Changes to the BBO legislation for 2023

Changes to the BBO legislation for 2023

Introduction

On November 11, 2022, the Government introduced a memorandum of changes to the 2023 budget of the Government. One of the proposed changes is to introduce a BBO/BAVP/BAZV (“collectively (”BBO”) at import. as of June 1, 2023. The draft budget legislation was subsequently passed by the parliament. The 2023 budget, therefore, includes the amended income streams for the government to include the BBO to be levied at the time of import at either the airport or the port. Following this change in fiscal policy, the government will have to amend the BBO legislation. This will have to be introduced to parliament before the end of the year along with the other elements of the fiscal reform. These changes i.e. the BBO at import already exist in draft legislation that was being considered in 2020 but was not introduced.

The 2023 BBO

Currently, no BBO is levied at the time of import (at the border). According to the explanatory note to the draft law, the incentive for businesses and natural persons to self-import goods becomes stronger as the BBO rate increases. This development is deemed undesirable as it results in certain economic inefficiencies. Some of these inefficiencies include the creation of a non-level playing field between professional importers such as wholesalers vis-a-vis other businesses that self-import (the same) goods for their operations. An example of this would be the self-import of food, beverage, and construction products that are otherwise available from local importers. The introduction will be combined with a  right of deduction for business on BBO levied on the import of commercial intended for direct re-sale otherwise known in Dutch as “‘handelsgoederen”. These goods are those that are imported e.g. by wholesalers or other businesses that import a (finished) product and sell this directly to an end-consumer (“Goods”).  An example of the latter would be an electronic store that imports iPhones and sells that to its clients. Because of this right of deduction, the cumulative effect of the BBO on these products is eliminated and therefore avoiding a cumulation of BBO for the end-consumer. This will help suppress the inflationary impact on the Goods, which includes food and beverage items. The right of deduction is limited only to those businesses that trade in Goods. Other companies that import goods that are not intended for direct resale but that will be consumed or processed for the sale of another product or service will not have this deduction option. Natural persons or businesses that are involved in the trade of Goods but that have avoided their legal obligation to pay BBO, will not be able to get the right of deduction. Hence, this measure will also aid in the increased compliance of the BBO, which will also benefit the treasury.

Broadening the base

This principle is similar to the VAT or BTW commonly used in Europe and other countries. This will lead to a broadening of the base of BBO players. Businesses that before were fully exempted from BBO will now contribute to the treasury by paying BBO on the import of goods. This will generate more revenue for the government, which can be used to support aspects such as education and health care.

The current estimate is that the new BBO will raise an additional Afl. 35 million per year. Sources from the field indicate that this amount is a rather conservative estimate. For 2023 the forecast is set at Afl. 15 million for the year 2023 because the change will take place effective June 1st, 2023.

Hotels, restaurants, real estate & manufacturing

While the IPC regime for the hotels will expire the hotels will benefit from a deduction of the BBO paid at import from the profit taxes, hence this measure will not adversely impact that sector. Most local restaurants do not rely on the self-import of their principal food & beverage products and therefore are not likely to feel an increase in cost because of this measure. Real estate developers will now have to pay BBO for the import of construction materials and FF&E. This one-off payment based on the current real estate market does not affect the appetite of the developers to continue to develop, not the buyers from buying. Bottom liners will complain but in the end, profits will dominate. Local manufacturers would not have to be BBO on raw materials.