The Curaçao E-zone N.V.
What is a Curaçao E-Zone?
A Curaçao E-Zone is a geographical location, either a terrain or a building, that was designated by the Curacao government with the purpose of trading goods or services. Businesses located in these so-called e-zones benefit from favorable fiscal facilities.
The Curacao government created two types of E-Zones. E-Zones that facilitate the trading of goods and merchandise and e-zones that facilitate the trading of digital products and services:
- Merchandise E-Zones mainly host businesses that use Curacao as a logistical hub. They process goods on-site and subsequently ship them onwards to other countries.
- Services E-Zones mainly host businesses that sell their digital products and services online. This mostly concerns activities like trading and services that facilitate trading. The e-zone law offers ample wiggle room for interpretation.
A maximum of 25% of the revenue may be generated on the island. Profit generated from local transactions is taxed at a 34.5% rate, profit generated abroad is taxed at only 2%. The latter is the main benefit of running a business from an E-Zone.
Usually, a private foundation (in Curaçao also known as SPF) will act as founder and sole shareholder of an e-zone entity. Typically. a trust company is appointed as an executive. After deducting the 2% corporate income tax, 98% can be paid out as a dividend to its shareholder: the private foundation. This dividend payout is not subjected to taxation.
How to benefit from a Curaçao E-Zone?
To benefit from this attractive 2% corporate income tax rate, your business needs to apply to obtain e-status. After obtaining approval for your e-zone business, you need to establish your business into one of the designated e-zones within 6 months. The operator of the e-zone of your choice will process the application for you. Establishing your business can be as easy as renting (shared) office space and installing a server and software.
Curaçao E-zone NV Case studies
In this section, we’ll discuss some examples and explain if, and why the owner does or does not comply with the requirements to establish an E-zone NV
1: International trade
Mr Nonimous is beneficiary of a private foundation called NoName.
NoName SPF is in the process of establishing a legal entity in Curacao. This legal entity aims to sell merchandise and services to an international clientele. They are looking to obtain business permit for an e-zone.
Yes. An e-commerce business like this usually qualifies to obtain an e-zone license and will most likely get one. Once the e-zone status has been established, this business will be subject to a 2% profit tax rate. The remaining 98% may be paid out to NoName SPF without further tax deductions.
2: A sole proprietor in the import and export business
Mr. Thomas is in the import & export business. He currently operates his business as a sole proprietor.
Being a sole proprietor with a substantial revenue, Mr. Thomas is subject to a high tax rate. Mr. Thomas is looking to lower his tax pressure. He hopes to move his sole proprietorship into the e-zone and lover his tax rate to 2%.
Does this business meet the standards for an e-zone license?
Unfortunately, he doesn’t. Mr. Thomas won’t be able to move his sole proprietorship into the e-zone. Curacao e-zones only allow for e-zone N.V.’s
3: A realtor based in Spain
Buenos Dias Realty specializes in selling vacation homes in Spain and Portugal. Corporate income tax rates are high in Spain and this entrepreneur is looking for a more profitable way to do business.
Some research leads him to the Curacao E-zone route. He ponders hiring a trust agency to establish a private foundation that will be the sole shareholder of an E-zone N.V. A private server located within the E-zone will host the website that showcases the vacation homes available in Spain and Portugal.
Will Buenos Dias Realty be able to save on taxes due by involving an e-zone N.V.?
Yes, by all means. Every sale that has been established using the site hosted on this private server, generates a 20% commission. The E-zone N.V. sends an invoice to the realtor in Spain. This commission is taxed against a 2% profit tax and 98% can be paid out to the SPF without further deductions.
4: An entrepreneur – inventor
The Dutch entrepreneur-inventor Pondersome has designed a piece of machinery for the construction industry. He has established patent rights and intends to market this product internationally.
Will mr. Pondersome be able to save on taxes due by establishing an E-zone NV and a private foundation?
Yes, absolutely. He could sell his patent rights by notarial deed to a Curaçao based private foundation. As long as business operations have not started yet, selling against a low rate will be fully justifiable. The SPF will be sole shareholder of an E-zone NV. This e-zone N.V. will sell the product online and target a worldwide audience. Profit will be taxed at 2%. The Curaçao based E-Zone N.V. will own a B.V. in The Netherlands. The private foundation will grant license rights to this B.V. Royalties from certain countries, such as for instance the U.S., Germany and France, will be subject to a source tax of 25%. 75% remains. Because the royalties are granted to a Dutch B.V., these royalties will be reduced from 25% to 5%. Another 20% savings.
How much can you save by moving your business to a Curaçao E-zone NV?
Let’s illustrate that with an example:
A Dutch E-commerce business (B.V.) with a € 100.000 profit, will be charged 30% corporate income tax. € 70.000 will be available as dividend to be paid out to shareholders. This € 70.000 is subject to another 25% dividend tax. Therefore another € 17.500 will be deducted and € 52.500 will be divided among the shareholders.
Had this business been operating as an e-zone NV within an e-zone in Curaçao, this € 100.000 would have been subject to a 2% corporate income tax. € 98.000 could have been paid out without further tax deductions to its sole shareholder: a private foundation.
Please read our page on private foundations for more information about how beneficiaries of private foundations get access to funds.
Is an E-zone NVrequired to have dedicated servers?
In most cases, businesses operating from an e-zone are required to keep a dedicated web server. Usually, these kinds of servers are powerful, sophisticated machines that require lots of maintenance and eat up large quantities of costly bandwidth. For many small and medium-sized businesses, this is, in a way, overkill. Recently, more economic dedicated web servers that require maintenance less frequently and keep their use of bandwidth at bay have become available. This cuts down on monthly fees substantially.