With this letter the Tax Authorities clarifies the positions taken in the actual decision, attended in the tax ruling decree regarding real Cura\u00e7ao economic presence (substance) issued on 16 November 2023.<\/p>\n
The Tax Authorities have been requested to confirm whether there is sufficient real economic presence in Cura\u00e7ao, based on the article 1C, paragraph 2 of the Profit Tax Ordinance 1940 (hereafter: PTO). Based on mentioned article certain economic substance requirements must be met in Cura\u00e7ao by entities that derive foreign income with an active business enterprise in Cura\u00e7ao.<\/p>\n
In order to elaborate on our assessment on this case, we present you the following facts and understandings of the case:<\/p>\n
In order to assess whether the company has real economic presence in Cura\u00e7ao, according to the article 1C, paragraph 2, PTO, we have analyzed the following criteria:<\/p>\n
We herewith elaborate on each of the above mentioned criteria separately as applicable in this case.<\/p>\n
Having an active business enterprise<\/strong><\/p>\n Based on article 4, paragraph 4, PTO, the taxable base for Cura\u00e7ao profit tax purposes will be limited to income generated and attributable to a domestic business enterprise in Cura\u00e7ao. Foreign income generated and attributable to an active business enterprise in Cura\u00e7ao will be excluded from the taxable base for Cura\u00e7ao profit tax purposes. Income that is not generated and attributable to an active business enterprise, the so-called passive income (royalty income, rent income), shall be deemed generated through domestic business enterprise and will therefore be included in the taxable base for Cura\u00e7ao profit Guidance on the interpretation of carrying an active business enterprise can be found in the Dutch case law.<\/p>\n Based on the Dutch case law, the company is an active business enterprise, if the following elements are met:<\/p>\n The company is considered an organization of capital and labor, due to the nature of their activities in trading, participating in the economic Marketplace with the intention to generate profits, having a local office space with management and employees in Cura\u00e7ao, their overall investment having substantial risks incurred, spending significant time with their activities, with actual generated profits.<\/p>\n Having permanent establishment in Cura\u00e7ao<\/strong><\/p>\n Whether there is a permanent establishment in Cura\u00e7ao must be assessed in this specific situation on the basis of the article 1, paragraph 5 through 11, PTO which is based on the article 5, paragraph 1 of the OECD Model Tax Convention (OECD Model). Based on aforementioned articles and the explanatory notes on the articles, the company is considered to have a permanent establishment if the following cumulative conditions are met:<\/p>\n As a place of business can be considered, a branch, an office, a factory, a workshop, premises, facilities, or installations used for carrying business, a certain space at disposal (owned or not owned) for the business activities of the company. The company has an office space in Cura\u00e7ao used as the central place to conduct its business activities. As mentioned this place of business should be fixed. This means there should be a certain permanency of this place located in Cura\u00e7ao. This place should not be used temporarily. The office space of the company is permanently established in Cura\u00e7ao. Based on the explanatory noted, this fixed place of business should carry on the business of the company wholly of partially. The company does carry its whole business through this fixed place of business in Cura\u00e7ao.<\/p>\n Core Income Generating Activities in Cura\u00e7ao<\/strong><\/p>\n The company should perform its core income generating activity in Cura\u00e7ao (CIGA). Based on the PTO and the explanatory notes on the PTO in accordance with the OECD, the core income generating activities are those that generates the revenues and consequently the profit of the company, but also increases the value of the company. For each case, what the CIGAs actually consists of must be assessed based on the facts and circumstances. For these activities, the local management of the company must have its authority on the decision-making with regard to the activities. It should not be restricted in its authority or autonomy nor receive instructions to follow from (management)abroad to a large extent. Supporting activities are in overall not considered to be core income generating activities.<\/p>\n In this case the following CIGAs have been identified by the entity:<\/p>\n In principle the CIGAs are considered to take place in Cura\u00e7ao, if the business activities are managed, organized, initiated and monitored from Cura\u00e7ao and that the policy related functions take place in Cura\u00e7ao. It is not required that the execution of the day-to-day functions take place in Cura\u00e7ao. Mentioned CIGAs are in line with the criteria and are commissioned to the two local directors and the foreign director of the company. In this respect, the foreign director should be physically present in Cura\u00e7ao when management and strategic decisions related to the activities are made. In any case atleast the two local directors, thus the majority of the Managing Directors will be present at all times in Cura\u00e7ao upon management and decision making. It can be concluded that the CIGAs of the company are performed in Cura\u00e7ao.<\/p>\n Management and Employees in Cura\u00e7ao<\/strong><\/p>\n In order to comply with this criteria, the company must have a local management in place which is responsible for the relevant decisions and the policy to be made for the day-to-day execution of business. As aforementioned, the company meets these criteria. Also, the company must have an adequate number of employees with the adequate qualities and knowledge to perform in their function. The organization of the company consists of the following directors and employees:<\/p>\n Mentioned directors and employees have the adequate qualities and knowledge to perform in their function. This qualification is assessed based on the employees\u2019 training and experience and whether the employee is capable of discharging power and responsibilities appropriate to the nature and scope of the company\u2019s activities.<\/p>\n Local incurred operating costs annually<\/strong><\/p>\n It should be assessed, whether the company has an adequate amount of annual recurring local costs, that is appropriate to the nature and extent of the activities of the company. However, the PTO does not have a guidance on what should be considered \u2018appropriate\u2019 of \u2018adequate.\u2019<\/p>\n The following expenses are locally incurred:<\/p>\n Taking the expenses incurred by the company in the last two years into consideration it should be concluded that the company has local incurred operations costs annually. These expenses are of support to the CIGAs.<\/p>\n To finalize, based on our assessment we hereby confirm that the company has a real economic presence (substance) in Cura\u00e7ao. However, we emphasize that there is no clear description of what is seen as \u2018sufficient\u2019 or \u2018adequate\u2019 presence or substance, not in the Cura\u00e7ao legislation, neither in the Cura\u00e7ao case law or literature. Future Cura\u00e7ao case law in this aspect or changes in Cura\u00e7ao tax legislation on this specific subject may be of influence on our assessment whether there is \u2018sufficient or appropriate\u2019 substance.<\/p>\n Please note that the tax ruling is applicable for 5 years, unless the conditions are no longer met or there are changes in the Cura\u00e7ao tax legislation that may be of influence on our assessment.<\/p>\n The Tax Inspector;<\/p>\n","protected":false},"featured_media":0,"parent":0,"menu_order":0,"template":"","categories":[32],"tags":[],"class_list":["post-5542","updates","type-updates","status-publish","hentry","category-press-releases"],"acf":[],"_links":{"self":[{"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/updates\/5542","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/updates"}],"about":[{"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/types\/updates"}],"version-history":[{"count":1,"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/updates\/5542\/revisions"}],"predecessor-version":[{"id":5543,"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/updates\/5542\/revisions\/5543"}],"wp:attachment":[{"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/media?parent=5542"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/categories?post=5542"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/minfin-dev-h.profound-dev.com\/en\/wp-json\/wp\/v2\/tags?post=5542"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\ntax purposes.<\/p>\n\n
\nin the course of trade;<\/li>\n\n
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