Following the dissolution of the Netherlands Antilles during the last 10 years, and the granting of new status to the countries involved, new tax arrangements between the Netherlands and Curacao have now been proposed. 

In June 2014, a proposal for a new bilateral tax regulation between the European part of the Netherlands (including Bonaire, St. Eustatius and Saba1) and Curacao (the "BTR") has been sent for approval to the Dutch House of Representatives and the Council of Curacao. The new arrangements should enter into effect on 1 January 2015. The BTR will replace the multilateral Tax Regulation for the Kingdom that applies between the Netherlands2 and the countries of the former Netherlands Antilles and Aruba from 1964 (the "TRK"). However, only in respect of the relation between the Netherlands and Curacao. With respect to Aruba and St. Maarten the TRK will still apply. The BTR will function as a tax treaty, but as the Netherlands  and Curacao are both part of the Kingdom of the Netherlands, it has the form of a Kingdom Act. Unlike the TRK, the BTR mainly follows the OECD Model Tax Convention.

Points to note

Corporate tie breaker rule. The BTR does not include the common corporate tie breaker rule, which determines the tax residency of a dual resident company on the basis of its place of effective management. The rule included in the BTR is that the competent authorities of both states have to agree upon the tax residency of the dual resident company by mutual agreement. Such a corporate tie breaker rule is, for instance, also included in the 2008 tax treaty between the Netherlands and the United Kingdom.

Permanent establishment. In the TRK a permanent establishment (“PE”) is described in the definition article.  However, no separate PE article is included that outlines extensively in which situations a PE will be recognised or not. Such an article is now included in the BTR and is, in principle, based on the OECD Convention. However, it includes a so called provision for service PEs. This means that a PE is deemed to be present if services will be provided for more than 183 days in the other state during a period of twelve months. A service PE will be recognised even if there is no fixed place of business in the other state. A provision for service PE's is common practice in an international perspective and a similar provision is included by the Netherlands in the 2013 tax treaty with China.

Contrary to the OECD Convention, a provision for the constitution of a PE for offshore activities is also included in the PE article. In this regard, a PE is deemed to exist if activities in relation to the exploration and exploitation of natural resources in territorial waters exceed 30 days during a period of twelve months. Generally, such a provision is included in a separate article in a tax treaty. In the 2012 tax treaty between the Netherlands and Germany an offshore provision is, however, also included in the PE article. 

Dividends. In principle, the Netherlands levies 15 percent withholding tax on dividends distributed by a Dutch company to its shareholder. Currently, Curacao does not levy any withholding tax on dividend distributions made by a Curacao company. As such, the reduction of withholding tax under the dividend article in the TRK and the BTR is mainly relevant for Dutch companies distributing dividends to their Curacao shareholder(s). 

Under the TRK, the Dutch dividend withholding tax ("DDWT") rate of 15 percent can be reduced to 8.3 percent, provided that certain conditions are met. The BTR will provide, under certain conditions, for a DDWT rate of 0 percent on dividends. This is an improvement compared to the TRK. If the conditions are not met, a DDWT rate of 15 percent will apply. However, a transitional regime may apply to ensure a 5 percent DDWT rate for current situations. We will elaborate on this further below. First, we will discuss under which conditions one can benefit from the 0 percent DDWT.

0 percent DDWT rate3

Under the BTR, the DDWT rate can be reduced from 15 percent to 0 percent, if the Curacao tax resident and beneficial owner of the dividends:

  1. has a capital (partly) divided into shares and directly owns at least 10 percent of the capital in a Dutch company and is considered a "qualifying entity”; or
  2. is a state, any political subdivision or local body thereof governed by public law; or 
  3. is a pension fund. 

An entity is considered a "qualifying entity" (this condition can be seen as a limitation of benefits ("LOB") provision) as referred to under 1. if:

  1. the direct or indirect stock exchange test is met; or
  2. the headquarters test is met where such entity must function as the headquarter of a multinational; or
  3. the real presence test is met where the entity must employ at least three full-time Curacao individuals.

An entity other than a "qualifying entity" may still apply the 0 percent DDWT rate if it has a capital (partly) divided into shares and directly owns at least 10 percent of the capital in a Dutch company and:

  1. the activity test is met where it actively conducts a business and the dividends received from the Dutch company are connected herewith; or 
  2. the structure between the Netherlands and Curacao is not set up with the main objective to apply for the 0 percent DDWT rate. A request to obtain approval has to be filed in this respect with the Dutch authorities; or
  3. at least 50 percent of its capital is directly or indirectly held by Dutch and/or Curacao individuals.

Transitional regime - 5 percent DDWT rate 

For entities that do not qualify for the 0 percent DDWT rate under the BTR, a transitional regime may apply. Under this regime, the dividend provisions in the TRK will still be applicable to shareholdings of at least 25 percent in a Dutch subsidiary until the end of 2019. The DDWT rate on such dividend distributions will, however, be 5 percent instead of the 8.3 percent under the TRK. Under this regime, the Netherlands will also not effectuate the so called Dutch substantial shareholding regime.4 

Further, under the TRK it was not fully clear whether liquidation proceeds should be treated as dividends or capital gains. The BTR now includes a broader definition of dividends, which also covers liquidation proceeds. This finally provides certainty on the qualification of liquidation proceeds between the Netherlands and Curacao.


Anti-abuse. The BTR includes a general anti-abuse provision under which national anti-abuse provisions, such as the Dutch substantial shareholding regime and fraus legis, can still be invoked under the BTR. A similar provision is included in the TRK.5

If entities qualify for the 0 percent or 5 percent DDWT rate under the transitional regime, the Netherlands can, however, not invoke the substantial shareholding regime in relation to a Curacao shareholder. 

Hybrid entities. The BTR includes a provision on the basis of which the competent authorities will settle any mismatch on the classification of an entity as transparent or non-transparent by mutual agreement. This is to prevent double taxation and non taxation under the BTR.

In addition, the BTR provides for automatic exchange of information and a mutual agreement procedure, which is based on the OECD Convention.


The set-up, content and wording of the TRK was outdated. The BTR is more in line with international standards such as the OECD Convention and the tax treaty policy applied by the Netherlands. 

It seems that the international BEPS discussions have inspired the drafting of the BTR, considering the provisions on the corporate tie breaker rule, hybrid entities, the real presence test and the various anti-abuse provisions. 

In our view the BTR should further facilitate trade and investment opportunities. However, only when there is real presence in one of the countries or an economic link between them.