Curaçao has entered into 25 TEIA’s with, amongst others, all key jurisdictions as the USA, the UK, Sweden, Denmark, Finland, France, Spain, Australia, New Zealand, the BVI, Colombia and Argentine.
A tax agreement to avoid double taxation is in force with Norway and the of course the TAK with the Netherlands, shortly to be replaced by the TANC.
Tax agreements to avoid double taxation where agreed upon with Malta and the Seychelles.
Curaçao has reached an agreement with the USA on April 30, 2014 to sign a model 1 IGA FATCA agreement which has come into force in 2015.
The participation exemption was modernized in 2009 and now contains a 100% exemption for dividend income and capital gains provided that:
- The Curaçao parent company holds at least an interest of 5% or more in the nominal paid in capital in the subsidiary; or
- The Curaçao parent company is a member of a Cooperative Association;
Also introduced was a dividend definition. As a result it will be possible to obtain income free from taxes from a participation that does not qualify for the full Curaçao participation exemption by way of repayment of capital, (partial) liquidation and repurchase of shares.
The profit tax rate was reduced from 34.5% to 25% in 2015 and will decrease to 22% in 2016. Furthermore introduced where:
- Tax amnesty rules;
- The tax transparent legal entity;
- The trust;
- The option for trusts, private foundations, NV’s and BV’s that meet the requirement for the tax exemption, and FGR’s to be qualified as special purpose investment vehicles (doelvermogens) and become subject to an effective tax rate of 10%.
Captive Insurance regime
The captive insurance regime was amended in 2014 and the amendments came into force retroactively as per January 1, 2013 and are intended to make the Captive Insurance regime more attractive.
Companies that insure non-domestic risks may calculate their profit on the basis of 5% of the annual premiums and capital. This profit is taxed against the normal tax rate of 25% (2015) resulting in an effective tax rate of 1.25% (2016: 1.1%).
The international trade & service facility
The international trade & service facility, or popular called the ‘export’ facility, facilitates not only trading activities, but also international banking, finance, license and other financial service activities provided certain substance conditions are met. The participation exemption rules are applicable on income derived from interest in subsidiaries held by a company that applies the export facility.
Tax Arrangement Netherlands Curaçao
The Tax Arrangement Netherlands Curaçao (“TANC”) was published on June 10, 2014, amended in April 2015 and is expected to come into force on January 1, 2016 and serves as a “treaty” to avoid double taxation between the Netherlands (including the Caribbean Netherlands) and Curaçao. The TANC is based on the OECD model treaty, but there are some differences due to the special relationship between countries within the same Kingdom and because of wishes of both countries for taxation of certain sources of income in the source country.
First I remark that Curaçao does not levy dividend withholding tax (nor does Curaçao levy withholding tax on interest or royalty’s), therefore the reduction of dividend withholding tax under the dividend article of the TANC is at this moment only important for dividend payments from the Netherlands to Curaçao
The main rule is that dividends may be taxed in the country of residence of the receiver of the dividends but that the source country may levy 15% dividend withholding tax.
Reduction to 0%
The TANC introduces a 0% dividend withholding tax rate on dividend payments to
- pension funds;
- Public entities;
- Companies that hold at least 10% of the shares in the subsidiary and in turn are held for at least 50% by individuals resident in Curaçao or the Netherlands
- Companies that hold at least 10% of the shares in the subsidiary and are considered qualifying companies under the limitation of benefits clauses.
The dividend article contains a reservation for levying taxes in situation in which a company pays a dividend to a holder of a substantial interest who has emigrated to one of the countries. Both countries may apply their substantial interest rates (the Netherlands 25%, Curaçao 19.5%) instead of the dividend withholding tax rates. The provisions seems to be applicable too on dividend payments made by companies who have moved their effective management and control to either the Netherlands or Curaçao
Exchange of information
The exchange of information provisions states that the tax authorities of Curaçao and the Netherlands will exchange information that may be considered relevant for the application of the TANC or relevant to the applied domestic tax. A privacy clause is imbedded in the exchange of information provision stating that the obtained information should be treated in the same manner as information through domestic provisions.
Emile is a tax lawyer and partner with Steevensz|Beckers Tax Lawyers in Curaçao. He holds a BA in tax law from the Academy of the Dutch Federation of tax advisors and an LL.M in tax law of the University of Leiden.
Emile is working the general tax practise with a focus on international tax structures and international tax planning, private equity structures, ruling practise, due diligence, aircraft lease, mergers & acquisitions, international trading structures and asset protection.