Tax incentives for investments 

  1. Introduction

In 2017 the Ordinance tax incentives for investment entered into force (“Ordinance”). This Ordinance replaces the individual ordinances to promote the establishment of businesses and construction of hotels, to promote land development, tax incentives for industrial enterprises and for the renovation of hotels.

  1. Qualifying activities

Based on the Ordinance, certain tax incentives are available to:

  1. companies that are active in the hospitality and leisure industry (e.g. hotels and casinos);
  2. land development companies aimed at the promotion of tourism or development of public housing;
  3. (industrial[1]) companies whose activities consist entirely, or almost entirely of:
    • research and development with respect to process- and product innovation;
    • aviation (including space travel) and shipping;
    • education;
    • health care;
    • transport and logistics;
    • Creative industry (art and exploitation of intellectual property);
    • modern agriculture and fishery;
    • generating and delivering sustainable energy;
    • information technology.

To benefit from the tax incentives, the following conditions must be met.

For companies that are active in the hospitality and leisure industry
The initial investment in construction and furbishing of the premises must exceed ANG 2,000,000 and the company must offer permanent and full-time employment to at least five persons registered in the Curaçao civil registry. If existing premises are expanded, renovated and/or refurbished, the minimum required investment amounts to ANG 1,000,000

For land development companies aimed at the promotion of tourism or development of public housing
The investment in the development of qualifying undeveloped terrain[2] (making it ripe for construction, creation of infrastructure) must exceed ANG 2,000,000.

For (industrial) companies with activities mentioned under 3
The minimum investment for establishment of the business must exceed ANG 1,000,000 and the company must offer permanent and full-time employment to at least five persons registered in the Curaçao civil registry.

If the activities of an existing company as mentioned under 1. and 3. are expanded, or an existing company as mentioned under 1. and 3. is renovated and/or refurbished, the minimum required investment amounts to ANG 1,000,000.

In all cases, the minimum amounts have to be spent within two years after a tax incentive is first applied. In general, this will be upon first import of material which has been exempted from import duties (see 3.3. here after).

  1. Tax incentives

3.1       Real estate tax

If the investment amount does not exceed ANG 5,000,000, an exemption of real estate tax is granted for a period of five years on all real estate or rights to which such real estate is subject belonging to the company. If the investment amount exceeds ANG 5,000,000 and this amount is spent within five years after a tax incentive is first applied, the exemption of real estate tax is granted for a period of 10 years.

3.2       Profit tax

Instead of the regular profit tax rate (22% in 2018), a reduced rate of 2% is applicable in the fiscal year in which a tax incentive is first applied and the subsequent five years (for a total of six years) if the investment does not exceed ANG 5,000,0000. This term is extended to ten years (for a total of eleven years) if the investment exceeds ANG 5,000,000 and at least ANG 5,000,000 is spent within five years after a tax incentive is first applied.

3.3       Import duties

An exemption of import duties is applicable on all materials and goods needed for the construction and furbishing of the premises from which a business is carried out; materials needed for the creation of infrastructure, building of real estate (public housing), the construction of hotels or other real estate used for recreational purposes or the expansion, renovation and/or refurbishment of such real estate; tangible fixed assets and materials, and goods (including tangible fixed assets) needed for the expansion, renovation of refurbishment. The exemption varies in length between two and five years, depending on the use which will be made of the goods and materials, and takes effect from the moment a tax incentive is first applied.

3.4        Income tax

No income tax will be due on dividends paid to shareholders, or distribution of profits to holders of profit-sharing certificates, if proof has been provided to the satisfaction of the Inspector of Taxes that the dividends or profit distributions originate entirely from profits that have been subject to the reduced profit tax rate. The exemption is only applicable if the dividends are paid or profit distributed within two years after the fiscal year in which the profit was realized.

  1. Formal requirements

The taxpayer must file a written request with the Director of Fiscal Affairs (hereinafter to be called: “Director”) to apply the incentives. The Director must render a decision within three months of receipt of the complete request[3]. It is possible to object to and appeal the decision of the Director. If the Director does not render a decision within the three months’ term, the request is granted by operation of law.

If a project, because of force majeure, cannot be completed within the prescribed timeframe, a written request may be filed with the Director to extend the exemption of import duties with two years.

The taxpayer requests the Director to declare that the conditions for application of the tax incentives have been met (i.e. the required minimum investment has been spent within the allotted time-frame). This request must be done with respect to the fiscal year in which the conditions are met. The request must be accompanied by financial statements that have been audited by an independent expert and provided with an unqualified opinion. The investment amounts should appear clearly and easily from these financial statements.

The Director must render a decision on the before-mentioned request within three months. It is possible to object to and appeal the decision of the Director. If the Director does not decide within the three months’ term, the request is granted by operation of law.

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[1] For purposes of the Ordinance, an industrial company means a company that processes, treats or assembles goods locally, creating a new product.

[2] Only terrain belonging to a development plan approved by the Uitvoeringsorganisatie Openbare Werken qualifies.

[3] For brevity’s sake, we have not listed all the mandatory components of a request for application of the tax incentives in this memorandum. However, we are happy to provide you with additional information upon request.