What is so interesting about the Ex-patriate regulation?
Written by Sue van Elteren
Posted on 4 Feb 2016 - 4 minutes read
Both Curacao, St. Maarten, Aruba and the BES islands have a so called Ex-patriate regulation. This regulation means that expatriates who come to work on our islands can under certain conditions qualify for this favorable tax regulation.
The conditions that must be adhered to vary per (is)land but generally come down to this:
- the employee must immediately prior to his employment at one of our islands have lived abroad for a continuous period of at least five years;
- The employee possesses specific expertise at academic or HBO (higher vocational education) level;
- employee has at least a certain number of years of relevant work experience and
- a minimum expat remuneration is required which varies by island to at least ANG 100,000 each year on St. Maarten to ANG 150,000 Curacao, Aruba AWG 150,000 and USD 83 500 on the BES islands (2016 figures).
In principle, the minimum expat remuneration requirement on St. Maarten does not apply on all expats, only in the event that the expat has no specific expertise at academic or HBO (higher vocational education) level and has at least five years of relevant experience available at that level.
An expat ruling should be applied for at the Tax Authorities. This ruling is in principle applicable for a period of five years, after which an extension for the same period can be requested. In Aruba, a period of four years is applicable provided that he trains a local employee who has to take over his/her work. The expatriate status may be extended by two years, provided that the employer makes it plausible that no local employee with an expertise equal to that of the expat has been found.
The advantage of an expat salary calculation is:
- income tax is determined based on the net wage, not based on the gross salary;
- social security contributions but also the income tax may be borne entirely by the employer.
And because basically there are no deductions of social security premiums and wage taxe from the expatriate salary, the net wage of an expat is equal to his/her gross salary.
In addition, each (is)land also has other expatriate benefits. For example on Curacao ANG 15.000 per year in taxed fringe benefits (company car, phone, free living etc.) will not be taxed, so no wage tax and social security premiums have to be calculated. This exemption is called the expat exemption for fringe benefits. On St. Maarten this exemption amounts to ANG 25.000 per year and on the BES islands USD 8.380 per year. On Aruba an exemption for taxed fringe benefits is not applicable, however certain costs up to AWG 15,000 per year can be reimbursed untaxed.
In addition to the above mentioned expats benefits an expat is also eligible for other untaxed allowances such as a reimbursements of refurnishing costs and travel, hotels and rental cars can be reimbursed untaxed and/or paid for by the employer. These untaxed allowances are applicable for a certain period of time and also often maximum allowance are applicable.
The wage tax calculated based on the net wage will be deducted in the pay slip, however the exact same amount is paid back to the expatriate as some kind of untaxed allowance. By applying this method, the wage tax is actually paid by the employer. In Aruba, there is a slightly different arrangement than on the other islands. On Aruba the wage tax paid by the employer, should only once be included in the base salary for wage tax. This causes a one-time higher base salary for wage tax and the wage tax is thus once set slightly higher.
Unlike mentioned expatriate benefits expats in Curacao, St. Maarten and Aruba do not qualify for the tax deduction of the ‘acquisition costs’, on which a regular employee is entitled to. An expat in the BES islands however, does qualify for this deduction of acquisition costs.
In Celery when creating a new employee an employee category ‘expat with ruling’ can be selected. In this case, Celery automatically applies the social premiums paid fully by the employer, wage tax is paid back as some kind of untaxed allowance, the exemption for taxed fringe benefits is automatically applied and except in BES calculations the acquisition costs are removed. Also, the end date of the expat ruling has to be entered in Celery so that the employer will be reminded by Celery timely as soon as the end date of the ruling will be reached. That way Celery remembers employers in time to stop application of the expat salary calculation and/or to file a request for extension for a second expat period.
In this way, Celery makes it very easy to process a correct expat salary calculation! Try it yourself, open a fee Celery trial account and process an expat salary yourself.
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