Important Court ruling for transfer tax on long lease right renewals

When you hold a long lease right (in Dutch “recht van erfpacht”) on land owned by the government of St. Maarten/ Curaçao, you are usually allowed to construct a building on such leased land. However, the long lease rights are not indefinite; often they are valid for several decades. After this period, you must renew your long lease right to continue occupying the land. This renewal constitutes a taxable event for transfer tax purposes (in Dutch: “overdrachtsbelasting”).

In the past, it has been common practice of the Tax Authorities to charge 4% transfer tax, not only on the value of the land but also on the value of any building situated on this land. Our office started a tax court case on behalf of a client against the Tax Authorities, arguing that the transfer tax for renewal of long lease rights may only be levied on the value of the land and not also on the value of the buildings.

The Court of First Instance has judged in favor of the taxpayer (our client) and has ruled that a long lease right holder can only be charged transfer tax on the value of the land, not also on the value of the building(s).

If your long lease right is due to expire or has been recently renewed and the notary has withheld transfer tax on the value of both the land and the buildings, please contact Maarten Tervoort at our St. Maarten office or Arthur van Aalst at our Curaçao office.

Maarten Tervoort, tax adviser St. Maarten, tervoort@bakertillysxm.com
Arthur van Aalst, tax adviser Curaçao vanaalst@bakertillycuracao.com