Curacao Offshore Investment Funds

Introduction.

The idea of Curacao offshore investment funds simply refers to any collective investment, be it a mutual fund, managed fund or collective fund of any other type. Whilst inward investment to businesses and industry already located on Curacao is always welcomed, Curacao also has a thriving international finance industry and is already the home of tens of thousands of investment companies. Investment funds not only come in various types but also the markets and businesses they trade in vary temendously; so the following also looks at some of the various tax regimes you could encounter.

Portfolio Investment and Holding companies

Keeping it very simple their income tax rates are 2.4% to 3%, unless the company elects to be taxed at another rate. Whilst capital losses are not deductible, capital gains realized on the alienation of capital assets are not subject to any taxation. Should you borrow money from a recognized source to fund investments, it will automatically mean that you can deduct the interest you pay on the loan from your tax liability. Even borrowing from a non-recognized source, you might be able to negotiate a deal with the tax authorities.

Offshore mutual investment funds.

Quite simply, being part of the Netherlands Antilles a fund incorporated in Curacao can be highly attractive. For example, towards the top end of investment funds with minimum net assets of (US) $50 million and with a minimum of 50 share holders employing just four people locally on Curacao – will be exempt from profit tax. Alternatively, should you truly be one of the big players you can get an exemption on net assets over $300 million, providing you have just two Curacao’ employees. Even if your fund is below $50 million the tax regime is very gentle and for a fund of less than $25 million you’re only liable for a 1% tax of the net asset value. To encourage re-investment the resulting income is taxed at between 2.4% and 3%, but is limited to $10,000 – so still a very attractive tax regime for offshore investments.

Real estate companies.

Despite a downturn in real estate recently in the wake of the sub-prime mortgages scandals, real estate continues to be an attractive investment for fund managers. For real estate off Curacao and away from the Netherlands Antilles – there is no tax liability on its income. This includes dividends from a subsidiary, again providing that it is derived ‘abroad’. Real estate on Curacao can be eligible for tax exemptions and sliding scales for ground rents, more information on Curacao real estate is available from the islands tourism website.

Trading, Management and Consulting companies.

A major attraction for investment funds that specialize in trading, management or consulting activities is that they can negotiate their own taxation regime directly with the tax authorities; this usually only takes a couple of weeks. Aside from that you will need to pay a profit tax at 24% on earnings up to about $50,000, which then rises to 30% over that approximate amount. However, by working with the tax authorities you can substantially limit the tax burden. Presuming you’re not ‘domiciled’ on Curacao you won’t be liable for any personal taxes, which only apply to the islands residents.

Captive Insurance Company.

Popular with investment funds is trading in insurances and presuming the insurance company does not earn income on the island or within the wider Netherlands Antilles; income on an international captive insurance, or re-insurance, company is taxed at a modest 2.4%. However, what is referred to as ‘treaty related insurance income’ is taxed at 24% to 30%.

Royalty companies.

In reference to income from patents, copyrights, licenses etc; income arising from them is taxed at between 2.4% and 3%. Royalty companies would definitely benefit from discussing with the tax authorities if they are eligible for tax exemptions as deductions for depreciation can be agreed. However, be aware that this area of business being used in an investment fund will be expected to report an annual minimum income.

Curaçao