In June of 2018, The Parliament of Curaçao has approved new legislation that has made significant changes in the General Ordinance on National Taxation, the Profit Tax Ordinance 1940 and the National Ordinance.
These amendments will mostly affect preferential tax regime companies and also include some administrative requirements for tax matters. Most changes will go into effect 1 January 2019.
Getting in line with OECD recommendations
The Organization for Economic Cooperation and Development (OECD) has minimum standards and guidance for preferential tax regimes. They have looked at Curaçao and realized that the tax legislations in place were not fully aligned with their recommendations. Curaçao has made the necessary legislative changes which will allow for compliance with the OECD.
What are the changes?
The changes are affecting mainly special regime companies. These entities will likely have to go through some changes to be compliant.
Changes will affect the e-zone companies. Prior to these tax law changes, these entities could trade electronic services and goods. Going forward they can only trade goods. These companies must adapt. For example, an online gaming company would no longer be allowed to trade through an e-zone in this new regime it would have to convert into a different company.
Royalties companies will be heavily affected by the tax changes. In the past, a company could develop something in the US, sell it to a company in Curaçao and earn the royalties in Curaçao. Royalty companies will have to look for alternatives, unless the Intellectual Property has been developed in Curaçao.
The tax-exempt company regime, as it now exists now, will transform into a Curaçao Investment Company, while the current Export Regime will go through changes.
For all preferential tax regime entities, substance requirements will have to be met in order to qualify for the special regime status.
Some other changes are:
- when filing tax returns, the information on the ultimate beneficial owners needs to be disclosed;
- a fee will have to be paid to the tax authorities when requesting a tax ruling;
- fines will be levied if an entity is not compliant with the tax regulations;
- private foundations will need to file tax returns starting book year 2019; this should not change the tax position of foundations with passive income;
- Country by Country Reporting laws have been enacted.
These changes will level the playing field for Curaçao on the global scale. For most existing entities, these tax changes should not substantially affect their business, but understanding these new tax laws is essential for compliance.
How can we help?
TMF Group Curaçao has the experts that understand the complexities of local laws, regulations, processes, and requirements. To find out how we can support your company through these tax changes in Curaçao, please contact us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.