The Tax aspects with respect to renting real estate
Introduction
This memo comprises an overview of the tax aspects relating to renting real estate in St. Maarten. It is not intended to be comprehensive and consequently should only be relied on as an introduction to general tax matters relating to renting real estate. The tax aspects are considered with respect to renting real estate by residents and non-residents of Sint Maarten. Please note that non-resident taxpayers are, in principle, taxed in the same way as resident taxpayers, however certain restrictions apply.
When a taxpayer owns property directly, the taxable rental income corresponds to received rental income less deductible expenses. However, if the property does not constitute a business, the received rental income is taken into account at 65%.
The net rental income
As mentioned in the previous paragraph, the received rental income is taken into account at 65%. The received rental income is the income received for renting the property. The owner of the property is allowed to split the revenue of the property in revenue for renting the property and revenue for renting the furniture of the property. Only the deducted of the rental income are expenses that are normally for the account of the user, such as:
• Cleaning;
• Garden maintenance;
• The users electricity bill;
• Costs of an agent who oversees the property;
Expenses of an agent who is helping the owner to find renters are not deductible. Expenses with regards to maintenance or other expenses that normally are for the account of the owner are not deductible. The only expenses that are deductible of the 65% rental income are interest paid on a loan taken out to acquire the property and the premiums for the mortgage-linked life insurance and 90% of the paid Turnover Tax. The result of the above mentioned is the net rental income and is subject to Income Tax rates ranging from 12,5% to 47,5%(2014/2015).
Example
The correct way to calculate the taxable rental income is:
Total rental income ANG 80,000
Furniture income ANG 30,000 –
Rental Income ANG 50,000
Rental Income: ANG 50,000
-Cleaning ANG 1,000
-Garden ANG 1,000
– Electricity Bill ANG 1,500
-Agent ANG 1,500
Rental Income ANG 45,000
ANG 45,000 x 65% ANG 29,250
-Interest on loan ANG 3,000
-Life insurance ANG 250
– 90% Turnover Tax ANG 1,000
Net rental income ANG 25,000
The net rental income of ANG 25,000 is subject to Income Tax rates ranging from 12,5% to 47,5% (2014/2015).
Please note that after applying the above rates, the taxable amount may be reduced with a basic reduction for residents and non-residents: ANG 1,976(2014)/ 2,025(2015). Residents of Sint Maarten may be qualifying for other allowances, such as child and/or senior allowances.
Filing an Income Tax return
The Income Tax return should be filed within two months after the date stipulated on the income tax return form. If the taxpayer did not receive a return within six months after the calendar year and is expecting to have to pay Income Tax, he or she must request issuance of a tax return within fifteen days after expiration of the six month period. It is possible to request an extension, which is limited to 18 months after the end of the tax year concerned.
Other taxes Room Tax (‘Logeergastenbelasting’) / Turnover Tax:
Please note that a 5% Room Tax (“logeergastenbelasting”) is levied from nonresident guests of hotels and other guesthouses, including rentals of vacation villa’s and condos. The turnover of real estate is in principal subject to 5% Turnover Tax. However, there is an exemption for the Turnover Tax if the rented property is the home and principal residence of a resident of St. Maarten. There is also an exemption for the turnover of real estate if there is Room Tax paid over the turnover.
Transfer Tax / Real Estate Property Tax:
A Transfer Tax (“overdrachtsbelasting”) of 4% is levied on the transfer of real estate. Furthermore there is a Real Estate Property tax (“grondbelasting”). This annual tax is levied on the value of the real estate. The tax rate amounts to 0,3% of the value of both unimproved property and improved land with structure, and is charged to the owner of the properties. However, due to lack of a real estate value system on Sint Maarten for over 40 years, this tax is currently not levied by the government of Sint Maarten.
