News and Insights

New Tax Arrangement Between the Netherlands and Curaçao

Tax Development Jun 25, 2014

On June 10, 2014, the Dutch State Secretary of Finance presented a new tax arrangement between the Netherlands and Curaçao to the Dutch Parliament. Since the political reforms within the Kingdom of the Netherlands took place in 2010, talks have been ongoing regarding the replacement of the tax arrangement for the Kingdom of the Netherlands (“TAKN”). The Dutch government is intending to replace the TAKN by three new bilateral arrangements between The Netherlands and Curaçao, Aruba, and Saint Maarten. The tax arrangement between the Netherlands and Curaçao is the first of these three new bilateral arrangements that was published. Below is an overview of the most important changes.


Currently, the Netherlands generally applies 15% withholding tax on outgoing dividends, whereas Curaçao does not levy withholding tax on outgoing dividends. Under the current TAKN, 8.3% dividend withholding tax could be levied on outgoing dividends between TAKN parties. In the new tax arrangement, a withholding tax rate of either 0% or 15% would be applicable. The 0% withholding tax rate on dividends is applicable in case the beneficial owner: 

  • Is a state;
  • Is a pension fund;
  • Owns at least 10% of the shares in a company, and that company is a qualifying person based on the limitation on benefits provision in the arrangement. (See below.)

A qualifying person is a company that:

  • Is publicly traded or owns at least 50% of the shares of one or more companies that are publicly traded and are resident of either the Netherlands or Curaçao or are entitled to at least the same benefits based on a different treaty;
  • Is the headquarters of a group of companies and performs an important part of the board supervision or provides an important part of the groups financing and meets the following conditions:
    • The group companies are involved in at least five jurisdictions and generate at least 10% of the total group revenue in those jurisdictions;
    • Less than 50% of the total group revenue is generated in the dividend paying jurisdiction; and
    • The headquarters is liable to the general tax regime in the jurisdiction of residency;
  • Structurally employs at least three local full-time employees in its jurisdiction of residency who independently perform their activities and manage the capital and revenues of the company (substance requirement).

Furthermore, the 0% withholding tax applies in case the above criteria are not met and:

  • The company actively performs trade or business activities, and the received dividends are originated or connected to that company; or
  • The company obtained a ruling by the competent authority which states that the primary goal of the company is receiving or paying the dividends is not to attain the 0% withholding tax.

In addition, a 0% withholding tax applies in case the beneficial owner company is owned for at least 50%, directly or indirectly, by individuals who are resident of either the Netherlands or Curaçao, and that company directly owns 10% of the shares of the dividends paying company.

For existing situations that do not meet the requirements as listed above, the new tax arrangement provides a grandfathering rule that includes the application of a 5% withholding tax until 2019 for Dutch companies that pay dividends to their parent company in Curaçao. To apply for this grandfathering rule, the parent company is required to have an interest of at least 25% in the subsidiary.

In all other situations, a 15% withholding tax applies.

Hybrid Entities

In case double (non) taxation arises as a result of a classification mismatch (when a company is transparent in one jurisdiction and non-transparent in the other jurisdiction) between the Netherlands and Curaçao, the authorities will start a mutual agreement procedure to prevent double (non) taxation.

Capital Gains

The source jurisdiction is entitled to levy tax on capital gains. For cases in which capital gains and dividends will be derived from a substantial interest (a shareholding of at least 5%) in a Dutch company by a former Dutch resident who emigrated to Curaçao, the Netherlands is entitled to levy tax for a period of ten years insofar the capital gains and dividends have been built up in the Netherlands before emigration. In case a Dutch resident with a substantial interest emigrates before the publication of the new tax arrangement between the Netherlands and Curaçao, the Netherlands is entitled to levy tax for a period of five years.

Anti-Abuse Provision

The Netherlands and Curaçao are entitled to apply national law concerning fraud, abuse, or improper use without any restrictions. However, based on a grandfathering rule, existing structures will not be harmed by the Dutch substantial interest rule of article 17, paragraph 3, sub b DCITA until the end of 2019.

Other Changes

The new tax arrangement also contains changes in regard of:

  • Inheritance and gift tax: The Netherlands is entitled to levy inheritance and gift tax for a period of five years after emigration of a Dutch resident to Curaçao.
  • Pensions: For non-government pensions, in principle, the jurisdiction in which the pension recipient is resident is entitled to levy (regarding regular payments). Nevertheless, non-government pensions may also be taxed in the source state with a maximum of 15%. Government pensions are taxed by the source state.
  • Rewards for athletes and artists: A source state levy is applied for athletes and artists.
  • Income for performing services longer than 183 days: For cases in which services are performed for a duration that exceeds 183 days, the jurisdiction in which these services are being performed is entitled to levy tax.
  • Corporate residency: For cases in which a company is resident of both jurisdictions, the competent authorities will enter a mutual consultation to determine in which jurisdiction the company is resident.
  • Information exchange: The Netherlands and Curaçao agreed to automatically exchange information in accordance with international standards.
  • Mutual agreement procedure: A resident can apply for a mutual agreement procedure between the two competent authorities. Based on the above, it can be concluded that most existing structures involving Curaçao need immediate review and restructuring to avoid potential adverse tax consequences. If you need any help or more information regarding the new tax arrangement between the Netherlands and Curaçao, Ryan International Tax professionals are available to provide more details on this arrangement and how it may affect your organization.