance Minister Hiro Shigemoto has said that Income Tax ordinance gives the country’s tax authorities the ability to request that (mostly) American condo owners pay government a portion of what they generate from renting their condos to visitors. He anticipates the implementation, which was questioned by members of parliament from the coalition and the opposition, will yield 21 million guilders in revenue in 2012, not the 48.5 million guilders mps had quoted last week.

“Based on the calculation it is anticipated that the amount of income tax is 9.7 million guilders on a yearly basis. Going back five years this means a maximum amount of 48.5 million guilders. In the budget a conservative amount is taken into account: 21 million guilders,” Shigemoto said.

The minister also announced that even if the government of St. Maarten had a double taxation treaty with the United States it would not have blocked the tax department’s ability to levy and collect the income tax on real estate.

“Based on the international principles on double taxation regarding to income derived from immovable property, the state where the immovable property is situated has the right to tax (the so called lex situs rule). When double taxation occurs, it is primarily the resident state – in this case the USA – that should avoid it by exempting the income derived from foreign immovable property from their national tax base. Therefore it is very realistic to include this item in the budget,” Shigemoto states in his answers.

Later he’d add, “Persons residing outside of St. Maarten and deriving income from immoveable properties situated in St. Maarten are subjected to tax in St. Maarten. Whether or not these persons are paying tax in their country of residence is not relevant for the enforcement of St. Maarten’s domestic tax law. In the event that St. Maarten requires the assistance of the tax authorities from other countries in the determination, assessment or collection of St. Maarten taxes, such a request will be made to our tax treaty partners.”

The finance minister admits attempting to collect this revenue is a new practice, and announces that he plans to continue it going forward. The minister also informs parliament that there is a plan of approach for implementing the collection of the income from this newly implemented measure and that he does not expect it will have any negative effects on the island’s real estate sector.

“The income tax from real estate of non-inhabitants is based on certain criteria: number of persons that owns a condo, the average rental income, high and low season and percentage of tax etc. (based on a survey held in 2011),” Shigemoto states.

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