Export increase essential for growth
Minister of Finance supports Curaçao’s National Export Strategy
The Minister of Finance, the Honorable Kenneth Gijsbertha, functioned as Minister of Economic Development and Minister of Finance at the same time, during the period of February 2019 up till August 27, when the Honorable Giselle Mc William was sworn in as Minister of Economic Development.
Even though it was tough to have such high-level responsibilities at the same time, Minister Gijsbertha showed leadership and determination to do a great job! Under his leadership and with his full support the Government of Curaçao signed the contract with International Trade Centre to support Curaçao in the development of a National Export Strategy (NES).
Ministry of Finance plays Important Role in exports
Being responsible for the country’s finances, monetary affairs, national and international tax matters and the credit institutions and banking sector, gives the Ministry of Finance an important role in export development.
By supporting the NES the Minister of Finance ensures the implementation of the monetary and fiscal policies which secures income for the government.
The general objectives of the Ministry of Finance are to:
Promote an effective and balanced financial policy and financial management for Curaçao. This concerns the continuous care for and the development and evaluation of financial policy. This is to ensure proper management and control of the use of public funds.
Ensure optimal and balanced fiscal policy and its effective implementation, as well as customs matters.
Promote financial integrity by fighting, detecting and preventing money laundering and the financing of terrorism.
Monitor the non-financial sector (including the exchange of information and maintaining contact with local and foreign regulators).
Tax Incentives for export
While taking measures to guarantee a balanced budget and a sound financial management for Curaçao the Ministry of Finance introduced important tax reforms in 2018 to comply with international regulations.
At the same time the Ministry introduced important facilities to stimulate exports and innovation. During the National Export Awareness Week in May, Mr. Terrence Melendez, Senior Manager Tax at EY Dutch Caribbean, gave a presentation about these incentives. Here are few.
Foreign sourced income
A distinction was made between domestic and foreign sourced income for export and international Trading. Domestic sourced income is in principle taxed at a rate of 22% while foreign source income is fully exempt from profit tax.
Definition of foreign-sourced income:
Profits derived by Curaçao tax resident entity through permanent establishment or permanent representative in another jurisdiction
Profits derived by Curaçao tax resident entity from immovable property in another jurisdiction
Profits derived outside Curaçao for delivery of goods and services to customers outside Curaçao
Points of attention
Administration of taxpayer should be organized in such a way that all revenues and directly related costs in connection with the international activities can be distinguished in order to determine foreign-sourced income
A fee could be applicable
Ongoing consultations with E.U.
Turnover tax aspects
Export & International Trading
Foreign-Sourced Income Exemption – Excluded Services
Profit Tax exemption for foreign-sourced income will not apply for Insurance and reinsurance services and management and other trust services.
Services provided by notaries, lawyers, public accountants or tax advisors are also not applicable for profit tax exemption, nor related services.
Other services that are not applicable for profit tax exemption, are qualifying Intellectual property and Shipping activities (tonnage tax).The Free zone regime was changed in 2018. The original Free Zone is back!
Services are now excluded from Free zones.
• Only delivery (trade) of goods and repair, maintenance or goods from abroad and packing/ storage (P&S) services possible under regime
• Foreign income taxed at 2%
• Local income also taxed at 2%
• Additional substance requirements
Intellectual Property Company
Nexus Approach for Income from Intangible Assets
• Income from qualifying intangible assets can be taxed as low as 0%.
• Income from non-qualifying intangible assets is in principle subject to the general profit tax regime (22%).
Qualifying intangible assets:
Intangible assets ensued from Research &Development activities for which taxpayer obtained R&D certificate and:
1. Patent or breeder’s right has been granted to taxpayer or application process for a patent or breeder’s right is ongoing;
2. Form of copyrighted software;
3. With permit to place a medicinal product on market;
4. Taxpayer obtained supplementary protection certificate from patent office or a similar body;
5. Taxpayer obtained registered utility model for protection of innovation; or
6. Related to intangible asset mentioned under 1 to 5.
Qualifying Intangible Assets for Small Tax-Payers
Requirements mentioned under 1 to 6 will not apply to a “small taxpayer” which has a R&D certificate in respect of intangible assets with similar characteristics
Amount of benefits received by taxpayer in FY and 4 preceding FYs from intangible assets that have ensued from R&D activities for which the taxpayer obtained R&D certificate issued by entity appointed (increased with the expenses to obtain mentioned benefits in those years) does not exceed ANG 75,000,000; and
Total net turnover of taxpayer does not exceed ANG 500,000,000 according to the (consolidated) FS of the FY & 4 preceding FYs.
Net turnover: proceeds from supply of goods & services by taxpayer after deduction of discounts and taxes levied on turnover.
Deemed Qualifying Intangible Assets
Following categories of assets may also qualify for application of IP regime if all other requirements are met:
An exclusive license to use an intangible asset ensued from R&D activities, for which R&D certificate issued by an Agency (to be appointed) was obtained, in a certain way, for a certain period of time, or in a specific geographical region
New intangible asset ensued from R&D activities of taxpayer in relation to existing intangible asset which was not developed by taxpayer itself Brand names, logos, and comparable intangible assets will under no circumstances be considered “qualifying intangible assets” for the application of IP regime.
• K – Qualifying expenditures incurred in connection with R&D
• T – Overall expenditures incurred (qualifying and non-qualifying)
• Benefits – Income received from qualifying intangible asset
“If a company had only one qualifying intangible asset and incurred all of the expenditures to develop that asset itself, the nexus approach would simply allow all of the income from that asset to qualify for tax benefits.”
An alternative calculation of qualifying benefits is possible for newly developed intangible assets (with claw-back mechanism)
Turnover tax aspects
The Tax Holiday facility has been adapted and expanded which makes it more attractive for investors. The tax incentives also have interesting and favorable incentives for investment and export related activities. Qualifying activities include:
• Land and real estate development (under certain conditions)
• Research and development
• Aviation, aerospace and shipping
• Education and social services
• Wholesale and retail
• Culture, sport and recreation
• Creative industries
• Modern agriculture and fishing
• Generating and supplying green energy
• Information technology
• Renovation and/or expansion (under certain conditions)
Tax benefits related to Tax Holiday:
• 2% profit tax (6 – 11 years)
• Exemption for import duties for building materials (2 – 5 years)
• Exemption for turnover tax for building materials (2- 5 years)
• Exemption for income tax on dividend income received
• Exemption for real estate tax (5 – 10 years).
There is a minimum investment requirement of Ang 5,000,000 and in some cases a local staff of minimum 10 employees.
The Curaçao Investment Company: The Tax-Exempt Company
A Curaçao Investment Company (CIC) (in Dutch: “Curaçaose beleggingsvennootschap”) is subject to 0% profit tax, for Holding, Financing and IP related activities. There are some cumulative requirements for these incentives.
CIC status granted upon request
CIC is tax resident in Curaçao and has a capital divided into shares
Statutory objective & actual activities CIC exclusively/ almost exclusively out of financing, investing in securities & deposits, or development and exploitation of intellectual and industrial property rights & similar property rights or rights of use
Board of Directors CIC maintains register with names & addresses of all UBO that, directly or indirectly, hold at least 25% of shares or voting rights in CIC
Board of Directors consists only of individuals residing in Curaçao or certified trust companies residing in Curaçao or directors or employees thereof
Board of Directors shall prepare annual financial statements within 12 months after each financial year on which independent expert should give unqualified audit opinion which, amongst others, indicates that CIC continuously meets all statutory requirements for application of CIC regime
CIC does not qualify as a bank or comparable credit institution subject to supervision of CBCS or as a provider of consumer credit (in Dutch: “ verstrekker van bonkredieten”)
CIC has real presence in Curaçao