Important changes in CuraƧao tax legislation

29-06-2018 - Bridge Consulting

The exempt company is replaced by the Curaçao Investment Company   The National Ordinance proposes to abolish the profit tax regime for the exempt company as of June 30, 2018. Existing exempt companies may continue under the current income tax regime up to and including 31 December 2018, with the exception of benefits that relate to a non-qualifying intangible asset (see paragraph 2 below). These benefits from a non-qualifying intangible asset are in principle taxed as of 1 July 2018 at the regular profit tax rate of 22% (for the year 2018).   From 1 July 2018 it will be possible to set up a private or public limited company as a Curaçao Investment Company. The income tax regime for the Curaçao Investment Company is similar to that of the current exempt company. A Curaçao Investment Company becomes subjectively liable to tax and therefore has to file a profit tax declaration every year. Qualifying income, such as qualifying interest or dividend income, is taxed at a new 0% profit tax rate to be introduced.

The Curaçao Investment Company may develop intellectual and industrial property rights and exploit it after development. If the operation relates to benefits from a qualifying intangible asset, these benefits are taxed at a profit tax rate of 0%.
Benefits from an immaterial asset
An intangible asset is a fixed asset that is not tangible, such as patents, trademark rights, goodwill or development costs. As of 1 July 2018, a definition of a qualifying intangible asset is given in the profit tax. In short, this concerns an intangible asset for which the Bureau for the Intellectual Property of Curaçao has issued a statement on research and development research to a Curaçao taxpayer regarding, among other things: • a patent or plant breeder's right; • a copyright protected software; • a marketing authorization for medicines; • a protection certificate; • a registered utility model for the protection of innovation. Brands, logos and similar assets are not considered as qualifying intangible assets.  
In the National Ordinance, it is proposed that the benefits of a qualifying intangible asset, for both entities that fall under the regular profit tax regime and for the Curaçao Investment Company, are taxed at the 0% profit tax rate as of 1 July 2018. Export facility regime expires; Curaçao opts for territoriality system.
The National Ordinance proposes to terminate the export facility regime on 30 June 2018. Existing export facility entities may be continued under the current profit tax regime up to and including 31 December 2018, with the exception of benefits that relate to a non-qualifying intangible asset (see paragraph 2 above). As from 1 July, these benefits are in principle taxed at the regular 22% profit tax rate.  The National Ordinance broadens the definition of foreign profits with the result that all delivered services and goods sold to foreign buyers are exempted for profit tax. The provision of services and sales of goods to local buyers with a foreign exchange license is also regarded as a delivery or service to a foreign buyer.
With this, Curaçao opts for a territoriality system in which only profits are made with locally delivered services and goods sold are taxed with profit tax. A number of services, such as insurance and reinsurance activities as well as trust activities, services of notaries, lawyers, public accountants, tax consultants, related services and shipping activities, are excluded from the territoriality system.

Real presence ('substance') The National Ordinance proposes a specific provision that determines the actual presence for a Curaçao entity. Real presence is more particularly relevant for entities using special tax regimes and is assumed if the entity for its nature and scope of its activities: • has an appropriate number of qualified full-time employees; • has an appropriate amount of annually recurring local operating costs.  We assume that the requirements are cumulative and not alternative, at this moment the legal text about them is unclear. If an entity wishes to receive certainty about the actual presence, for example about the question of who is a qualified employee and how many employees must be employed on a full-time basis, then it is possible to request a ruling from the tax authorities. The E-zone regime is limited to selling goods and no longer providing services
The National Ordinance proposes to limit the E-zone regime (the 2% profit tax rate) from 1 July 2018 to the delivery of goods. The goods may be sold to both foreign and domestic customers. The result achieved with the sale of the goods (also sold to domestic customers) is taxed at the current profit tax rate of 2%. Services no longer fall under the 2% profit tax rate. Existing E-zone entities can be continued under the current E-zone regime up to and including 31 December 2018 (ie including the provision of services). 
Sale of goods from E-zone to Curaçao with a 9% turnover tax In the National Ordinance it is proposed to extend the definition of the import of goods for turnover tax with imports from an economic zone. As a result of this change, all goods delivered from the E-zone are charged to a Curaçao customer with a 9% sales tax. No refund or settlement is granted for this sales tax. The export of goods and services from Curaçao to abroad is taxed with 3% sales tax.