Curaçao, a recognized international financial center, is the largest island of the Dutch Caribbean (formerly known as The Netherlands Antilles) and is located in the southern part of the Caribbean.
Curaçao enjoys a high per capita income, a well-developed infrastructure, a secure economy, and a stable political environment. Quite a large number of investment, holding and finance companies have been established in Curaçao because of the location and the fiscal framework of the island.
Corporate income tax is levied on resident and nonresident entities. Resident entities are those incorporated under former Netherlands Antilles or current Curaçao laws, even if their management is located abroad, as well as entities incorporated under foreign law, but effectively managed in Curaçao.
For resident entities, corporate income tax is, in principle, levied on the aggregate amount of net profits earned from all sources during the entity’s accounting period. Nonresident entities are subject to tax on specific Curaçao income items, such as profits earned through a permanent establishment and income related to real estate property in Curaçao, including interest derived from a mortgage on such real estate property.
Resident and nonresident entities, including branches of foreign companies, are taxed at a standard rate of 27.5%. However, different rates may apply to companies qualifying for tax holidays, E-zone companies, offshore companies, tax-exempt companies and companies applying the export facility.
Incentives are available under E-zone legislation. These incentives replaced the incentives that were previously available under the free-zone legislation. The E-zone legislation offers tax incentives to e-commerce companies and trading companies with an e-strategy that are located in an E-zone. In principle, the activities of these companies must be focused on trading with, or providing services to, companies or persons located outside Curaçao. Profits derived by E-zone companies from sales of goods or services to companies or individuals located in Curaçao may not exceed 25% of the total annual turnover. In general, E-zone companies are taxed at a rate of 2%.
The offshore regime was abolished in 2001. However, under grandfathering rules, special incentives are available for qualifying offshore companies in existence before 1 January 2002. Offshore companies are resident companies owned by nonresidents that perform their business activities abroad; that is, they mostly earn foreign-source income. Income derived by offshore companies (for example, from royalty, financing, holding, portfolio investment, mutual fund, real estate and service activities) is taxed at corporate income tax rates of 2.4% to 3%. For trading and service companies, offshore status may result in the application of reduced rates.
Tax-exempt companies (TECs) are exempt from Curaçao corporate income tax. Only private limited liability companies incorporated under former Netherlands Antilles or current Curaçao laws may qualify as TECs. TECs are allowed to solely or practically solely (more than 90%) engage in financing, investing in securities and deposits and licensing of intellectual and industrial property rights and similar property rights.
To qualify as a TEC, a company must submit a written request to the Tax Inspector and certain conditions must be satisfied. TECs are not eligible for benefits under the Tax Regulation for the Kingdom of the Netherlands or for benefits under any other double tax treaty of the former Netherlands Antilles or Curaçao. However, exchange-of-information provisions in the tax regulation, tax treaties and tax information exchange agreements apply to TECs. If a TEC loses its tax-exempt status, it is treated as a regularly taxed company subject to tax on its worldwide income, and it receives a tax-free step-up.
The Curaçao export facility provides an effective profit tax rate of approximately 3.9%. One of the requirements for the application of the export facility is that at least 90% of the profits be derived from activities oriented abroad. In addition, the company must have real presence in Curaçao that is suitable for the nature and extent of the company’s activities.
The 2011 tax reform of the Curaçao corporate income tax legislation introduced the option for private foundations and trusts to be subject to a reduced effective corporate income tax rate of 10%. In principle, Curaçao private foundations and trusts are fully exempt from corporate income tax if they do not conduct an enterprise. After the option is exercised, the reduced effective rate of 10% applies for a period of at least three full fiscal years. After this three-year period, the private foundation can request to discontinue being subject to the reduced effective rate of 10%.
Curaçao public limited liability companies or private limited liability companies can opt for fiscal transparency for Curaçao corporate income tax and individual income tax purposes. To qualify as a transparent company, a written request must be filed and certain conditions must be satisfied. If fiscal transparency is elected, the limited liability company is treated for tax purposes as a partnership; that is, only the partners can be taxed in Curaçao on Curaçao sources of income. If a transparent company loses its tax-exempt status, it is treated as a regularly taxed company subject to tax on its worldwide income.
Withholding taxes are not imposed on remittances of profits by branches to their foreign head offices and Curaçao does not levy dividend withholding tax ondividend distributions.
Curaçao has an extensive advance tax ruling practice. These rulings include the following:
These rulings are usually valid for a three-year period, with the option for extension every three years.
Curaçao currently has a tax treaty with Norway and the Tax Regulation for the Kingdom of the Netherlands (consisting of Aruba, Curaçao, the Netherlands and Sint Maarten) is applicable.
Curaçao has negotiated tax treaties with Jamaica and Malta, which have not yet been ratified by the Curaçao government.
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