APRIL 2020

Application of the new tax regime in Curazao

With the approval of the Tax Reform Law of December 30, 2019 by the Curazao Parliament, a new territorial tax regime is introduced for the income tax. The main characteristics are:

- Suppression of the exemption of foreign earnings: only local income is subject to income tax, with foreign earnings not subject.
- Deduction of foreign costs and taxes: Companies that do not have any national income cannot deduct expenses
- Specific foreign activities:
    - Insurance companies that cover risks located outside of Curazao will not be subject to the tax.
    - Insurance companies that cover risks located in Curazao fall into two categories: life and non-life insurance. Income of local companies from life insurance activities remains 10% of premiums and capital received in a tax period and income of local companies from non-life insurance activities remains 20% of total premiums and capital received. This income is taxed at a rate of 22%.

- Passive income: The income from passive income will be considered domestic income, so they will be taxed at the standard rate of 22%.
- New special regime for domestic activities: A new 3% income tax rate is introduced for the income of local companies from a series of activities that take place in or from Curazao. These qualifying activities are:
    - Build and upgrade aircraft and ships, as well as repair and maintain aircraft and ships with a length of at least 10 meters, and machines, facilities, and equipment located on and for use on board these aircraft and ships;
    - Services provided by call-, service- or datacenters to the extent that they provide support activities for companies with an annual turnover of at least NAf 50 million (approximately USD 28 million);
    - Services provided by warehousing companies;
    - Services provided in or from Curazao to unrelated investment companies and managers of investment companies.
- E-zone entities: The entities established in zone E (or free zone) are subject to the regular income tax regime. The 2% special tax rate is eliminated.
- Regular accounting required: Companies that have no household income are required to comply with all regular accounting standards requirements, have their accounting in Curazao, and make annual financial statements. Foreign earnings will be classified as domestic earnings if the usual accounting standards are not followed.
- Presentation of accounts and taxes of Foundations of private interest: The tax declaration must contain all the information about the UBO, the director and the beneficiary (ies).
- Relief for double taxation: The current tax credit for foreign taxes paid is modified in the sense that the tax credit will only be applicable for foreign taxes paid on the income considered (Curazao) as internal income.