In Sint Maarten, income earned from short-term rentals is subject to taxation. The taxable rental income is calculated by taking 65% of the gross rental income, from which certain deductible expenses are subtracted. These expenses may include interest paid on loans used to acquire the property, premiums for mortgage-linked life insurance, and 90% of the paid Turnover Tax. The resulting net rental income is then subject to income tax rates ranging from 12.5% to 47.5%, depending on the amount.
Saint Martin, divided into the French side (Saint-Martin) and the Dutch side (Sint Maarten), has distinct tax systems impacting short-term rentals (STRs) due to its dual governance structure. Here's how the tax regulations relate to STRs:
Dutch Side (Sint Maarten):
- Room Tax (Logeergastenbelasting):
◦ A 5% room tax applies to vacation rentals, including villas, condos, and guesthouses.
◦ Time-share guests pay a fixed fee of NAF 90 (USD 50) per week, included in the annual maintenance fee.
- Turnover Tax (BBO):
◦ A 5% turnover tax is levied on goods and services, including STR activities.
- Real Estate Property Tax (Grondbelasting):
◦ This 0.3% annual tax is levied on the value of both improved and unimproved real estate, affecting rental property owners.
- Transfer Tax (Overdrachtsbelasting):
◦ A 4% tax applies to real estate transactions, including properties used for STRs.
- Compliance:
◦ Property owners must collect and remit these taxes as per the tax code.
French Side (Saint-Martin):
- Tourist Tax (Taxe de Séjour):
◦ A 4-5% tourist tax is applied to STR accommodations and collected directly from guests.
- Corporate Tax Exemptions:
◦ There are tax incentives for investments in new commercial properties, with exemptions on property taxes for the first five years.
- No Import Tax on Goods:
◦ Goods, including those for rental properties, are duty-free except for specific products like petrol.
- TGCA Tax:
◦ This indirect tax, similar to VAT, is not levied on imported goods.
Key Impacts on Short-Term Rentals:
• Revenue Generation: Tourism, including STRs, significantly contributes to the economy, with cruise-related tourism generating $423 million during the 2014/2015 season on the Dutch side alone.
• Economic Importance: STRs support local employment and contribute to public infrastructure through taxes, but compliance is critical for property owners to avoid penalties.
• Tourism Recovery: Both sides rely heavily on tourism, but events like Hurricane Irma (2017) and COVID-19 disrupted operations, making tax revenues even more crucial for economic recovery.
Recommendations:
STR owners in both territories must ensure compliance with tax laws, including proper registration, collection, and remittance of taxes, to avoid penalties and contribute to local economic development.
Additionally, a 5% Room Tax is levied on non-resident guests of hotels and other guesthouses, including rentals of vacation villas and condos. This tax is typically collected from guests and remitted by the property owner or manager.
It's important for property owners engaged in short-term rentals to maintain accurate records of all income and deductible expenses to ensure compliance with Sint Maarten's tax regulations. Filing an income tax return is mandatory, and the necessary documents, such as statements of rental income and proof of expenses, should be submitted to the Tax Administration.
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