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Curaçao: Country and Foreign Investment

Executive Summary

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 Curaçao 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, Curaçao 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 Curaçao continue to be Dutch nationals.

Curaçao lies in the Southern part of the Caribbean, between Venezuela and Cuba. The capital, Willemstad, is the main financial centre and seat of Government.

The legal, political and administrative systems are largely modelled on Dutch originals, but there has been some common law influence on the offshore regime. Government, Judiciary and Central Bank are established on Curaçao. Dutch is the official language, but English is often spoken; the local language is Papamiento, a Creole dialect. The local currency is the Netherlands Antillean guilder (ANG) and there were plans to replace this with the Dutch Caribbean Guilder from 2012. The cost of printing the new currency coupled with political uncertainty have led to the introduction of the new currency to be delayed until 2013 at the earliest. There is a well-connected airport on Curaçao; flight time to Miami being about one hour. Curaçao has a good port, and is part of the Dutch ship registry.

The Curaçao economy is very open and is highly dependent on tourism and offshore financial services. Most goods are imported since there are few natural resources. The important refinery in Curaçao, run by neighboring Venezuela's state oil company PDVSA, was shut for a while but is now partially open again, and used mostly for trans-shipment to China. GDP per head at USD15,000 (2011 est.) is reasonable for the Caribbean area as a whole, but unemployment is high. The Government used to run a large deficit, but had been planning a balanced budget from 2009. Failure to introduce important reforms to reduce health care spending have led to a substantial deficit in 2011 and 2012.

Local taxes are quite high for residents, but there is a well-developed offshore sector which originated in World War Two as a haven for Dutch companies fleeing the German occupation of the Netherlands. Many financial links are to the Netherlands in one direction and to South America in the other. The financial and professional infrastructure is well-developed, with a Dutch (civil law) cast. Banking, mutual funds (for professional investors), shipping, licensing, insurance and holding companies are the main offshore sectors. The tax burden on most offshore activities is light but not minimal.

The Netherlands Antilles, and Curaçao by default, has traditionally had tax treaties only with Norway and, of course, the Netherlands, which gives access to the many Dutch tax treaties and good withholding tax regime. However, it has been seeking to create a more extensive tax treaty network, and in addition to a Tax Information Exchange Agreement with the United States, has concluded TIEAs with a number of other countries.

There is no banking secrecy legislation as such, but the jurisdiction does not normally respond to requests for help on tax matters from other than treaty partners. In fact, the Netherlands Antilles had faced pressure from international bodies to legislate more firmly against drug-related financial transactions: the Antilles' geographical position has led to a substantial illicit trade in drugs and drug money through the jurisdiction. The authorities are seen as being helpful to international investigators of drug crime, but the Parliament has in the past shown itself reluctant to put in place legislation improving disclosure.

At the end of 1999, 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 from 1st January 2002 along with a revised 'BRK' (Tax Arrangements for the Dutch Kingdom), removed the distinction between 'onshore' and 'offshore' companies and simplified tax rates. However, existing offshore companies are grandfathered until 2019. 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) or AEC in English (Antilles Exempt Company), and it has supplanted the offshore NV for many purposes.



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