Finance Minister Gumbs Tables Revised Procedural Tax Law in Parliament

GREAT BAY--Minister of Finance Marinka Gumbs presented the National Ordinance Revised Procedural Tax Law (“Landsverordening herzien formeel belastingrecht”) to Parliament of St. Maarten, describing the proposed amendments as a first step in a broader tax reform process focused on modernizing procedures, strengthening compliance, and improving legal certainty.

In her presentation, the Minister emphasized that procedural tax law governs how taxes are administered, collected, and enforced, and that updating it is necessary to adapt to changing times, safeguard revenues, and maintain fairness for taxpayers. She also stated that the law is being updated to ensure St. Maarten can fully meet international tax treaty obligations, particularly regarding the exchange of information.

A decade-long trajectory, with key submissions and amendments

The Minister outlined that discussions on introducing the revised procedural tax law date back to 2010. She explained that in September 2016 the draft law was submitted to the Council of Advice of St. Maarten, with advice returned to government in January 2017. The draft law was officially submitted to Parliament on November 10, 2023, a few months before the January 2024 election.

After taking office in May 2024, the Minister said she instructed that an amendment note be prepared, and that the amended package was subsequently submitted to Parliament on March 7, 2025. She stated it is not entirely clear why it took approximately eight years after the 2017 advice for the draft to be formally submitted to Parliament, while acknowledging that Hurricane Irma and the COVID-19 pandemic likely caused significant delays within government processes.

In the amendment note, the Minister further detailed that the draft law was submitted to Parliament via the Governor’s office on November 10, 2023. She stated that on February 26, 2025 the Department of Fiscal Affairs submitted a Nota van Wijziging, which was approved by the Council of Ministers of St. Maarten on March 5, 2025 and sent to Parliament on March 7, 2025.

What the revision covers, and what it does not

The Minister stressed that the revision pertains to procedural tax laws, including:

• the General National Ordinance on National Taxes (ALL),
• the Collection Ordinance,
• the National Ordinance on the Collection of Direct Taxes, and
• the ordinance governing collection through writs of execution and related legal proceedings.

She underlined that these revisions do not affect material tax law such as who and what is taxed, assessment bases, or tax rates, and that those topics will be handled separately once submitted to Parliament.

Reform objectives presented to Parliament

The Minister said the procedural framework is being updated and modernized “to align with current times,” and listed key areas addressed in the proposed amendments:

• enhanced enforcement and increased compliance measures,
• the introduction of a Transparent Company regime,
• adjustments to align with international standards introduced by the Organisation for Economic Co-operation and Development and the Caribbean Financial Action Task Force,
• rectifying omissions, modernizing, harmonizing, and clarifying provisions,
• simplifying and harmonizing collection legislation,
• inclusion of the Audit Team St. Maarten (ATS) foundation and reinstatement of SBAB in the legislation.

Stronger enforcement tools and higher penalties

The Minister stated that the draft introduces enhanced enforcement measures intended to deter evasion and create a level playing field. She explained that the amended law would grant the Inspector of Taxes authority to impose corrective penalties by applying the National Ordinance on Administrative Enforcement (approved by Parliament in 2018), enabling enforcement orders that include a payment penalty (dwangsom) or administrative coercion (bestuursdwang), once independently deemed applicable for the Inspector to legally impose such sanctions.

She also presented increases in fines for non-compliance such as non-filing or late filing, and the possibility to designate cases where a penalty of 200% can be imposed, an increase from 100% to 200%. She said current compliance and enforcement measures are outdated and that fines have lost much of their intended effect since the introduction of the ALL.

Electronic communication, a legal foundation for digital tax administration

A key procedural improvement presented was the option for electronic communication with taxpayers. The Minister said paper-based communication has become increasingly ineffective, pointing to cases where assessments do not reach taxpayers, reach too late, or where submitted returns cannot be traced due to manual handling and physical processing. She added that electronic communication can reduce administrative burdens, deliver cost and paper savings for the Tax Department, and reduce environmental impact associated with transmitting paper documents.

She clarified that taxpayers will retain the option to communicate solely through paper if they desire, and that the electronic channel is an addition, not a replacement. She also emphasized that adoption of the law does not mean official documents can immediately be sent to or received from the Tax Office electronically, stating this is not yet the case. According to the Minister, the provisions are meant to lay the legal foundation for future digital tax administration, with additional safeguards and verification measures still required for full implementation, supported by a new tax IT system.

Adjusted time limits for additional assessments

The Minister stated that the proposal reduces the period for additional assessments in domestic cases involving taxpayer-caused errors from 10 years to 5 years. She also stated that in cross-border situations involving taxpayer-caused errors, the period is extended from 10 years to 15 years.

Transparent Company regime, flexibility and shareholder-level taxation

The Minister described the proposed Transparent Company regime as part of an effort to increase diversification and flexibility in the tax regime for entities in St. Maarten. She said flexibility includes the ability to choose from various legal forms, and argued that offering a wide range of entities and facilities can make St. Maarten more attractive to investors.

She explained that a Transparent Company is an NV or BV that requests to be treated as a partnership for profit tax, income tax, and dividend tax purposes once it meets all relevant criteria. Under this approach, the company itself is not liable for corporate income tax, and for St. Maarten tax purposes the company’s income and assets are deemed to be those of the shareholders in proportion to their entitlement. She stated that if a resident or a St. Maarten-established legal entity is a shareholder, that person is directly taxed on their share of profits, and that profits earned by the Transparent Company immediately qualify as income earned by the shareholder for yearly filings.

International obligations, beneficial ownership and prosecution risk

The Minister told Parliament that the draft includes amendments driven by recommendations received from the OECD Global Forum and the (C)FATF, including proposals related to identifying the ultimate beneficial owner. She stated that if a person subject to the obligation does not properly record beneficial ownership data or answer the Inspector’s inquiries, they may be liable to prosecution under Article 49 of the ALL. She said this reflects the government’s commitment to cooperate with other states to combat tax evasion and avoidance.

Clarifications and harmonization, including partner definition and objections

The Minister said the draft also corrects shortcomings and technical inaccuracies in the ALL, adds definitions to strengthen clarity, and expands how the Inspector may request presumed taxpayers to file returns, including inviting groups through public announcements via the media, and, in the future, facilitating electronic submission instead of physical delivery or distribution of forms.

She outlined additional proposed changes, including:

• expanding the ALL’s scope so it becomes directly applicable to room and car rental tax (with the Inspector as competent authority),
• updating and defining terms (including permanent establishment, Director, Inspector, Receivers, CRIB number, among others),
• introducing a legal system for delegation of the Inspector’s responsibilities with clarified scope,
• streamlining partner definition by introducing a general partner definition in the ALL that includes spouses and unmarried adults with a notarial cohabitation contract who are registered at the same address in the Personal Records Database,
• enabling one objection letter for multiple assessments (instead of separate objections per assessment),
• clarifying the obligation for institutions required by law to share information with government, given differing interpretations and confidentiality claims,
• allowing fiscal confidentiality exemptions to be granted by ministerial regulation to improve efficiency, without lowering confidentiality standards.

Collection laws to be integrated

The Minister said the proposal would integrate two ordinances governing the collection of tax debts, extending the Collection Ordinance to apply to all taxes and repealing the Ordinance on the Collection of Direct Taxes. She stated that omitted articles from the repealed law would be included to avoid incompleteness.

Amendment note additions, ATS and SBAB, capacity constraints, and implementation date

In the amendment note, the Minister stated that the Foundation Audit Team St. Maarten (ATS) is formally included within the framework of the Tax Authority so that Inspector powers apply equally to ATS and SBAB, and that both entities can conduct tax audits under the same legal framework, including via Article 48 of the ALL.

She said that after taking office she met ATS employees, including three St. Maarten students completing their RA study, and described that as meaningful, pointing to capable young professionals willing to serve the country. She also stated she advocated for Article 48(2) to be amended to reinstate SBAB after it had been removed from the draft law, and to formally include ATS in the list of public institutions under the ALL.

The Minister cited recruitment and retention challenges linked to restrictive salary scales, stating that the Tax Office audit department currently has only three tax auditors, which she said is not sufficient for modern tax administration. She argued that ATS, staffed with qualified professionals, is essential to strengthen audit capacity and improve compliance.

She also presented the retraction of an implementation date of January 1, 2025, stating it is no longer feasible. Additionally, she said a separate article is introduced to formally establish the citation title as “Landsverordening herzien formeel belastingrecht,” correcting an omission and fulfilling a legal requirement intended to enhance legal certainty.

The Minister described the revisions as “necessary, measured, and forward-looking,” and said they modernize tax administration, strengthen compliance, and enhance legal certainty while safeguarding fairness. She stated that since taking office she has been advancing the digital archiving of tax documents and working to ensure AOV benefits for pensioners are not treated as taxable income.

She told Parliament that next week she will return with a proposal for the retraction of land and inheritance tax, and that work is ongoing on other adjustments, including the approach toward a reduction in profit tax. She asked Parliament to support the amendments so the country can continue building a strong, transparent, and reliable fiscal framework.

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