Dear Weekender,
As the end of the year approaches, we would like to take this opportunity to share some general information on time-sensitive tax-saving opportunities that may still be implemented before year-end.
Reduction individual taxable income
Certain expenses incurred before the end of 2025 can reduce the taxable income. Some examples are as follows:
- Donations to certain organizations. These reduce your taxable income with a maximum of 3% of that income, provided the requirements are met.
- Certain expenses related to your own home may reduce your taxable income, such as financing costs (maximum of XCG 27,500) and maintenance costs (maximum of 2% of the value for land tax purposes and not exceeding XCG 3,000). It is important that the date of actual payment is in 2025, regardless of the invoice date or due date.
- Interest paid on personal loans can reduce your taxable income for a maximum of XCG 2,500 (or XCG 5,000 for married couples).
Real estate rental income*
Real estate entrepreneurs are advised to closely check to which extent they are engaged in commercial rental and rental of certain private dwellings. It is advisable to make a distinction between these two types, because of the different turnover tax consequences connected with it:
- Commercial lease is normally taxed with turnover tax.
- In case of lease for habitation, it can be permanent habitation or short-term lease. If it concerns permanent habitation, i.e., habitation for at least one year, an exemption from turnover tax can be applied. If it concerns short-term lease on the other hand, turnover tax will in principle be due.
- We emphasize that if it concerns short-term lease to tourists, an exemption from turnover tax is applicable, provided that room tax is due.
Contractors
If you retained services from individuals offering their services as independent service providers, the names, address, identification number and telephone numbers of these individuals should be reported to the Tax Authorities no later than January 31, 2026.
Tax provisions*
Under certain conditions, it is possible to form a provision for future expenses. In that way, such future expenses may already be deducted from the taxable profit of this year.
Creating a provision can also be helpful to support your liquidity position. If there is a reasonable level of certainty that the expenses will arise in the future, it may be advantageous to form a provision, for example, for the following items:
- Expenses for legal proceedings.
- Medical expenses and other employee benefits.
- Risk of irrecoverable loan receivables and claims.
Investment deductions and accelerated depreciation*
Assets used within the company should be capitalized on the tax balance sheet and depreciated over time in accordance with the applicable rules. The depreciation rate depends on the life span of the assets and the remaining value. Alongside these established depreciation rates, there is also the option for accelerated depreciation, which allows the company to depreciate one-third of the acquisition cost of a business asset early in its useful life. This enables the company to recognize higher expenses in a year when it has higher taxable income.
If an amount exceeding XCG 5,000 is invested in business assets in a fiscal year, 8% of the investment amount may be deducted from the taxable profit of that year as well as from the taxable profit of the next year. For real estate investments (not land), the deduction rate is 12%. This means that…
- It can be advantageous to enter into obligations before January 1, 2026, with regard to envisaged investments, in order to already claim the investment deduction this year.
- The (higher) depreciation basis will also be available sooner.
If your qualifying investments in 2025 are below XCG 5,000, it could be considered to make additional qualifying investments before the year end to meet the threshold.
UBO-registry
As of June 8, 2024, the St. Maarten Chamber of Commerce & Industry (“COCI”) has begun registering Ultimate Beneficial Owner (“UBO”) information for companies, foundations, partnerships, trusts, and foreign entities conducting business in St. Maarten in the UBO registry. Newly incorporated legal entities must file their UBO information within seven (7) days of incorporation.
We trust that this provides you with valuable insights once again, and we wish you all a wonderful end to the year. #knowyourtaxes
Yours sincerely,
Nicole Echobardo | HBN Law & Tax
