To stimulate the economy, the Minister of Economic Development and the Minister of Finance recently decided to reduce the profit tax rate in Curaçao with effect from 1 January 2023. To this end, the "Aanschrijving Wijziging belastingtarief winstbelasting " was recently published in the Government Gazette on 22 September 2023. In this article the most important changes are reviewed so that you may benefit from the opportunities the profit tax in Curaçao provides.
On Curaçao, among others, N.V.'s, B.V.'s, foundations from companies and branches of foreign companies are subject to profit tax. The standard profit tax rate is 22%. The 22% profit tax rate is lower than the average rate of the EU and Latin American countries. In addition, Curaçao has a number of special regulations for profit tax. For economic zone companies, a reduced profit tax rate of 2% applied. In addition, companies with a tax holiday benefit from a reduced profit tax rate of 3%. Curaçao also has the territoriality principle whereby the foreign taxable profits of companies established here may be excluded from the levy of profit tax according to a cost formula.
The profits of a sole proprietorship to the contrary are subject to a progressive income tax rate ranging from 9.75% to a maximum of 46.5%.
In order to stimulate the economy of Curaçao, icreate employment and induce economic activity it has been decided to reduce the profit tax rate due by introducing a bracket rate consisting of two rates. A reduced rate of 15% on the first ANG 500,000 in domestic taxable profits and the standard rate of 22% on a domestic taxable profit of more than ANG 500,000.
An example for clarification. Suppose the domestic profit of a company is ANG 650,000. Normally, this company would have to pay 22% of ANG 650,000 and thus ANG 143,000 in profit tax. From the year 2023, this company now has to pay 15% on the first ANG 500,000 in domestic profits ad ANG 75,000 and 22% on the remaining ANG 150,000 ad ANG 33,000. In total, this company realizes a saving of ANG 35,000 because this company now has to pay ANG 108,000 in profit tax. Lowering the profit tax rate means that companies have more financial opportunity to invest in their growth and expansion. That is why it is important to apply the reduced profit tax rate of 15% in the profit tax return from the year 2023. Furthermore, it is advisable for persons with a sole proprietorship to check whether it is not more advantageous to convert their sole proprietorship into a B.V. or N.V. in case of higher personal income tax rates. Finally, it is also important to check whether your company is eligible for the special regimes such as a tax holiday with a profit tax rate of 3% or the territoriality principle whereby foreign profits are excluded from the taxable basis for profit tax purposes. Gain information and insights on how to optimize the profit tax position of your company and benefit from the opportunities the Curaçao regulation has to offer.
Zuleika Lasten is a Tax Partner at Soxia, headquartered at Cas Coraweg 1, Curaçao.
For more information, please contact: Telephone: +599 (9) 736-1616, Email: info@soxia-tax.com Website: www.soxia-tax.com
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