New companies can no longer incorporate in Curacao under the offshore tax regime. Those companies incorporated under the regimen before January 2012 are exempt until the last day of the book year, beginning before 1 July 2019. Our local expert explains.
The offshore tax regime in Curacao ended on 1 January 2002. As of this date no new companies can incorporate making use of the offshore, low tax, regime. Companies incorporated before 2002, still can make use of the favourable tax regime until the last day of the book year, beginning before 1 July 2019. Companies using the calendar year as their book year are exempt until 31 December 2019.
After the exemption period, offshore companies will be subject to the onshore tax regime. In principle, the general profit tax rate (22% for the year 2017) on taxable income will apply. Yet, the current Curacao tax laws offer lower tax alternatives to this tax regime, depending on the activities performed by the entity.
Curacao onshore tax regime
Like the offshore tax regime, no dividend withholding tax will be payable under the onshore tax regime in Curacao.
Under this tax regime, operating income from local subsidiaries or from non-domestic real estate will not be taxable. Dividends received from foreign subsidiaries will also be exempt from tax under a participation exemption - unless profits in the foreign country are pay rates below 10% and foreign income makes up 50% or more of dividends, interest or royalties.
If the offshore entities have other types of income, the net profits will be subject to a general profit tax rate of 22% (2017 tax rate).
Alternative tax regimes
In Curacao there are a few alternative tax regimes under the current tax laws, these are:
- Tax transparent company
Under this tax regime, the company is not subject to taxes, but taxable profits will be allocated to the shareholder(s). There are several requirements to request this tax transparent status but, these will not be a big hurdle for most entities.
- Tax exempt status
Entities that receive income from financing, licensing activities or investments may be interested in this option. Dividend income from subsidiaries might not be exempt, depending on the source of income and the share percentage held in the subsidiary. There are some requirements to be fulfilled to be able to apply for the exempt status, but these are not too complex.
- Export tax facility
Companies trading outside Curacao or companies participating in activities like financing, licensing and shareholding in other companies, can apply for the export facility tax regime as long as more than 90% of the income comes from outside of Curacao. These export tax facility entities will pay an effective profit tax rate of 3.19% (based on the 2017 tax rate). Income from non-domestic real estate will not pay taxes. There are certain requirements to complete to be able to apply.
- E-zone tax facility
Like the export tax facility, the e-zone tax facility suits active trading companies, but excludes financing and licensing income. Under this regime at least 75% of the income must come from foreign sources and must facilitate a 2% profit tax rate on the foreign derived income. The company will need to be established in one of the designated e-zone areas in Curacao. As for the other regimes, there are requirements to complete to be able to apply.
More alternatives for the current offshore regime may arise before the end of the exemption period. Contact your local fiduciary and / or tax adviser to see if you need to take action regarding your Curacao offshore company.