Key Tax Considerations for Investing in Curaçao Real Estate

If you are a Dutch resident interested in investing in real estate on Curaçao, there are several key tax considerations to keep in mind. Fong-Mang Cheong, Country Managing Partner and Tax Partner at Ernst & Young, explains these important points below.

Curaçao real estate: Box 3 or through a BV (Limited Company)?

Real estate is taxable in the country where it is located. The country of residence of the owner generally provides an exemption for the income generated by this property to avoid double taxation. For Dutch residents who purchase property in Curaçao, Curaçao has the right to tax income derived from that property, while the Netherlands must grant an exemption for this income. Investments by Dutch residents typically fall under Box 3 taxation. However, when the investment involves foreign real estate (in this case, Curaçao), the deemed income is exempted in the Netherlands.

This rule also applies to corporate taxation. It can therefore be advantageous for a Dutch BV (limited liability company) to invest in Curaçao real estate. Such a company would receive an exemption in the Netherlands for the net income from the Curaçao properties. Additionally, income from investment in a Curaçao real estate company is generally exempt under the Dutch participation exemption. However, the income will still be subject to taxation in Curaçao. Below we discuss the primary tax implications of investing in Curaçao real estate.

Income Tax

Real estate located within Curaçao typically constitutes a domestic source of income, potentially subject to Curaçao income tax. This also applies to rights associated with property located in Curaçao, such as leasehold and usufruct. Therefore, even if the property owner resides abroad, real estate may still be taxed as Curaçao-sourced income.

If the property is used as a (secondary) residence by the owner, it is generally not subject to income tax. Curaçao does not levy a rental-value tax (huurwaardeforfait) nor does it have a Box 3 taxation system like the Netherlands.

However, if the property is rented out, it typically generates taxable income. Rental income from real estate is taxed progressively, up to a maximum rate of 46.5%. From the taxable income, you may deduct: (i) interest costs related to the purchase or improvement of the property, and (ii) a deemed deduction of 35% of rental income to cover potential additional expenses.

Capital gains (profits from property sales) are generally not taxable. However, if substantial rental activities or development activities are involved, the income could be considered business income or earnings from self-employment. In such cases, rather than the deemed deduction of 35%, all relevant actual costs might be deductible. Additionally, there is an investment deduction of 30% on maintenance and improvement costs exceeding ANG 5,000 for protected monuments. Any capital gains realized in these cases would be taxable.

Real estate held by companies subject to profit tax

Profits from the exploitation and sale of real estate by a (Dutch) company are subject to profit tax in Curaçao. The current corporate tax rate is 22%. There is a legislative proposal that, starting from January 1, 2023, introduces a tiered rate: profits up to ANG 500,000 would be taxed at 15%, and any excess would be taxed at 22%. The aforementioned investment deduction for maintenance and improvement of monuments also applies here.

Investing via a Stichting Particulier Fonds (SPF)

Many individuals and companies have invested in Curaçao real estate through a Stichting Particulier Fonds (SPF). The SPF is not allowed to engage in business activities but may invest in real estate. Under current Curaçao law, an SPF is subject to profit tax but exempt from profit taxation as long as the profit does not derive from business operations. It is important to note that this legislation may change after 2023.

In addition to the above, property transfer tax, turnover tax, and real estate tax may also apply to your investment in Curaçao real estate. Given the complexity of these tax aspects, consulting a tax professional is advisable. This will ensure that you develop a well-informed strategy, optimizing your tax benefits while complying fully with all legal requirements.