WILLEMSTAD - According to the Social and Economic Council (SER), concluding a tax treaty with another country is 'strictly not necessary, since Curaçao, like countries such as India, Hong Kong and the United Kingdom, has no withholding taxes'.
This is stated in the latest advice on the new legislation on double taxation. This does not alter the fact that the conclusion of Double Taxation Agreements (DTAs) is important as a signaling function. The SER believes that the Netherlands should cooperate better with Curaçao and be more supportive in concluding DTAs. Because, "the Curaçao tax treaty policy is currently far from adequate," according to the SER.
It is explained that in a DTA the taxing rights are divided so that the risk of double taxation is strongly prevented.
“This removes a possible barrier for residents from both countries to develop economic activities in the other country in question. The treaty provides legal certainty for taxpayers in both countries. Given the open economy and the very small home market, Curaçao has an interest in an extensive treaty network based on, among other things, the signaling function that this emanates and the possible snowball effect that can occur (increasing interest among other treaty parties). Tax treaties can remove obstacles for foreign companies to establish themselves in Curaçao and thus promote employment.”
Withholding tax is the deduction of tax 'at source', i.e. when certain income such as wages, interest or dividend is made payable. The SER explains that in the tax law of Curaçao it is the case with regard to the profit tax that income that is enjoyed from certain activities developed outside the island, is not included in the levy of the profit tax. As a result, from a strictly fiscal point of view it is not necessary to conclude DTAs as there is no double taxation.
But, it immediately adds: “It is more complicated in practice because at the same time new guidelines from the Organization for Economic Co-operation and Development (OECD) must be taken into account to prevent 'harmful tax practices'. From an international point of view, therefore, stricter requirements are imposed each time with which the treaty parties must comply. By definition, DTAs have an important signaling function. Suppose Curaçao has a hundred DTAs with countries from all over the world, then the island quickly becomes attractive to the outside world from a fiscal point of view.”
In the advisory report, the SER puts it as follows: "The SER sees a useful 'tool' in strengthening the treaty status of Curaçao in tax terms for combating aggressive tax planning and undesirable practices such as tax avoidance and evasion, so that international tax image of Curaçao is further enhanced.”
In addition, Curaçao can also generate other income if tax treaties have been concluded. The SER refers here to the regulation of Article 17 of the OECD Model Convention, which contains allocation rules for income of artists and sportspeople. "The rewards that athletes and artists receive for performances may be taxed in the country in which the performance is performed," the internet explanation reads.