Income tax on your second home on Bonaire?

As a real estate agent and appraiser on Bonaire, we frequently encounter inquiries regarding the acquisition, ownership, and transfer of a second home on the BES islands (Bonaire, St. Eustatius, and Saba), also known as the Dutch Caribbean. Let us briefly explain the various types of taxes involved in real estate in the Dutch Caribbean while you reside in the European Netherlands. Let's examine the key points without too much legal jargon.

When purchasing the vacation home

When purchasing a vacation home on the BES islands, a 5% transfer tax is levied on the fair market value. This value must be at least equal to the purchase price. There are exemptions available, such as for newly constructed buildings. For new construction, the local equivalent of VAT applies, known as the General Consumption Tax (ABB) at 8%.

While owning the vacation home

Annually, property tax is levied on the notional yield of the property's value. How this works exactly, including calculations and exemptions, can be found here: Property Tax on Bonaire (Vastgoedbelasting).

When renting and selling the vacation home - income tax

Foreign taxpayers do not pay income tax on real estate in the BES islands. Dutch residents are exempt in the Netherlands from income tax on rental income and sales profits.

A brief explanation: If you are residing in the European Netherlands, the Netherlands will want to include the vacation home on one of the BES islands in the income tax assessment (box 3) (based on the residence principle). The BES island will want to include the vacation home in the property tax assessment (Vastgoedbelasting) because the property is located there. Fortunately, there is a provision to prevent taxation in both places. Under the Tax Agreement for the Netherlands, the Netherlands will grant a reduction to prevent double taxation. In other words, you only pay property tax on Bonaire.

When gifting and inheriting the vacation home

Since January 1, 2011, no gift or inheritance tax has been levied on the BES islands. When gifting or inheriting the property on Bonaire while residing in the European Netherlands, it will be taxed in the Netherlands, without double taxation due to the absence of gift or inheritance tax on the BES islands.

Are you considering purchasing a vacation home on Bonaire? Take a look at our offerings suitable for vacation rentals. Click here for our listings suited for vacation rentals.