US Expats working on Bonaire

What happens if you still want to keep working for your US employer but can work remotely from Bonaire? If you’re here as a tourist but spend some time online working for your employer back in the US, as a practical matter the local tax office doesn’t really care. And this type of short term work has no US tax impact either.

If you want to be on Bonaire more than 6 months, you do need to apply for residency.  Once you are a US Citizen and Bonaire resident two countries want to tax you but it works out that they split the tax. As a resident you are subject to Bonaire worldwide taxation.  Your salary for services physically performed while on island is subject to tax here. Services performed in the US or elsewhere are not. They are excluded from Bonaire tax because of our Double Tax Decree.  

For US tax purposes your Bonaire source salary income would still be reported in the US but it would be tax free there, either due to the Foreign Earned Income Exclusion or by using foreign tax credits.  Your US source income is taxed the same as if you hadn’t left the US.

If you are working for a US company and it is solely your own company and you are a director of the company, that company would be “doing business” on Bonaire. The company would have to register here with the Chamber of Commerce and the tax office.  There is no corporate level income tax as long as you meet the requirements of the BES 0% rate. But the salary you earn here would be subject to quarterly withholding taxes.   As long as you are a director there are no employer payroll taxes.

If you are an employee of a company which you don’t own, say “Giant USCo”,  the rules get a bit fuzzier.  Technically an employee working for Giant USCo could create a “permanent establishment” of Giant USCo here by having an “office” here. Giant USCo would have to register same as the example above.  This is a typical international tax rule and now a big deal everywhere due to Covid.  Most US companies do not like the extra registration and paperwork that goes with establishing a branch in a foreign country so you’d need to discuss that with your employer.  This is especially true if the company has customers on Bonaire, or if you are an officer of the company.  The extra cost to Giant USCo if registered would be a 13.4% employer’s payroll tax on your salary, plus the filing requirements above.  

If you are a lowly regular salaried employee and there are no customers of the Giant USCo on Bonaire, it would be an exposure for the company but unlikely to be investigated by the local tax office.  So far I have not seen the local tax office try to get the foreign company to register in this case, but that does not really mean your employer is home free, just seems to be under the radar.  It’s better to have the discussion with your employer first than to have them be contacted by the tax office with a request for years of back taxes.

To avoid the exposure entirely, some employers will only allow you to continue to work for them outside the US on a consulting basis, not as an employee. You would set up your own US or Bonaire company, which collects a fee from Giant USCo, and that company pays you a salary.  That company would be yours to register here.  This provides a buffer between Bonaire and Giant US Co. You would cease to be a direct employee of Giant USCo and in most cases would lose employee benefits like health care, vacations, etc. You’d have to decide if it’s worth it, but I have had this solution work for some clients, especially if they are nearing retirement.

Some US employers will not agree at all to allow an employee to work from another country and won’t agree to the "contract with your company" idea, so then you’re kind of stuck; guess it's time to retire!