Curaçao

Tax residency – A BV is tax resident in Curaçao if it is incorporated under Curaçao law or it is managed and controlled from within Curaçao.

Basis – Corporate income tax is levied on worldwide income.

Tax rate – The corporation tax rate is 22%. However, there are several favorable tax regimes:

• Investment Institutions: A BV which activities are limited to investments in debt instruments, securities, and deposits, licensing of intellectual and industrial properties and similar assets may qualify for a full tax-exemption.
• E-Zone Companies: E-Zone companies are subject to a profit tax rate of 2% and exemption on import duties. To qualify as an E-Zone company all goods and services must be sold and rendered to clients outside Curaçao.
• Transparent entity (TV): Companies may request to operate as tax transparent legal entities (i.e. treated as a partnership for tax purposes).

In order to meet requirements under the BEPS Inclusive Framework – Curacao has also adjusted its tax regime to abolish deemed ‘harmful’ features.

E-Zone companies will be limited to goods and repair and maintenance services, and the distinction between the local or foreign supply of goods and services has been abolished. Now, all supplies of goods will be taxed at 2%, regardless of the client locations, and will no longer be exempted from sales taxes. E-Zone companies are also required to fulfill certain conditions related to the economic substance in order to qualify for the regime.

Previously, export facility companies which had 90% or more of their income derived from foreign clients were subject to a reduced rate of 3.2%. Under new amendments, the export facility regime has been replaced by a new tax regime applying territorial taxation – income from foreign sources is not subject to either turnover tax and profit tax, whereas local-source income is subject to standard corporate tax rates.

Under a tax-exempt status, companies which activities were limited to investments in debt instruments, securities, and deposits, licensing of intellectual and industrial properties and similar assets qualified for a full tax exemption. With recent amendments, tax-exempt companies are now considered investment institutions and subject to 0% profit tax, however, companies licensing intellectual property do not qualify for an investment institution status.

In certain cases, income derived from IP rights in Curaçao may be exempt from taxation if there has been appropriate research and development work and expenditures in Curaçao, or the IP has been developed by a foreign company not belonging to the same group structure of the Curaçao company.

Companies that were considered non-resident for tax purposes and had an offshore status may opt for a tax-transparent status whereby income would be taxed at the personal level rather than the corporate level.

Capital gains – Capital gains are treated as ordinary income and taxed at standard rates. However, capital gains derived from participations, in which the Curaçao company holds at least 5% of the shares and the subsidiary is either taxed at 10% or is an active business (derives less than 50% of its gross income from dividends, interests or royalties), may be fully exempt.

Dividends – Dividends are subject to a 10% tax. However, dividends gains derived from participations, in which the Curaçao company holds at least 5% of the shares and the subsidiary is either taxed at 10% or is an active business, may be fully exempt.

Interests – Interests received by resident taxpayers from domestic banks are subject to an 8.5% withholding tax.

Royalties – Royalties are subject to corporate income tax.

Withholding Taxes – There are no withholding taxes.

Foreign-source income – Foreign-source income is generally subject to corporate income tax unless the entity qualifies as a Tax Exempt BV.

Losses – Losses may be carried forward 10 years. Carryback of losses is not allowed.

Inventory - Inventory valuations are usually made at the lower of cost or market value. In general, the book and tax methods of inventory valuation will be acceptable.

Anti-avoidance rules – Transfer pricing rules are applicable to all types of transactions between related persons, which must be conducted at arm’s length according and supported by relevant documentation.

Thin capitalization rules apply only with respect to loans from a Tax-Exempt BV. There are no controlled foreign company rules.

Tax credits and incentives – In addition to the above-mentioned Tax-Exempt, Export Companies and E-Zone companies, investments made in tangible fixed assets may be eligible for an investment deduction of 10% in the first year of acquisition. Tax holidays may be available for companies investing in the tourism sector. Insurance companies may also benefit from favourable tax regimes.

Personal income tax – Individuals may be considered tax residents if their center of existence is deemed to be in Curaçao.

Residents are taxed on their worldwide income at progressive rates up to 46.5%. However, under the pensioner’s regulations scheme, an eligible individual may opt to be taxed at a 10% flat rate on his foreign-source income or at the applicable progressive rates on deemed income of ANG 500,000. A reduced rate of 19.5% may apply to income received from a qualified pension savings account, private foundation, a trust or a substantial share interest.

Capital Gains are taxed at the standard PIT rate.

Other taxes – Sales tax is levied at 6%. Other tax rates (0%, 7% and 9%) may apply to certain goods and services.

Curaçao levies a real property tax of between 0.4% and 0.6% on the tax value of the property. There is an inheritance and gift tax of 6% and up to 25%, respectively. Exemptions may apply.