CURAÇAO OFFERS A WIDE RANGE OF TAX INCENTIVES GEARED TOWARDS SPECIFIC BUSINESS NEEDS.
FOR ALL BUSINESSES THE FOLLOWING FISCAL INCENTIVES ARE AVAILABLE:
- Depreciation of business assets;
- Investment allowance of 10% of the total investments in business assets of ANG 5.000 can be deducted for profit tax. However, if the investments are alienated, a disinvestment addition should be included to the taxable income of the year of the disinvestment.
- Retirement contributions for pensions are tax deductible.
- Loss Compensation and Carry Forward: losses of a particular fiscal year can be carried forward and deducted from the profit tax that has to be paid during the following consecutive ten years
- Participation Exemption: profits received by a holding company from a subsidiary in which the holding company holds 5% or more of the shares, can be 100% exempt from profit tax.
- Fiscal Unity: a holding company and its 100% subsidiaries, can form a fiscal unity for profit tax purposes whereby the companies are regarded as one taxpayer for profit tax and the losses of one or more companies can be offset with the profits of other companies within the fiscal unity.
- Business Merger: companies can benefit from tax facilities to achieve a business merger tax free
- Legal Merger: companies can benefit from tax facilities to achieve a share merger tax free.
- No withholding taxes in Curaçao on dividends, interest or royalties
In addition to these general incentives Curaçao offers the following specific incentives and entities depending on your specific situation and activities.
This incentive offers tax facilities to investors who invest in hotel construction, industrial companies and land development, provided they meet the conditions of a minimum investment of ANG 5 million and for certain projects providing employment to at least 10 FTE’s invest. The exemptions are:
INTERNATIONAL SHIPPING COMPANY
Aside from the shipping and aviation tax rate, international shipping companies can request the application of the favorable tonnage tax. With the tonnage tax the company declares a fixed amount of profit based on the tonnage of the ship instead of the actual profit. The tonnage tax can be requested by companies that solely exploit ships. To use the tonnage tax the company must register its ship in the tonnage tax register.
- Gross profit of the company is calculated based on a fixed profit starting at ANG 2.00 per net ton up to 10.000 net ton, ANG 1,35 for between 10.000 net ton and 25.000 net ton and ANG 0.60 per net ton exceeding 25.000 net ton.
- The calculated fixed profit is taxed at the general rate of 22%.
- The user/non-owner and the managing company can also be assessed on the tonnage.
Based on the territorial system only profits obtained from domestic business are included in the taxable basis of profit tax. A distinction is made between domestic direct expenses and foreign direct expenses in relation to the core income generating activities. The non-domestic portion of the benefits is demonstrated by the ratio of domestic and non-domestic costs to the extent that they are causally related to revenue generation. In other words, depending on the cost calculation formula, the foreign profit of a company established in Curaçao can be excluded from 22% profit tax.
Through the use of a transparent company, the risks of operating a business may be limited without the company being subjected to profit tax. The company is transparent for tax purposes and will be treated as a partnership and the shareholders as the partners in that partnership. The shareholders / partners are deemed to have received direct benefits according to their share in the profit of the company.
The transparent company is for example often used to set up a joint venture.
A company with a capital divided into shares can obtain an exempted status for profit tax and be subject to 0% profit tax. The exempt company regime is geared towards investment and finance purposes. An exempt company may for example be used as a mutual fund or for intercompany finance activities. However, investment in real estate is not allowed. To qualify for the exempted status, the company must meet certain conditions with regard to the allowed activities, management, shareholders registry and annual accounts.
PRIVATE FOUNDATION AND A CURAÇAO TRUST
A private foundation and a trust are widely used for investment purposes, normal asset management or for management of family assets. If the private foundation or trust does not carry on a business, it is exempted from profit tax. In case the Private Foundation does operate a business, the profit from that business will be subject to the general profit tax rate of 22%. It is possible to request that the private foundation or trust are regarded as a taxable Special Purpose Fund (in Dutch: doelvermogen). The corporate tax rate will in that case be 10% on regular income as well as capital gains.
Two special income tax regimes are available for those who want to move to Curaçao:
- Pension (penshonado) regime.
- Expatriate regime.
Available to individuals who earn pension income or who live from capital returns and take up residence in Curaçao. There is no requirement as to nationality and no stipulation of a minimum period of residency. To be eligible the following requirements must be met:
- The person must have lived abroad during the five years before becoming a resident;
- The person must have reached the age of 50 at the time of registration;
- The request must be submitted to the Tax Inspectorate within two months;
- The person must be legally admitted for residency for an indefinite period of time;
- The person is entitled to a foreign pension or other income from sources abroad, including income from work performed abroad;
- The person owns a residence or a protected monument on the island with a value of at least ANG 450,000 (approx. USD 250,000).
The legislation provides for two income tax options, namely:
- Income from foreign sources is taxed at 10%, or
- Foreign income is fixed at ANG 500,000 (USD 280,000) and the corresponding income tax due amounts to approx. ANG 220,000 (USD 120,000);
- Depending on the age of the individual social securities will be due as well.
The regime is meant for employees who contribute ‘specific expertise’ to a company in Curaçao. It offers advantages such as exempted salary components and exempted fringe benefits. Most important advantage is that a net salary does not have to be grossed up. Thus the taxable income is calculated based on the net income instead of the gross income which leads to significant tax savings. If granted it applies for a maximum of 5 years, with the possibility of an extension up to 10 years.
- Completed studies at an institution of higher education or academic institution;
- At least 5 years of working experience;
- A salary of at least ANG 150,000 per year; and
- The “specific expertise” may not be, or not readily be, available in the local labor market.