By Offshore-E-Com Editorial
04 February, 2014
With its low tax, business friendly âE-Zoneâ legislation, advanced telecommunications infrastructure, and sophisticated business environment, the Caribbean island of CuraÃ§ao is now a very attractive proposition for e-commerce companies looking to locate operations or back-up facilities in the Americas region.
The jurisdiction of CuraÃ§ao was created on October 10, 2010 when the Netherlands Antilles was dissolved and became two separate jurisdictions, the second being Sint Maarten. At the same time, the other three islands that made up the Netherlands Antilles (Bonaire, Sint Eustatius and Saba) became special overseas municipalities of the Netherlands. CuraÃ§ao lies about 50 km north of Venezuela and is about 2.5 hours by air from Miami.
With a population of just over 145,000, the official language of CuraÃ§ao is Dutch, but English and Spanish are widely spoken, especially in the capital, Willemstad. CuraÃ§ao is a country within the Kingdom of the Netherlands, with full autonomy in internal affairs; it is a parliamentary democracy and is politically stable. The Netherlands government is responsible for defense and foreign affairs. The legal system is based on Dutch civil law but includes some influence from English common law.
CuraÃ§ao is not naturally well-favoured with domestic resources. The economy is largely based on tourism, petroleum processing/trans-shipment and offshore finance. However, the offshore financial sector has developed steadily since its origins in the Second World War, giving CuraÃ§ao in particular a more sophisticated business infrastructure than most countries in the region.
There are no government restrictions on foreign-owned businesses in CuraÃ§ao, and inward investment is encouraged. The strongest commercial links are with the Netherlands and the United States, and this is reflected in the available selection of local professional services and their personnel and skills. Likewise, there is a sophisticated financial structure in place which is based on a Netherlands model.
In a bid to encourage exports, employment generation and economic growth generally, the E-zone (services) legislation was introduced by the Netherlands Antilles government in 2001. E-Zones are specific appointed areas within the Netherlands Antilles, from which business can be conducted with the rest of the world.
Free trade zones are located at the harbour at Willemstad, the Hato-CuraÃ§ao international airport and the Industrial Park. The free zones are secure and permanently maintained; they are fully serviced, and have telecommunications connections. As of 2014, there are more than 100 businesses active in the harbor free zone, occupying total floor space of almost 91,000 square metres. The airport free zone is home to 41 companies.
The free trade zones are an effective distribution centre for export to the Caribbean, Americas and the EU. There are no customs duties imposed for imports, trans-shipment and/or export of goods; foreign exchange transactions in respect of free zone goods are exempt from commission. The free zone rules also apply to the export of âservicesâ, including e-commerce-related services like data management and call centre operations.
To qualify for the free zone incentives, a company must obtain a minimum of 75% of its annual turnover from exports. Sales to the local market are allowed up to a maximum of 25% of the total sales turnover, but normal import duties and profit tax rates apply.
On April 1, 2001, special tax legislation for international Internet companies on CuraÃ§ao 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'. Only companies with a capital divided into shares may perform activities in the e-zones, including trading or providing services to companies located outside CuraÃ§ao.
In terms of corporate tax, the profits of companies within the e-zones are taxed at 2 percent â including surtax â until January 1, 2026. This rate is not applicable to the profits of an e-zone company if they are generated by the sale of goods or services to companies located in the former Netherlands Antilles or generated through the rendering of services to affiliated companies located in the country. In addition there is no import duty or turnover tax charged on goods entering the e-zones. Other incentives are available to foreign investors including reduced rent of up to 40 percent for buildings in the free zone.
A company may be allowed to conduct business with other firms located in an e-zone but has to apply to the local authority before doing so. If given the go-ahead, the company must meet certain criteria relating to price setting, quality of the goods and services on offer and the distribution of goods. The turnover generated through local business may not exceed 25 percent of total turnover.
Employees who have lived in excess of five years outside the Netherlands Antilles before starting work in an e-zone can qualify for expatriate status, with certain tax-free benefits â providing certain conditions are met. An e-zone company can calculate the wage tax on the net salary of the employee without being required to 'gross up' the salary.
Otherwise, a stay in CuraÃ§ao for work or residence requires residence and/or work permits, unless you are already a long-time resident (more than 10 years). But as in many international offshore financial centres, there are rules which aim to give local workers preference in job applications.
CuraÃ§ao has a telecommunications infrastructure that is considered on par with US and European standards and includes modern digital switches, satellite link-ups, fibre optic cabling, worldwide direct telephone links and mobile networks.
The underwater optical glass-fibre cable 'Americas II', running from North America via the Caribbean to South America became operational for CuraÃ§ao in October 2000. In February 2001 another cable with vastly more capacity made its landfall in CuraÃ§ao with the arrival of the cable-laying ship Manta during its deployment of the optical glass-fibre cable 'Arcos'. Arcos was the highest-capacity submarine cable yet laid, and was the first to be 'self-healing' in the event of physical damage.
Arcos has a capacity of 960 gigabits in comparison to the 25 gigabit capacity of Americas II. The cable connects CuraÃ§ao directly with several countries in South America, the Caribbean and Miami. The shareholders of Arcos decided to place their Network Operation Center (NOC) on CuraÃ§ao, under the control of United Telecom Services (UTS), the local telecom holding company in CuraÃ§ao.
Discussions and several initiatives regarding the set-up of an Internet exchange for the Caribbean region, e-commerce and e-zone led in March, 2009, to the launch of the CAR-IX (not-for-profit) Association, founded with financial support from the Netherland Antilles Bureau of Telecommunication and Post. Founding members included UTS, Scarlet, Telbo, Digicel and EOCG Wireless. The CAR-IX platform was designed and is operated by Amsterdam Internet Exchange (AMS-IX). It provides continuous high quality full capacity peering services for Caribbean and South American networks that want to keep as much traffic local for network optimization and financial benefits.
In November 2001, a new E-Commerce Park (ECP) project on CuraÃ§ao with a multifunctional datacentre was launched. The key element of the E-Commerce Park is its location. The Park is situated next door to the UTS building with its direct connection to the backbone of the most important telecom cables resulting in high-quality, continuous 24/7 service from its Network Operating Centre.
After going operational over ten years ago with one data centre and just three server cabinets, today the ECP houses more than 100 cabinets with more than 2,000 servers. The ECP now looks after over 150 clients located across three data centres providing services such as internet access, co-location of servers, disaster recovery, domain name registration and office space.
As Rob Vermeulen, chief executive officer of the ECP, recollected in an interview with Insight magazine: âIn 1999 the internet was showing enormous potential and growth and the NASDAQ was soaring high. In that year a group of people from the public and private sector went to New York to attend a conference called âE-commerce Offshoreâ. After this conference, those present believed that this was something CuraÃ§ao could excel in due to its geo-location, its heritage in the financial sector and trading and the fact that two subsea cable systems were landing in CuraÃ§ao. Redundant, fast and reliable internet access, is obviously a precondition to have if you want to be a âplayerâ in this field of expertise. The Government introduced (as one of the first countries in the world) the E-Commerce Legislation (recognizing digital handshakes as valid agreements) as well as the E-Zone legislation (the free zone for exporting services), creating attractive incentives to the internet ânewconomyâ.â
The nerve centre of the ECP is its Network Operations Centre, within which the server equipment is located. Only a limited number of staff have access to this temperature- and humidity-controlled building, which is guarded round the clock by the Parkâs security staff. The ECP guarantees its customers a minimum of N 1 redundancy (meaning that all components have a back-up in the event of failure) and is categorized as a Tier III data center (which guarantees 99.982% availability). A major 10,000 square foot annex to the original facility was completed and opened in late 2008. Besides providing solutions to the e-zone businesses, the new facility was built to provide business continuity and disaster recovery solutions to local and regional companies. The new complex is currently housing the landing station of Columbus Networks as well the CAR-IX internet exchange.
Another significant advantage of CuraÃ§aoâs location is that it is outside the hurricane zone. While hurricanes can occur between July and October, they rarely threaten CuraÃ§ao, which lies south of the Caribbean hurricane belt. Nonetheless, the Network Operations Centre is built to withstand a category 5 hurricane, and therefore the Park is a particularly suitable place in the region in which to locate disaster recovery and business continuity infrastructure. These are two niche areas where Vermeulen expects to see âsubstantial growthâ in the next few years.
"Digital information becomes the fruit of tomorrow and therefore its availability is becoming crucial," he says. "I also believe that we are well positioned to be a location of choice for the Latin American market. We will be the place where Latin America and the rest of the world do their e-business."
So, as a major offshore jurisdiction with tens of thousands of offshore enterprises already installed, including many trading companies, CuraÃ§ao is a major centre of e-commerce activity in the Caribbean region. The island's geographical location, its good telecommunications links and sophisticated business infrastructure add to the inevitability of a significant e-future for the island.
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