The Curaçao Private Foundation
What is a Curaçao Private Foundation?
A Curaçao private foundation, also known as SPF, is a legal entity formed in accordance with the law of Curaçao. A Curaçao private foundation is established by means of a notarial deed. Typically, a private foundation is used to manage and protect the beneficiaries assets, such as for instance shares of other legal entities, real estate, deposits & royalties.
Private foundations are registered with the registry of foundations at the Curaçao Chamber of Commerce. The by-laws of the foundation grant certain rights to the founder. These rights can be transferred by either a notarial or a private deed. The by-laws direct, amongst others, who has access to the assets managed by the private foundation.
As long as a trust agency is appointed as director of the private foundation, its beneficiary can remain secretive. Curaçao legislation holds Curaçao based trust agencies to the protection of the identity of beneficiaries.
Nobody is able to seize what you don’t own
Beneficiaries of private foundations are usually appointed by means of a private deed. And one cannot confiscate what one does not own. As soon as your assets have been transferred to a Curaçao private foundation, you are no longer the owner. Creditors can no longer touch your assets, relieving you of many concerns. You would not consider keeping a large sum of cash at home, simply because it could be stolen from you either, right?
When your assets are managed by a Curaçao private foundation, there is nothing left to steal, for the straightforward reason that a private foundation does not actively participate in civil life. It does not create debts, it does not make commitments. As soon as your assets have been moved into the private foundation and therefore have been separated from you as a natural person, your assets will be secured. Imagine a life without nightmares about foreclosures and repossessions.
You are legally covered. And you get to enjoy the fiscal benefits of the Curacao private foundation, too.
Donations from a Curaçao private foundation to its beneficiaries are not subject to any taxation in Curaçao.
The Netherlands: Gift Tax
If these donations are directed towards beneficiaries residing in The Netherlands and comply with certain conditions, they are even exempt from gift taxes.
The Netherlands: Income Tax
Occasional donations from a private foundation to a natural person will not be seen as a source of income (such as wages or profit). Therefore these donations will not be taxed in box 1. The “worst-case scenario” here would be taxation in Box 3, against a 1.2% tax rate.
To avoid complications:
- Don’t establish a private foundation by yourself. If you don’t obtain founders rights and don’t expect an income from an SPF, notional return on investment is not applicable;
- Don’t receive periodical payments. Plan for incidental larger donations instead.
Why a Curaçao Private Foundation?
Why would you choose a Curaçao Private Foundation over a foundation in Panama or Liechtenstein?
The Curaçao Private Foundation is similar to foundations in Panama and Liechtenstein. Curaçao, however, created an improved version. All “errors” of foundations in other countries have been straightened out. Also, a Curaçao Private Foundation offers many more options for customization. Lastly, Curacao Private Foundations are priced competitively.
Why would you prefer a Curaçao Private Foundation to an Anglo-Saxon trust?
If you consider moving your assets abroad, please note that most jurisdictions do not acknowledge a Trust as a legal entity. This can cause all sorts of issues down the road. A Curacao Private Foundation, however, is an independent legal entity with rights and in some cases obligations.
How to make the best use of a Curaçao Private Foundation
The following examples may help you picture how a private foundation could be beneficial for your particular case
1: As a business owner
If you are a shareholder in a legal entity, you:
- Need the services of a notary and will be taxed over substantial interest when selling your shares;
- Need to pay gift-tax when you decide to give away shares to your children;
- Need to know the heirs of your shares will be subject to inheritance tax when you pass away;
- May unwillingly direct earnings towards undesirable heirs after passing away;
- Will need to pay yourself a substantial minimum salary, related taxes, and fees if you act as managing director;
- You risk third parties seizing your shares in case if private payment arrears.
When a Curaçao Private Foundation owns these shares instead, you steer clear of all these inconveniences:
- Instead of selling the shares, you appoint a new beneficiary of the private foundation. The relation between the business entity and its shareholder(s) remains unchanged and therefore no legal is obliged.
- Your children will be appointed as beneficiaries of the private foundation instead. Again, nothing changes in the relationship between the business entity and its shareholders. There is no base to impose taxation;
- Again, the heirs you have appointed will become the new beneficiaries of the private foundation. No taxes will be levied;
- Succession law does not apply to beneficiaries of Curaçao private foundations. You get to decide who will inherit your rights as beneficiary;
- Since you are neither managing director of the foundation nor major shareholder of your business, this legislation no longer applies to you;
- Since the private foundation has no part in your private properties, or debts, nor are you the legal owner of the private foundation, there is no legal base to seize your shares.