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Curacao: New Export Regime in Place as Old One Is Being Grandfathered

(Jan. 22, 2014) Curaçao instituted a new export regime on January 1, 2014. The country’s Parliament approved the regime, which is designed to support companies involved in international trade in goods or services, on December 16, 2013. Applicable to companies that derive 90% or more of their profits from such goods and services, the regime taxes company profits at a rate of about 4%, but this may be reduced to 3% in the future if the general corporate income tax rate, now at 27.5%, is reduced to 20%. (Factsheet: New Export Regime in Curacao in 2014, PricewaterhouseCoopers Curaçao website (2013).)

In addition to international banks and international trade and services companies, holding and finance companies may apply the new regime, provided that they “have sufficient presence or substance on Curaçao,” with “the required level of substance [depending] on the nature and extent of their activities” and the substance criteria resembling “those that are applied in the Dutch profit tax ruling practice with regard to resident international financial service entities.” (Id.)

The new regime offers an alternative to companies still using the previous offshore regime, which has been grandfathered until 2019. Unlike the old regime, the new one does not distinguish between locally owned companies and those owned by foreign shareholders. (Id.) In addition to permitting the export of goods, the regime supports such international trade services’ activities as repair and maintenance services for foreign client goods that are subsequently returned abroad, as well as such services that are performed abroad; international warehousing services; provision of loans and licenses; provision of the use of intellectual property; and acting as a holding company. It excludes activities of “acting as a director of companies whose registered office or effective management is situated in Curaçao and other similar trust services; services performed by a notary public, lawyers, accountants, tax advisers and other such services.” (Id.; see also New Export Regime as of January 1, 2014, Deloitte website (last visited Jan. 17, 2014).)

The Curaçao International Financial Services Association (CIFA) welcomed the new export regime, noting that it “will prevent companies from moving their operations to other jurisdictions. Moving operations has a negative effect on Curaçao as an international financial center and the financial situation of the island will decline because of the loss in tax revenues from these activities.” (CIFA Welcomes New Legislation, CURAÇAO CHRONICLE (Dec. 23, 2013).) The CIFA added, however, that “[n]ot every business can benefit from the export facility,” given the new condition that at least 90% of the company’s business must be focused on overseas trade/ services and the substance requirement. (Id.)