PHILIPSBURG--Minister Franklin Meyers signed a NAf. 270,000 agreement with Dutch funding agency USONA on Friday for the setting up of an economic zone or e-zone on St. Maarten.
The minister said the establishment of such an e-zone, already in place on Curaçao for years, should boost the investment climate, create employment opportunities, and broaden the tax base.
"St. Maarten is a modern economy, very vulnerable to external and internal shock. Therefore, the Ministry for Tourism and Economic Affairs is proactively looking into means of strengthening and diversifying the current one-pillar economy of St. Maarten," the minister said.
Economic zones refer to special areas where normal trade barriers such as import or export tariffs do not apply. Bureaucracy is typically minimized by outsourcing it to the Free Economic Zone operator. Corporations setting up in the zone may be given tax breaks as an additional incentive.
Companies qualifying for e-zone status are legally guaranteed a profit tax rate of two per cent (island surcharges included) until December 31, 2025. An e-zone company is, in principle, only allowed to deliver goods and render services to customers who are not resident in the islands of the former Netherlands Antilles. On request, the delivery of goods and provision of services to customers resident within these islands will be allowed, but the profits of such transactions will be liable to the current 34.5 per cent profit tax.
The minister said the creation of an e-zone on the island is possible "without much difficulty" as the national ordinance on e-zones is already established. "Only decrees are necessary," he said.
He said the law will go to the Council of Ministers for approval close to the end of March. All requirements to establish a company within the e-zone will be outlined in the said law. The actual setting up of the e-zone will be mandated to the Ministry of Economic Affairs.
In order to stimulate foreign investment in the former Netherlands Antilles, the National Ordinance on Economic Zones (Official Gazette 18/2001) was introduced and took effect from January 1, 2001.
The e-zone legislation replaced the former free zone legislation, transforming former free zones into e-zones. However, the aim of the e-zone legislation is broader in scope, as it is also intended to attract e-commerce activities to the former Netherlands Antilles; the former free zone legislation only provided tax facilities for physical distribution. A specially-designed high-tech office park was built in Curaçao to attract e-commerce activities.
Based on the provisions of the National Ordinance on Economic Zones, an e-zone can be described as an area where goods can be stored, repackaged, processed, assembled, and the like, and services can be provided. However, restrictions apply to companies that wish to operate from an e-zone. For example, certain services - such as management services, accounting services and services performed by lawyers - cannot be provided from an e-zone. It is not clear if this would be the case for St. Maarten.
