CC | Press release Curaçao International Financial Association (CIFA)

The OECD has indicated that the E-zone, export regime and the legislation with regard to profits from Intellectual property (IP) have aspects that are considered harmful

WILLEMSTAD – The Curaçao International Financial Association (CIFA) has for many years, and together with other organisations such as the VAB (Association of Antillian Tax Advisors), cooperated with the Curaçao Government to ensure improvement and amendment of the legislation to keep pace with the constantly changing international requirements regarding compliance, substance and transparancy.

Since 2010 we have collaborated to ensure that Curaçao complies with the requirements of FATCA (Foreign Account Tax Compliance Act), CRS (Common Reporting Standards) and FATF (Financial Action Task Force). We also promoted legislation to comply with the OECD standards with regard to harmful tax practices.

In 2015 the OECD published the final reports of their BEPS project (Base Erosion and Profit Shifting). It is expected that all members of the OECD Global Forum will introduce legislation to comply with these BEPS standards and it has been announced that jurisdictions that do not comply with these standards will be blacklisted, which will have negative ramifications for the economy of these jurisdictions. Moreover, the European Union has indicated that Curaçao may become EU-blacklisted if Curaçao does not timely comply with these BEPS standards. CIFA therefore actively promotes the introduction of legislation that ensures that Curaçao remains compliant with these international standards.

Last week, the Parliament of Curaçao approved legislation to introduce one of these standards, the Country by Country Reporting. Based on this legislation, entities of large multinational companies that are established in Curaçao must file certain information with regard to their business activities in Curaçao. This is required by the OECD and many other countries have already introduced similar legislation. Included in this legislation was an amendment of article 1 of the Profit Tax Ordinance. The old text mentioned that a trust and a foundation, which was deemed to include a Private Foundation, are subject to profit tax for profits derived from operating a business. The new text now explicitly includes the Private Foundation. In practice, this does not change anything, as the Tax Authorities could already tax profits from a business operated by a Private Foundation. A more material change however is that in the Explanatory Notes it’s mentioned that Private Foundations will be required to start filing annual profit tax returns as from the year 2019, meaning that all Private Foundations will have to file a tax return in 2020 for the year 2019. Until now, the Private Foundations did not have to file annual tax returns, as a Private Foundation is, based on the Civil Code, not allowed to operate a business and therefore in practice should never be in a situation where it would be taxable for its profit.

The new requirement of filing an annual tax return is a result of the increasing importance for the Government to have all pertinent information available such as the ultimate beneficial owners and any information that might be required to comply with an international information request. Contrary to what has recently been mentioned in the news, the tax position of a Private Foundation will not change as of 1 January 2019. A Private Foundation that is not operating a business, is now, and will remain, exempt from profit tax. This of course also applies to the trust.

We would like to point out that further legislative changes will follow shortly. Another BEPS requirement is that jurisdictions amend their legislation to terminate or modify their preferential regimes so they will no longer be deemed harmful. The OECD has indicated that the E-zone, export regime and the legislation with regard to profits from Intellectual property (IP) have aspects that are considered harmful. CIFA and VAB have been working diligently with Government to prepare new legislation to comply with these OECD BEPS standards to make sure we can maintain our professional level of financial services and promote the investment climate of Curaçao for the financial sector.

Bron: CuracaoChronicle

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