Corporate Tax Comparative Guide

1 Basic framework

1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?

Curaçao has a single profit tax regime.

1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?

As of 1 January 2023:

• profit tax at a rate of 15% applies to taxable profit in amounts of up to XCG 500,000; and
• profit tax at a rate of 22% applies to taxable profit in amounts exceeding XCG 500,000.

A reduced profit tax rate of 3% applies to the following specific activities/industries where certain requirements are met:

• the aircraft and shipbuilding industry, which includes repair and maintenance services for:
• • aircraft and vessels measuring at least 10 metres in length; and
  • all machinery, installations and materials on board;
• specialised business support activities, such as call centres, shared service centres and IT centres, provided that they offer support to companies with a group turnover of at least XCG 50 million;
• warehousing companies; and
• services offered to unrelated investment institutions and portfolio managers of investment institutions.

There are also some profit tax regimes under which a reduced rate of 10% or 0% applies.

1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?

Profit tax is generally charged on a company's taxable profit for a book year, being the sum of its income less expenses.

1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?

The basis for the profit tax calculation is the principle of sound business practice. In general, this principle requires that a consistent accounting policy be applied that is independent of the probable outcome of the business. Following this principle, there could be different treatment based on the nature of the taxable income.

1.5 Is the regime a worldwide or territorial regime, or a mixture?

On 1 January 2020, Curaçao changed its profit tax law, replacing a system of worldwide inclusion with exemptions with a territorial tax system under which only profits that are attributable to a domestic enterprise are included in the profit tax base. However, passive income (ie, income that does not derive from material business activities) is always attributable to domestic (Curaçao) income. This includes income from dividends, interest and royalties. Entities applying the territorial system should meet substance requirements in order to avoid penalties.

1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?

If the calculation of taxable profit results in a negative amount, it is classified as a loss. A loss is offset against the profits for the next 10 years. This offset is done in the order in which the losses arose and the profits were enjoyed.

The Curaçao profit tax system is a territorial regime. This implies that only income from Curaçao sources is subject to profit tax; thus, there is no foreign tax relief for losses.

1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?

No.

1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?

The rates do not change depending on the income or balance-sheet of the taxpayer. However, as of 1 January 2023:

• profit tax at a rate of 15% applies to taxable profit in amounts of up to XCG 500,000; and
• profit tax at a rate of 22% applies to taxable profit in amounts exceeding XCG 500,000.

1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?

In addition to public limited liability companies and private limited liability companies established within Curaçao, profit tax is levied on the following entities:

• open limited partnerships, other companies or associations whose capital is wholly or partly divided into shares, cooperatives, mutual guarantee companies and special purpose companies;
• associations established within Curaçao whose capital is not divided into shares, trusts, private fund foundations and foundations (operating foundations, other than those established exclusively for the promotion of a general social interest); and
• entities established outside Curaçao, including all companies and associations whose capital is wholly or partly divided into shares, to the extent that income is derived from:
• • business activities carried on through a Curaçao-based permanent establishment;
  • real estate located within Curaçao or rights pertaining thereto; or
  • claims which, as to the principal amount, are secured by a mortgage established on property located within Curaçao.

2 Special regimes

2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?

Several special regimes exist, each of which has its own set of requirements for applicability. They include the following:

• reduced profit tax of 3% for the aircraft and shipbuilding industry;
• reduced profit tax of 3% for specialised business support activities;
• reduced profit tax of 3% for warehousing companies;
• reduced profit tax of 3% for services offered to unrelated investment institutions and portfolio managers of investment institutions;
• a special regime for the calculation of taxable income in shipping and aviation;
• a profit tax rate of 0% for Curaçao Investment Company;
• a profit tax rate of 0% for income derived from intellectual property in Curaçao;
• exemptions for certain profits; and
• optional treatment as a transparent entity.

2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.

Curaçao profit tax law allows for the establishment of fiscal unity between a parent company and one or more affiliated companies for profit tax purposes on request. This arrangement has several consequences:

• The results of the subsidiaries are allocated to the parent company;
• From a civil law perspective, the subsidiaries continue to exist but are no longer independently liable to file profit tax returns;
• Intercompany transactions between the parent company and the subsidiaries are eliminated when determining the profit of the fiscal unity; and
• Under stringent conditions, the losses of one company can be offset against the profits of another company that is included in the same fiscal unity.

In principle, dividends and capital gains derived from local and foreign participations by a Curaçao resident company are exempt from profit tax under the participation exemption. In short, a shareholding is a 'qualifying participation' if, among other things:

• the Curaçao company holds at least 5% of the share capital in the participation; or
• the cost price of the shareholding was at least XCG 890,000.

Under the anti-abuse legislation, dividend income is eligible for the full participation exemption only if the dividends are derived from a company that:

• is subject to profit tax (or a similar tax) of at least 10%;
• is subject to a foreign tax regime that is comparable with the Curaçao profit tax regime; or
• receives 50% or less of its income from passive sources (ie, dividend, interest or royalty income).

2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?

The basis for the profit tax is taxable profit. This is the only basis that can be used.

2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?

There are no specific rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident. The profit tax return can be filed in Caribbean Guilder, US dollars or euros.

2.5 How are intangibles taxed?

The basis for the profit tax calculation is the principle of sound business practice. Intangibles are taxed depending on which profit tax regime applies.

2.6 Are corporate-level deductions available for contributions to pensions?

Yes, under certain conditions.

2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?

Yes, for insurance companies and shipping and aviation companies, a different calculation of the taxable base can be applied.

2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?

No.

2.9 Are there any deemed deductions against corporate tax for equity?

No.

3 Investment in capital assets

3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?

Curaçao has a depreciation policy based on the principle of sound business practice that must, in principle, be followed, unless there are reasons to deviate from this policy.

3.2 Are there research and development credits or other tax incentives for investment?

Investments in Curaçao are incentivised in different ways, including:

• a profit tax investment allowance;
• the fiscal treatment of a Curaçao private foundation. Where the foundation does not carry out business activities, it is subject to profit tax, but at a rate of 0%. The private foundation can also be considered as a special purpose vehicle, in which case a 10% tax rate applies;
• a reduced profit tax rate of 3% where the Curaçao tax holiday regime applies; and
• a profit tax rate of 0% for income derived from intellectual property in Curaçao.

3.3 Are inventories subject to special tax or valuation rules?

Inventories are not subject to special tax rules. In this regard, the principle of sound business practice once again applies.

3.4 Are derivatives subject to any specific tax rules?

There are no specific tax rules for derivatives.

4 Cross-border treatment

4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?

Non-resident corporate entities are subject to Curaçao profit tax on the following bases:

• They have businesses which are carried on through a permanent establishment located within Curaçao;
• They have real estate located within Curaçao or rights pertaining to such real estate; or
• They have claims which are secured for the principal amount via a mortgage on:
• • real estate located in Curaçao; or
  • rights pertaining to property located in Curaçao.

4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?

Curaçao does not levy withholding tax on payments made to non-resident enterprises. This is thus also the case with regard to dividend withholding taxes: Curaçao does not levy a dividend withholding tax. However, certain payments may be non-deductible for profit tax purposes.

4.3 Do double or multilateral tax treaties override domestic tax treatments?

No.

4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?

In 2022, Curaçao introduced a national decree to offer unilateral relief for double taxation. This national decree sets out the conditions for the applicability of the relief.

4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?

Yes, in certain cases and based on the principles of sound business practice.

4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?

No. However, in case of an exit, the company is deemed to have been liquidated in Curaçao, which results in the taxation of the hidden reserves for profit tax purposes. The amount of the hidden reserves is equal to the fair value of the assets of the company reduced by the book value of the assets.

5 Anti-avoidance

5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?

A statutory general anti-avoidance rule as such does not currently apply in Curaçao. However, the Curaçao courts and the tax authorities have applied concepts such as fraus legis (see question 5.2) and facts over form without specific statutory provision for these concepts. There are also certain provisions in the legislation that constitute anti-avoidance rules, such as thin capitalisation rules.

5.2 What are the main 'general purpose' anti-avoidance rules or regimes, based on either statute or cases?

The main rule is fraus legis, or abuse of law. This rule was introduced by the Dutch Supreme Court (which is also the Supreme Court of Curaçao) and prohibits abuse of law, specifically in the context of a structure for tax purposes.

5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?

The major anti-avoidance tax rules can be summarised as follows:

• Transfer pricing: Curaçao adheres to the Organisation for Economic Co-operation and Development (OECD) guidelines. Transactions between related entities should be conducted under arm's-length conditions.
• Additional transfer pricing documentation: The filling of a country-by-country report is obligatory. A master file and a local file must also be submitted as part of the administration of the taxpayer.
• Common Reporting Standard (CRS): CRS rules applies in Curaçao.
• Limitation of deductible expenses: Expenses are generally eligible for deduction. However, some expenses are deductible only to a limited extent or are not deductible at all. Any applicable deduction limitations should be assessed annually upon preparation of the final profit tax return.
• Limitation on loss compensation: A limitation in this regard applies in certain cases.
• Restrictions on interest deductions: Interest on loans owed to a company belonging to the same group, to the extent that the loan is related to a so-called 'contaminated' transaction as defined by law, is not deductible.
• Pillar 2: Pillar 2 global minimum tax rules applies in Curaçao as of 1 January 2025.

5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?

This is possible. The Curaçao tax authorities have published a policy that provides guidance and conditions for specific requests. The tax authorities also publish anonymised rulings so that taxpayers can check what may or may not be possible in their own case.

5.5 Is there a transfer pricing regime?

Generally, Curaçao adheres to the OECD transfer pricing guidelines.

5.6 Are there statutory limitation periods?

Yes.

6 Compliance

6.1 What are the deadlines for filing company tax returns and paying the relevant tax?

For profit tax purposes, a company should annually file:

• a provisional profit tax return no later than the last day of the third month after the end of the financial year – a deadline which cannot be extended; and
• a final profit tax return, in principle, no later than the last day of the sixth month after the end of the financial year – an additional extension of six months is possible if the company is compliant with its profit tax returns.

In the provisional profit tax return, the taxpayer should report an amount of profit tax equal to the profit tax rate for the year for which the provisional profit tax return is being made applicable to the profit reported in the most recently filed final profit tax return. The final profit tax return is based on the signed and finalised financial statements for the corresponding year. The financial statements and ultimate beneficial ownership information should be disclosed in the final profit tax return of the company. Both the provisional and the final profit tax returns should be filed electronically through the online portal of the tax authorities.

6.2 What penalties exist for non-compliance, at corporate and executive level?

The relevant penalties may be summarised as follows:

• The tax authorities can impose a fine up to XCG 10,000 in case of late submission and/or payment. Where there is intent or gross negligence, this constitutes an offence in respect of which the tax authorities can impose a fine not exceeding 100% of the amount that is due in tax. This is also the case if the amount is not paid in full or on time.
• If the territorial tax basis is applied, in which foreign income is not included in the profit tax base (based on the cost ratio calculation mentioned previously in 1.5), failure to comply with the substance requirements may result in a fine, which can range from a minimum amount of XCG 50,000 to up to XCG 500,000 where the non-compliance is due to gross negligence or intent.

6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?

Yes, the following transfer pricing documentation obligations are applicable to multinational enterprises:

• the filing of a country-by-country report;
• the submission of the master file as part of the administration of the taxpayer; and
• the submission of a local file as part of the administration of the taxpayer.

There are also US Foreign Account Tax Compliance Act obligations that must be adhered to in Curaçao.

7 Consolidation

7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?

No.

8 Indirect taxes

8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?

As a general matter, sales tax is levied on:

• all supplies of goods or provision of services in Curaçao by entrepreneurs in the course or furtherance of a business or profession carried on by them; and
• the import of goods, regardless of whether they are imported by an entrepreneur or an individual.

In Curaçao, the following sales tax rates apply:

• Standard rate: 6%.
• Enhanced rates: 7% and 9% for certain services and goods.
• Other: Exemptions.

Curaçao has no concept of zero-rating. However, the taxation of exports is similar to that of zero-rated exports under value-added tax (VAT) regimes. For Curaçao sales tax purposes, where certain conditions are met, the export of goods is exempt from sales tax. In addition, a company may file a request with the inspector of taxes to deduct the sales tax paid with respect to the supply of goods that it uses as raw materials and consumables, such as semi-finished products, or as packaging materials in the production of goods.

Companies that must pay sales tax are generally ineligible for an input tax deduction for the sales tax they have paid, as is the case in a VAT system. As an exception to this rule, a company may file a request with the tax authorities to deduct the sales tax paid on certain inputs into goods meant for export.

In addition, a company can apply for a deduction of 50% of the sales tax paid by it for imports in a return period, provided that the goods are removed from its business assets as a result of the supply of goods or services (ie, generally, on-sold). The credit can be used only to the extent of the tax due, with any excess carried forward to future return periods. The company must submit a written request for the deduction to the tax authorities, whose decision may be appealed by the company.

8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?

No.

9 Trends and predictions

9.1 How would you describe the current tax landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The current tax landscape is quite dynamic and several new developments are anticipated in the next 12 months, including (major) proposed legislative reforms.

10 Tips and traps

10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?

On 1 January 2020, significant changes to the profit tax legislation took effect, due – among other things – to:

• the abolishment of the world profit principle; and
• the introduction of the territoriality principle.

In short:

• under certain conditions, foreign profit arising from material business activities can be excluded from the profit tax base; and
• passive income is, in principle, considered to be profit derived from domestic business activities.

In order to exclude such extraterritorial profits (and losses) from the profit tax base, a company must make a cost allocation in its administration. One tip is to proactively look at the territorial tax basis to see whether it is possible to avail of an alternative approach for the allocation of income and expenses, which may be beneficial for the taxpayer.

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.