Q&A: Netherlands Antilles and Austria

It started to fall apart when Aruba left the NA to become a separate constituent kingdom under the Dutch Crown. That left Curaçao, Sint Maarten, Saba, Bonaire and St. Eustatius in the NA. Under the latest deal, Curaçao and Sint Maarten would each become separate Kingdoms under the Dutch Crown, just like Aruba, while Saba, Bonaire and St. Eustatius would revert to direct control of the Netherlands home government.

Thus, the position of Aruba, Curaçao and Sint Maarten vis a vis the Dutch Crown would be similar to the status under the British Crown held by the Channel Islands and the Isle of Man, but without as much independence as Barbados (which shares the British Queen but not its government).

The position of Saba, Bonaire and St. Eustatius would become similar to the French overseas departments of Guadeloupe and Martinique.

At present, the NA is negotiating a bilateral Tax Information and Exchange Agreement (TIEA) with the United States. The NA government also announced that it will continue with its new policy of creating a double tax avoidance treaty network by commencing talks with Nordic countries in February 2007. Many offshore professionals would NOT consider this anywhere near a positive development.

In 2004 a new corporate law was introduced which simplified and liberalized some aspects of the formation and operation of most of the corporate entities. The most common include:

Netherlands Antilles Limited Liability Company (NV): This is the traditional format used by limited companies in the Netherlands Antilles. At least one shareholder is required, who may be legal or natural person. General Meetings must be held annually in the Netherlands Antilles, but shareholders can be represented by proxies. Managing directors can be persons or entities, and at least one must be resident in the NA. The authorized capital of the NV must be at least NAF50,000, of which 20% must be paid-up on incorporation. Shares can be registered or bearer; but the latter must always be fully paid-up. A registered office must always be maintained in the NA. There is no requirement to audit or file annual statements. The incorporation process is somewhat cumbersome, involving an investigation of prospective shareholders by the Ministry of Justice. A Netherlands Antilles NV cannot solicit funds from the public, sell its own shares publicly, or engage in banking, insurance, fund management etc without licenses or permissions from the Central Bank. A business license and a managing director's license need to be obtained annually, before business can actually commence.

Netherlands Antilles Offshore Company: This term has traditionally referred to standard NV which meets some additional conditions qualifying it for low tax treatment. All of the company's shares must be held by non-resident individuals or companies; and the company's income and profits must be derived totally from outside the jurisdiction.

The 2004 corporate law also provides for the following company types.

Netherlands Antilles Besloten Vennootschap (BV): incorporation is quick and relatively informal; there are no minimum capital requirements; the Deed of Incorporation can be in any language, although a Dutch or English translation must be attached; shares may or may not have a par value, voting rights or participation rights; shares must be registered; the BV must keep a share register; the BV can be converted into an NV and vice versa, or the two may merge.

Netherlands Antilles Exempt NABV: can be exempt from tax if: an application for a 0% tax rate is approved by the tax inspector; the Board of Directors must consist of resident individuals or resident certified trust companies; the purposes and activities of the BV should be limited to lending and investment, or financial services, or other similar activities short of becoming a bank!

Netherlands Antilles Stichting (Foundation): The stichting is the civil law equivalent of the common law trust. The main characteristics of the stichting are as follows: its creation must be entered in the commercial register of the Chamber of Commerce; it has no equity holders; it is managed by personal or corporate directors who may not share in the profits or assets, but one of which must be resident in the Netherlands Antilles; the identity of beneficiaries or holders of certificates of participation need not be disclosed; it may be transferred out of the NA to another civil law jurisdiction; and it is taxed in the same way as an NV. (US persons should note that the IRS generally considers civil law foundations as trusts, no matter what someone else calls them. As trusts they bring a tremendous amount of scrutiny on everyone connected to them.)

Tax Rates: The effective tax rates for most NA companies which are wholly-owned by non-residents and have no income from with the NA is between 2% and 3%. It should be pointed out that its tax regime is very complicated and cannot be effectively navigated without the use of local onsite expertise.

Asset Protection: Except perhaps for the stichting, “Asset Protection” does not figure very much in the offshore regime the NA has created and developed to date.

My analysis is that it is clear from the way the newest legislation is written that the NA wants to continue as an international financial center, but is increasingly directing its efforts towards financial services companies and larger corporate clients. As such, it may not be the best choice for a lone individual seeking asset protection or tax reduction. For the “little guy” this is an expensive an cumbersome place to do business with little real privacy and no substantial asset protection. In additional, we have no idea which way the wind will blow once the breakup is complete. Unless you are establishing an operation that fits within the NA’s targeted industries, I suggest a pass…

I will answer the second part of your question later this week.

—The Navigator