NB:
The Netherlands Antilles as such ceased to exist
in October 2010. This page deals with Curacao,
the largest component of the jurisdiction, which
has taken its place in many respects.
The
Netherlands Antilles originated as an offshore
financial centre in the Second World War, when
it provided a good destination for emigration
for Dutch companies during the German occupation
of the Netherlands. Since the war the Netherlands
Antilles government has followed a consistent
policy of encouragement towards international
holding, finance, property and licensing companies,
mutual funds and offshore banking. In Offshore
Business Review we examine some of the main
offshore business sectors in the Netherlands
Antilles. For details of the legal basis of
key sectors see
Law of Offshore,
and for details of taxation of offshore entities
see Offshore Legal
and Tax Regime.
On December 29th, 1999, the Parliament of the
Netherlands Antilles passed new tax legislation
known as The New Fiscal Framework intended to
improve the jurisdiction's image as an Offshore
Financial Centre and to revitalise its financial
services industry. The legislation, which came
into force on 1st January 2002, removed the
distinction between 'onshore' and 'offshore'
companies, simplifies tax rates, and introduced
a withholding tax. Alongside the tax legislation,
a new corporate form was introduced to allow
offshore operations on a tax-exempt basis: this
is the NABV (Netherlands Antilles Besloten Vennootschap),
and it has supplanted the offshore NV for many
purposes (see Offshore
Legal and Tax Regimes and Forms
of Company).
As
of April 1, 2001, special tax legislation for
international Internet companies on Curacao
came into force to act as an incentive to persuade
e-commerce companies to relocate their activities
to the Island. The new law replaced the old
Free Zone law and governs 'E-Zones' which are
areas within the Netherlands Antilles where
international trade and supporting services
may be carried out by electronic communication
and electronic commerce.
For
further details see e-commerce.
A
constitutional crisis erupted in the Netherland
Antilles in 2004 owing to irreconcilable differences
between the constituent islands and led to a
joint Commission appointed by the Netherlands
and the local government concluding that the
jurisdiction should be broken up, with the islands
of Curacao and St Maarten becoming autonomous
countries alongside the Netherlands and the
Caribbean island of Aruba, whilst the remaining
three islands - Saba, Bonaire and St. Eustatius
- should be brought under the direct control
of the Dutch government in The Hague.
This
was approved by the Dutch cabinet in December
2004.
The
transition process towards the dismantling of
the Netherlands Antilles began in July 2007
and
the Netherlands
Antilles as a jurisdiction within the Kingdom
of the Netherlands was dissolved on October
10, 2010. Two new jurisdictions, Curacao and
St. Maarten, came into existence. The other
three Islands, Bonaire, Saba and St. Eustatius
became Overseas Municipalities of the Netherlands
(OMON).
The Dutch monarch has remained as the head of
state and the Netherland continues to be responsible
for foreign affairs and defense. The citizens
of Curacao continue to be Dutch nationals.
Curaçao
Investment Fund Management
Curaçao, due to its location, is often
chosen for funds with a South American distribution
bias. Its other particular advantages stem from
its close connection with the Netherlands, and
its civil law legislative environment. More
generally, as a jurisdiction which does not
have mutual fund legislation which is 'recognised'
in most high-tax states, Curaçao is suited
to be the domicile of retail funds aimed at
unregulated markets (such as those of South
America), or of funds aimed at professional
investors, but not of retail funds intending
to have distribution in the high-tax (ie, richest)
markets.
On
the other hand, Curaçao has quite a good
position in regard to the USA for professional
investors, having been accepted under the IRS
'check-the-box' regulations, so that the Curaçao
NV can be treated as a limited partnership for
US tax purposes. From this point of view, the
more-or-less integrated status of Curaçao
into the Kingdom of Holland, and the very comfortable
relationship of the islands with their highly
communautaire 'mother' country, mean that there
is little risk of an EU-inspired attack on the
local legislative regime. This contrasts to
some extent with the position of the 'common
law' jurisdictions, which are increasingly being
pressured by the UK to come into line with global
politically-correct attitudes.
As
a base for investment funds, a civil law jurisdiction
arguably has some legal advantages over a common
law jurisdiction, since less demanding levels
of fiduciary duty and care and skill are required
of directors; and derivative shareholder lawsuits
are not possible in Curaçao.
The
National Ordinance on the Supervision of Investment
Institutions and Fund Administrators (NOSIIA)
came into effect in 2003.
Under NOSIIA, the Centrale Bank van Curaçao
en Sint Maarten (formerly the Central Bank of
the Netherlands Antilles) supervises and licenses
investment funds. Custodians must be corporate
entities whose main business it is to hold and
administer investment assets for third parties.
Daily
management of the fund must be carried out by
at least two individuals and the Supervisory
Board, if one is nominated, must be composed
of at least three members. No one may be appointed
to fill a position in the daily management or
on the Supervisory Board without the approval
of the Bank. Managers/directors
may be either individuals or companies but at
least one must be resident in the former Netherlands
Antilles.
There
are no legal limits placed on the fees of managers.
There
are no legal restrictions in Curaçao
on the investments which a fund may make or
on its borrowings.
Under certain circumstances a fund is obliged
to publish its accounts or to make them available
to the public.
A
fund is not obliged to prepare a prospectus
or have it approved by the supervisory authorities.
However, as one of the criteria for obtaining
a permit to operate, as a fund in or from Curaçao
is the adequacy of information supplied to the
public, in practice, funds will have to issue
a prospectus to inform the public.
See
Offshore Legal and
Tax Regimes for details of the taxation
of investment funds in the Netherlands Antilles.
In
2008 Curacao was, for the second year in a row,
named the top location for hedge fund administration
in the Global Custodian Hedge Fund Administration
Survey.
State
Secretary of Finance of the Netherlands Antilles,
Alex Rosaria, congratulated the Curacao international
financial services industry on its placing,
observing that: “That’s something
to be proud of -- and we are -- but we are not
complacent about our achievements. In
order to deliver on our promise of a trustworthy
international financial center, we have to continue
to differentiate ourselves based on our traditional
strengths: our sound economic and financial
fundamentals, skilled, educated and multilingual
workforce.”
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Curaçao Holding Companies
Offshore holding or investment companies are
defined in the National Ordinance on Profit
Tax 1940 as companies that have the 'exclusive
or almost exclusive purpose of investing their
assets in securities, including shares and other
certificates of participation and bonds, as
well as other claims for interest-bearing debts
however nominated and in whatever form'. See
Offshore Tax and Legal
Regimes for details of the tax treatment
of such companies.
Curaçao
holding companies are often used to hold the
shares of Dutch corporations which are themselves
the holding companies for investments or group
operating subsidiaries in third countries, thus
making use of the very wide network of Dutch
Double Tax Treaties, and the permissive Dutch
rules on withholding tax.
Curaçao
companies which provide financing for other
companies need a license from the central bank;
but such a company established as part of a
group financing structure can qualify as a 'Concern-Financing
Corporation' which does not require a license
if:
- it
receives at least 90% of its funding from
the group, and any bearer bonds it issues
are limited to institutional investors; or
- its
loans are only to group companies, and the
parent company of the group has provided a
guarantee to the central bank to cover its
external borrowing.
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Curaçao Licensing Companies
Offshore Licensing Companies are defined by
the National Ordinance on Profit Tax 1940 as
corporations that exclusively or almost exclusively
receive externally-generated revenues under
the following headings:
- the
sale, transfer or lease of copyrights, patents,
designs, proprietary processes or formulas,
trademarks, and other analogous properties;
or
- royalties
or rentals from motion picture films, the
use of industrial, commercial or scientific
equipment, the operation of mines or quarries,
or any other extraction of natural resources,
and other immovable properties; or
- technical
assistance.
See
Offshore Legal and
Tax Regimes for details of the tax treatment
of licensing companies.
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Curaçao Banking
Banks and other financial institutions in Curaçao
are licensed under the National Ordinance on
the Supervision of Banking and Credit Institutions
of 1994. Licenses are issued by the Bank of
Curaçao and Sint Maarten (the central
bank). See Law of
Offshore for details of the licensing
and supervisory process; see Offshore
Legal and Tax Regimes for details of
the taxation of offshore banks.
The
central bank distinguishes between 'Consolidated
International Banks' which are normally owned
or controlled by world Top 1,000 banks and which
are subject to adequate consolidated supervision
through their parent company, and 'Non-Consolidated
International Banks' which are normally owned
or controlled by a non-banking organisation,
and for which the central bank acts as the primary
supervisor.
The
central bank further distinguishes between onshore
banks, which are licensed to do business with
both local and foreign parties, and offshore
banks, which are licensed for external business
only. Offshore banks are known as International
Credit Institutions and are exempt from foreign
exchange controls. An offshore bank can operate
either as an NABV (Netherlands Antilles Besloten
Vennootschap), a Netherlands Antilles limited
company (NV) or as a branch. In 2009, there
were 12 onshore financial institutions and about
40 offshore financial institutions in the Netherlands
Antilles, with assets amounting to about NaF80bn.
Due
to its proximity to South and Central America,
the Netherlands Antilles have inevitably been
used both for physical drug-running and for
money-laundering. The Government is working
with Dutch officials to establish legislation
that will improve the ability of law enforcement
officials to investigate drug-related financial
transactions and accounts, and to require (local,
but not offshore) financial institutions to
investigate the origins of large cash deposits;
although the Government of the Netherlands Antilles
co-operates well with investigations into drug-related
crime, these legislative controls are not yet
in place at the time of writing. Parallel legislation
to give the Dutch authorities command and control
over a newly-established Antillean-Aruban Coast
Guard (which they had asked for) has been defeated
twice in the Antillean parliament.
In
2008, the Curaçao International Financial
Services Association, Ernst and Young Tax Advisers
and Amicorp Inc submitted a report on the possibilities
of developing Islamic finance in the Netherlands
Antilles to the State Secretary of Finance,
Alex Rosaria.
According
to the feasibility report, entitled: 'The Netherlands
Antilles: A New Mecca for Islamic Financing?'
there are certain immediate actions that the
local financial center can take in order to
accommodate Islamic financing.
However,
the report clearly indicated that if the Netherlands
Antilles wishes to become an important player
in Islamic financing in this hemisphere, more
profound changes and adaptations are needed
in the country’s legal and regulatory
framework.
The
reason for the completion of such a study are
clear, according to Rosaria:
“If
we are serious about being in the top-ten international
financial centers of the world, we can not,
not be involved with Islamic financing,”
he announced, going on to observe that the Netherlands
Antilles is currently negotiating a Double Taxation
Agreement with one of the most important players
of Islamic financing, the United Arab Emirates.
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Curaçao Insurance
See Offshore Business
Review – Insurance for a more general
treatment of captive insurance companies.
The Netherlands Antilles insurance sector is
regulated by the Bank of Curaçao and
Sint Maarten (central bank) under the Insurance
Supervision National Ordinance 1990. See Law
of Offshore and Offshore
Legal and Tax Regimes for further details
of the supervisory and licensing regime, and
the taxation of offshore insurance companies.
The
central bank distinguishes between domestic
insurers (which may be life or non-life insurance
comnanies) and international, ie offshore, insurers,
who may be captive insurers or reinsurance companies.
Foreign companies can qualify as local insurers
but will be subject to local supervision on
the same basis as a local company. According
to the Ordinance, an insurance company must
be a locally-incorporated limited liability
company (NV) with registered shares, or can
be a mutual insurance company. The bank has
power to grant exemption from this rule for
branch offices.
The
minimum authorised capitalisation of an insurance
company is ANG200,000 (at the time of writing)
but in practice capitalisation will depend on
the business plan as disclosed to the bank during
the licensing process. The company must have
a registered office in the Netherlands Antilles
and must keep its records there; there must
be a Managing Director (approved by the central
bank) in charge of day-to-day operations.
As
of 2008, there were about 80 licensed insurance
companies in the Netherlands Antilles, of which
about 30 were international, mostly captive
insurers.
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Curaçao Ship Management and Maritime
Operations
See Offshore Business
Review – Shipping for a more general
treatment of offshore shipping registries.
The
natural and tideless port of Curacao has a
container terminal and can handle large RO/RO
and LO/LO vessels. More than 20 shipping lines
operate 1,300 sailings a year from Curacao.
The international airport at Curacao has the
longest runway in the Caribbean and is well-served
by a number of international airlines. Storage
and handling facilities are modern and efficient.
There are free
trade zones at both the port and the
airport.
Upon
the dissolution of the Netherlands Antilles,
the Directorate of Shipping and Maritime Affairs
of the Netherlands Antilles changed its name
to the Maritime Authority of Curaçao.
The owner of a ship to be registered in Curaçao
should be a Dutch individual or corporation;
but this can be achieved simply by registering
a company in Curaçao.
See
Offshore Legal and
Tax Regimes for details of the special
tax treatment of offshore revenues of shipping
companies. The advantages of this ship registry
include:
- no
initial registration charges or taxes;
- a
simple registration procedure;
- no
nationality or employment requirements for
crew;
- non-resident
crew members are not subject to any local
taxation;
- service-oriented
shipping inspectorate and maritime administration.
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