Dear Members

In 2020, the new territorial tax legislation, based on which only local income is subject to tax, was introduced. Now the Tax Department has published a new decree with the standards on how to determine what is local income.

Local income consists of all income that is based on any activity in Curacao. As has been communicated in earlier updates, the determination of what is local income and what is foreign income is based on the ratio of local versus foreign direct expenses. The decree includes more detailed explanation on what can be deemed direct expenses and what are sales expenses and indirect expenses, which are not included for calculation of the ratio.

Profit made on business assets such as an office or machinery, will be calculated based on the use of these assets. If they have been used only locally, than any profit with these assets will be deemed local income.

The new regulation only applies to so-called active income. Passive income will always be subject to tax in Curacao. IP income will generally be deemed passive income and thus fully taxed. However insofar the IP income meets the requirements of the socalled IP box, which is based on the guidelines of the OECD, the income will be exempt from tax.

For more information please see attached guidelines.

Kind Regards, CIFA Board