HEDGE FUNDS AND TAXATION IN THE NETHERLANDS ANTILLES
The Netherlands Antilles provides a favorable tax climate
The Netherlands Antilles provides a favorable tax, legal and regulatory climate for (hedge) funds. It is possible in the Netherlands Antilles to discuss in advance with the tax authorities what at arms length remuneration will be acceptable. A tax-exempt vehicle is available for hedge funds. Furthermore, the Netherlands Antilles are concluding tax treaties with several other countries, such as Venezuela.
The Netherlands Antilles do not levy withholding tax on dividends or on royalties. A withholding tax on interest on savings accounts of individuals resident in the EU has been introduced (but not yet entered into force) in line with the EU savings directive as has been implemented by for example Luxembourg, BVI and Guernsey and Jersey. The implication of the EU Savings Directive in Europe and a lot of other countries are burdensome for funds and administrators qualifying as UCITS (Undertaking for the Collective Investment of Transferable Securities). As opposed to e.g. the Cayman Islands, funds established in Curaçao do not qualify as UCITS and therefore there is no need to withhold on redemption or pass client information to tax authorities in third countries.
The Netherlands Antilles corporate taxation will depend on the kind of vehicle used for the (hedge) fund. Please note that the below only applies if the (hedge) fund is a resident of the Netherlands Antilles for Netherlands Antilles corporate income tax and (if applicable) tax treaty purposes. Consequently, certain substance requirements should be fulfilled in the Netherlands Antilles.
Under certain conditions it is possible to obtain a tax-exempt status for a BV (private limited liability company). As a consequence of this status, a BV will not be subject to Netherlands Antilles corporate income tax. To obtain such status a number of criteria will have to be met.
Since interest is not considered a taxable remuneration for Netherlands Antilles turnover tax purposes, there is no Netherlands Antilles turnover tax payable in respect of the payment of interest. Also, payments in consideration for the issue by the (hedge) fund of shares, or the transfer of Notes or, principal or premium (if any) under debt securities are not subject to the turnover tax.
Turnover tax will in general be incurred on fees payable to investment advisers / managers, lawyers and accountants. VAT will also be due on any fee paid to the Netherlands Antilles trust company. However, in case certain conditions are being met, (hedge) funds will be exempt for turnover tax purposes. Also, in that case no turnover tax will be due on any fee paid to investment advisers/managers, lawyers, accountants or the Netherlands Antilles trust company.
Karel Frielink
Attorney (Lawyer) / Partner
