Room Tax vs. Turnover Tax
Dear Weekender,
Sint Maarten’s tourism economy runs on short stays. A villa rented for a week, a condo booked through Airbnb, a guesthouse filling up for carnival season. For property owners renting to visitors, this steady stream of income is welcome. What’s less well understood is which tax applies to that income, and why getting the answer wrong can be costly.
The confusion is understandable. Two taxes sit side by side, both charged at the same 5% rate, both connected to accommodation, yet the law draws a firm line: If you’re engaged in short-term lease to tourists, an exemption from turnover tax applies, provided that room tax is due instead. In other words, these are not two taxes stacked on top of one another. They are two different regimes, and only one applies at a time, depending on what kind of rental you are actually running.
Turnover Tax (BBO)
Sint Maarten’s turnover tax, known as TOT – in Dutch: “belasting op bedrijfsomzetten” (BBO) –is levied at 5% on the delivery of goods and all services rendered within the territory by resident or non-resident entrepreneurs acting within the scope of their business. This is the general, catch-all business tax, and it applies broadly to commercial activity, including most commercial leasing arrangements.
However, the ordinance carves out a specific exemption. An entrepreneur established within the tax territory is exempt from TOT on that portion of turnover shown to have been realized through the rental of immovable property to private individuals who reside within the tax territory, where that property is fitted out and intended for permanent habitation.
Two things stand out here. First, the exemption is tied to the tenant’s residency, not simply the length of the lease. Second, and importantly, whether a private individual “resides” within the territory is not determined by a fixed test, the law specifies it is assessed based on the circumstances of each case. A landlord cannot rely on a lease term alone to establish exemption; the actual living situation of the tenant is what counts.
This is precisely why short-term tourist rentals fall outside this exemption and into room tax territory instead. A tourist renting a villa for a week is, by the circumstances, plainly not a resident using the property as a permanent home.
Room Tax
Room tax – in Dutch: “logeergastenbelasting” – works the other way. Rather than taxing the entrepreneur’s turnover, it is a tax on the guest, collected and remitted by the property owner. The ordinance defines its scope precisely: It applies to anyone staying in a hotel, guesthouse, pension, apartment, house, or other building suitable for accommodation, in exchange for payment in any form, provided that person is not registered in Sint Maarten’s basic administration.
This last point matters. The determining factor isn’t nationality or how long someone intends to stay in a general sense; it’s whether the guest is formally registered as a resident in the local civil registry. A foreign national, who has properly registered locally, would fall outside the scope of room tax; a guest who isn’t, even during an extended stay, will generally fall within it.
It is worth noting, for completeness, that timeshare guests are not subject to the standard 5% rate. Instead, timeshare guests pay a fixed weekly fee of approximately XCG 90 (approximately USD 50). Owners and managers of timeshare units should therefore not apply the general percentage-based room tax calculation.
So which one applies to you?
Read together, the two provisions point to the same underlying test, approached from opposite directions:
- If you rent to someone, who resides in Sint Maarten, for permanent habitation, and the circumstances support that, you are generally exempt from TOT.
- If you rent to someone, who is not registered in Sint Maarten’s basic administration –typically a visiting tourist – room tax applies instead.
- Commercial lease that falls outside both of these categories is where TOT will normally apply.
For owners renting out a single villa or apartment to vacationers, this usually means room tax is the relevant obligation, not TOT.
Don’t forget Income Tax
Room tax and turnover tax are levied on the transaction. Separately, and in addition, the income itself is taxable. All rental revenue from Sint Maarten property must be declared in the personal income tax return for individuals (or the corporate income tax return (the so called “profit tax return” for entities), including payments received through platforms such as Airbnb, Booking.com, or Agoda. This is easy to overlook when income arrives electronically through a platform rather than directly from a tenant, but the Tax Authorities treat it no differently. Where a property owner is found to have intentionally underreported such income, a penalty of up to 100% of the undeclared amount can be imposed on top of the tax itself.
Final thought
For many property owners, short-term rental income feels like a straightforward side business. Tax-wise, it isn’t quite that simple, two similarly rated taxes govern different kinds of stays, and a third obligation sits on top of both. Understanding which applies, and reporting accordingly, is the difference between a manageable filing and an unwelcome assessment down the road. #knowyourtaxes
Yours sincerely,
Nicole Echobardo | HBN Law & Tax
