Running a self-employed business on Bonaire

If you are just starting off, you may decide that the cost of setting up a B.V. or N.V. and all the extra compliance issues are more than you can handle. You can start a self employed business here instead. It less up front cost and less filing requirements but does have some trade offs. It probably makes sense to just be self employed if the profit of the business will be under $20,000, but let's look at the issues.

Bonaire side:

A self employed business here is called an "eenmanszaak." The shorthand is an "EZ." You complete some paperwork at the Chamber of Commerce and register with the tax office. The taxes you be paying will be the ABB/sales tax (quarterly) based on the tax you collect from local customers. Since you are self employed, there is no wage withholding on what you earn. But if you hire employees you will need to also register and file quarterly wage withholding tax forms. The profit of the business will be reported on your Bonaire personal income tax return. If you have no other sources of income, the first $12,575 (2021 rate) is tax free and the balance is taxed at 30.4%. Unlike the profit of a Bonaire company, there is no zero tax rate to apply to the profit. A loss can offset other Bonaire taxable income, if you have any that is not already excluded under the Double Tax Decree.

US Side:

Because there is no "entity" there is no Form 5471/8992 and all the complexity that adds to your US return. You would report the income and expenses on Schedule C on your US return. The net income is subject to ordinary income tax after the $12,550 Standard Deduction (2021 rate.) But because you are earning this income outside the US you can either exclude the income as Foreign Earned Income on a Form 2555 or claim the Bonaire tax paid as a foreign tax credit on Form 1116. Because you are self employed the net income is also subject the self employment tax of 15.2%. The exclusion and credits only apply to income tax, not SE tax, so this is an extra cost. On the other hand if you have a loss, that loss can be used against other income in the US or carried forward to offset future income. In that way it is better than the GILTI rules that apply to Bonaire companies.

So you can see there are a lot of moving parts when comparing having a business on Bonaire in the corporate form or not.