The introduction of the unilateral regulation for avoidance of double taxation

In recent years, the focus was to make sure that the Curaçao tax system is in line with internationally accepted standards. Partly in this context, the National Decree for avoidance of double taxation (hereinafter referred to as: “National Decree” or “regulation”) has been introduced.

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This National Decree is a unilateral regulation for the avoidance of double taxation for a taxpayer, for example, by means of tax treaties. The purpose of this National Decree is to comply with international standards, but also to offer protection to residents against double taxation and to minimize tax obstacles for Curaçao as a place of residence or business. The National Decree introducing the unilateral avoidance of double taxation is applicable to personal income tax, wage tax, profit tax and inheritance tax.

Personal income tax


Based on this regulation a resident taxpayer is exempt from personal income tax related to foreign income. This is the so-called exemption method. Please find below some examples of foreign income that is exempted from personal income tax in Curaçao.

  • Income of a foreign enterprise. This refers to income from a permanent establishment, e.g., a branch, within another state.
  • Income from employment when performing or having performed work in another state under private law.
  • Income from exercising or having exercised the position as a board member or supervisory director of foreign-based entities.
  • Income from employment in respect of performing or having performed work outside the territorial waters of Curaçao on board of a ship or aircraft, where the actual management of the company is located in another state.
  • Income from performing or having performed work abroad as an artist or an athlete.
  • Income from real estate located abroad and rights thereon.
  • Income from rights to shares in the profits of a foreign entity, provided that such rights do not arise from securities ownership or employment.
  • Income from benefits derived from foreign government regulations from a legal entity governed by public law.

For the applicability of the exemption, it is important that the foreign income is subject to foreign income tax. It is not important that, actual taxation is not levied in whole or in part. It is sufficient that under the law of the other state the income is subject to tax.

Please note that in the case of work performed in the other state for less than thirty consecutive days, the income is only considered to be subject to tax in the other state if it appears that tax has actually been paid in the other state.

The exemption for foreign income is applied separately for each state from which the resident taxpayer receives income. This is done by granting a reduction on the income tax payable by applying the proportionality ratio.

Proportionality ratio

foreign income

Total taxable income + Deducted personal and extraordinary expenses

In the case of a resident taxpayer with both foreign and domestic income, the personal expenses and extraordinary expenses accruing in that year are allocated proportionately between foreign income and domestic income.

The exemption is calculated as follow:

Exemption = proportionality ratio X (income tax due based on the National Income Tax Ordinance (total taxable income) – general deduction)

The total exemption cannot exceed the income tax due in Curaçao.

When calculating the exemption, the domestic income that is taxed at a special rate, is not included in the calculation of the proportionality ratio. Furthermore, if the exemption relates to tax on foreign income to which a special rate should apply, the exemption may not exceed the special rate calculated on such income.

The “carry forward” rule applies when the foreign income exemption cannot be fully realized, for example, because the taxpayer has negative income from other domestic sources in addition to positive foreign income. Foreign income for which no exemption was obtained may only be exempted in the five years following the year in which the income was obtained. The latter is also applicable in case the foreign income is negative.

Wage tax

Employees residing in Curaçao are exempt from the wage tax related to the income received, which income is subject to tax in another state. In such case the foreign employer will not be considered as a withholding agent.

Profit tax

Income from immovable property is in principle subject to profit tax in Curaçao. Most states stipulate that income from immovable property located in their state may be taxed there. This can lead to double taxation. On the basis of this National Decree, a resident taxpayer is exempt from profit tax on income from immovable property, located on the territory of another state. The exemption is granted to the extent that the income is subject to tax. The exemption method is applied using the proportionality ratio.

Proportionality ratio

foreign income

Taxable profit

Exemption = proportionality ratio X Profit tax due

the case of profit tax, same as for the personal income tax, the total reduction cannot be more than the tax owed in Curaçao.

There is also a carry forward provision for the profit tax. The difference is that for the profit tax a period of ten years applies instead of five years.

Further, the credit for foreign withholding tax will be limited to that part of the foreign tax which relates to the profit from domestic business. When calculating the tax credit, Curaçao fully includes the domestic profit components in the taxable amount. Then the profit tax is reduced by the tax paid abroad. The latter is the first limit. If the profit tax, according to the National Profit Tax Ordinance is lower than the tax paid abroad, the lower amount is applied. This is the second limit. The purpose of these limits is to ensure that Curaçao does not deduct more foreign tax than was levied abroad, but also not more than the amount of Curaçao profit tax due on those profit components.

Inheritance tax act

The inheritance tax is levied from the beneficiaries of an inheritance of, or beneficiaries of a gift by, a resident of Curaçao. This National Decree contains a credit possibility for foreign similar taxes levied on the goods located in another state. The tax must have been levied by the state where the goods are located. This involves business operations in another state or immovable property located in another state.

The reduction is the lowest of the following amounts:

  • The amount levied abroad on gift or inheritance in connection with the foreign business or immovable property.
  • The amount calculated using the proportionality ratio as mentioned under the personal income tax.

The reduction can never exceed the total inheritance tax owed in Curaçao.

Inactment of the National Decree

  • For personal income tax purposes, the National Decree for avoidance of double taxation will be applicable to all years for which the assessment has not yet been irrevocably determined.
  • For profit tax purposes, the National Decree for avoidance of double taxationwill apply to all fiscal years beginning on or after January 1st, 2020.
  • For wage tax purposes, the National Decree for avoidance of double taxation will apply as of January 1st, 2023.
  • For inheritance tax purposes, the National Ordinance for avoidance of double taxation will apply to all legacies and gifts still outstanding on or after the date of enactment of this National Decree, and to all years for which the assessment has not yet been irrevocably determined.

Should you have any questions with regard to this National Decree, please do not hesitate to contact us. Our team would be more than happy to assist you with your questions.

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Vivian Pieters

Vivian Pieters