The SPF is a legal entity that must be established by deed executed before a civil law notary. As the SPF is a legal entity, it can independently possess assets and liabilities. Assets, including real estate, contributed to the SPF are in principle no longer part of the founder's estate.
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IIn contrast to a regular foundation, an SPF can be established in a way that allows distributions to be made to the founders or ultimate beneficiaries of the SPF. However, the SPF cannot have the purpose of making a profit by conducting business activities.
Appointing an independent third party as a director is crucial to prevent the settlor/beneficiary from maintaining control over the assets in the SPF. If you’re the founder of an SPF, you can share your wishes about the SPF and its assets with the board using a “letter of wishes.” It’s important to note that the director isn’t obligated to follow these wishes if they believe it’s not in the best interest of the SPF.
Tax considerations SPF
Profit Tax
Profits generated by an SPF are, in principle, exempt from profit tax in Curaçao as long as the SPF is not engaged in any business activities. Engaging in asset management or functioning as a holding entity would not necessarily qualify as engaging in business activities. Although there is no profit tax liability, the SPF is still obligated to file profit tax returns annually.
Personal income tax
For residents of Curacao, periodic or one-off distributions from an SPF constitute a source of income for income tax purposes in Curaçao. For non-residents, this is not the case.
For foreign investors it should be noted that this income may be subject to income tax in the country of residence.
Inheritance and gift tax
In the event of an inheritance, receiving assets through a legacy, or as a gift, inheritance tax is applicable. Opting for an SPF may be a strategic choice for estate planning purposes, as the incidence of succession tax may be significantly reduced.
When the SPF disburses to beneficiaries residing within Curaçao, succession tax may be levied. Yet, if beneficiaries are non-residents, the distributions from an SPF are exempt from inheritance tax. It’s important to note that such distributions may be subject to taxation in the recipient’s country of residence.
If a tax resident of Curaçao transfers assets to an SPF through inheritance, legacy, or gift, the SPF is subject to an increased succession (inheritance) tax rate of 25%.
Conversely, when assets are received from a non-resident through inheritance, legacy, or gift, the SPF is not subject to inheritance/gift tax in Curacao.
Global Advantage for Non-Residents
Remarkably, non-resident individuals benefit from a distinct advantage when assets are received through inheritance, legacy, or gift via an SPF. In such instances, the SPF is exempt from inheritance/gift tax in Curaçao, offering a noteworthy advantage for those with a global footprint. It’s imperative to acknowledge that such distributions may be subject to taxation in the recipient’s country of residence.
Conclusion
In summary, the Curaçao SPF provides a robust legal framework for asset protection and estate planning. Establishing an SPF, guided by general legal aspects and tax considerations, empowers individuals to safeguard their wealth and streamline inheritance processes. The unique features of an SPF, such as the ability to make distributions and the global advantage for non-residents, offer unparalleled flexibility and advantages.
Contact
For those seeking tailored advice and comprehensive insights into optimizing their financial strategies through the Curaçao SPF, our team of experts stands ready to provide expert guidance. Navigating the maze called tax requires a personalized approach. Unlock the full potential of your financial endeavors—reach out to us today for a consultation and embark on a journey towards secure and strategic wealth management with the Curaçao SPF.
Key Contact
Jeannitza Felix