PHILIPSBURG, Sint Maarten — Risk Auditor discovered a very recurring inconsistency in regards to Finance and acquisitions of capital properties in Sint Maarten. The problem relies on mortgages provided to NV/BV companies however the property purchased becomes personally owned. This practice has been occurring unnoticed, while the result of such in the Tax environment can be devastating.
Describing the case
The Bank loans a company an amount over which interest is calculated, which is 100% realistically and legally the burden of the company NV or BV however the property may not be registered in the books of the NV. if the deed does not indicate the NV/BV as the title holder . This scenario indicates that the NV is committed to paying for a property for 20 or 30 years over which no ownership rights can be exercised. In this case all payments to the bank must be registered as loan to the property holder for the pay back condition.
If the property holder is a liability in the company NV/BV the explanation can be given to pay off the liability, however the liability validation of the property holder will come into question. How did he obtain the funds of the finance? Another aspect is if the property holder becomes a receivable, there must be a Shareholder meeting minutes to support the funds released to the property holder.
Taxation impact
The Tax Department in such a case can consider the amount paid in the monthly installment as salary and or Profit share distribution over which taxes are due.
In addition this situation causes that the company is not entitled to any investment incentives and may not depreciate the asset. If the Accountant in the exercise overlooked the condition all the results of the Financial Statements are retroactively misrepresented and will trigger penalties in the Profit Tax environment. In addition interest charges for the loan cannot be declared in the income tax atmosphere.
This problem must be solved by Tax specialists due to the nature of the number of financial inconveniences and legal entanglements that are currently in blind corners.
