News › Taxand’s Take Article
Curacao: Pensioners to Benefit from Income Tax Regime
Taxand Curacao looks at the current income tax regime for pensioners "Penshonado Legislation". In particular, reviewing the conditions a pensioner must meet to benefit from the regime, applicable tax rate and legislation requirements.
- The pensioner needs to be living in Curacao. From a fiscal point of view a person's domicile is determined by considering the facts and less by observing formalities. A person's domicile is not only determined by confirming the names of their civil registration, for example.
- For 60 months, prior to the year in which the pensioner wants to apply for the fiscal pensioner status, their domicile cannot have been in Cura?ao or its predecessor the Netherlands Antilles.
- At the moment the pensioner wants to enter their name into the civil registration in Curacao they be at least 50 years old.
- Within 2 months of entering into civil registration, the pensioner needs to inform the tax authorities of their wish to be taxed in accordance with the pensioner legislation.
- Within 18 months of living (being registered) in Curacao the pensioner needs to have purchased a house with a minimum value of ANG 450,000 (approx. USD 257,000). The pensioner cannot then let their house to third parties.
A pensioner is not allowed to fulfill employment in Curacao or be self employed. There is one exception to this rule whereby it is permissible to be the director in a legal entity (directly or indirectly) owning at least 40% of the share capital.
Tax Rate and Income Type Under the Scope of the Pensioner Legislation
Foreign Source Income: the pensioner will be taxed against a flat income tax rate of 10%. Income from a foreign source is considered to be:
- income from a current or former employment or other activities executed outside Curacao
- income from real estate not situated in Curacao
- income from bank accounts, dividends distributed by companies which are not involved in activities in Curacao, and income deriving from a substantial interest in the share capital of a company not domiciled in Curacao
- income from annuities received from parties not residing in Curacao and lump sum payments deriving from a life insurance policy from parties not residing in Curacao
LumpSum Tax Payment
For a pensioner it is also possible to opt for a payment of approximately USD 150,000 instead of the 10% income tax rate. One cannot shift between these two systems on an annual basis but this can provide for some interesting tax planning opportunities. Under this lump sum arrangement one cannot benefit from the Tax Agreement of the Kingdom as it exists between the Netherlands and Curacao.
Social Security Premiums
Besides income tax if the pensioner is under 60 years of age they can also pay into the Old Age Pension Fund of which the maximum premium is currently (2011) approx. ANG 11.500 (USD 6,500). Pensioners also pay a special sickness insurance premium with a maximum 2% on their annual income. This is however capped off at approximately USD 240,000.
It is important for pensioners wanting to live in Curacao to understand the current "Penshonado Legislation" and to adhere to its guidance to benefit from the regime.
Your Taxand contact for further queries is:
T. +59 99 737 4916
We are interested to hear your opinion on this key piece of tax news. Join our LinkedIn Group and share your ideas. With tax professionals in nearly 50 countries you can understand the impact of tax issues affecting multinationals today.