Tuesday, 7 December, 2010

Curacao and Canada sign TIEA.

Following the succesful Tax Information Exchange Agreement (TIEA) between Spain and Curacao, a TIEA has been concluded between Canada and Curacao.
Canada and Curacao signed a TIEA on August 29, 2009. The Ministry of Foreign Affairs of the Kingdom of the Netherlands did announce that the TIEA between Canada and Curacao will enter into force as from January 1, 2011. 

A TIEA is, generally, an agreement to provide, upon request, information on the assets of a resident of one country that are located in the other country. It is an important tool to help prevent tax evasion in circumstances where the two countries to the agreement have not entered into a comprehensive tax treaty.

Recently enacted Canadian legislation has provided an incentive for countries to enter into TIEAs with Canada. Once a TIEA has entered into force, business income earned in that country by a foreign affiliate of a Canadian company can be included in exempt surplus and repatriated to Canada without additional Canadian tax. This provides the same tax treatment as business income earned in a country with which Canada has concluded a comprehensive tax treaty. 

For Curacao this means that Curaçao subsidiaries of the Canadian parent company with ‘active business income’ may be able to repatriate their profits to Canada without any further taxation at the level of the Canadian parent company. In connection with the relevant Canadian tax rule, (passive) intergroup interest and royalty income will also be considered as active business income. It is important to note here that no further requirement applies to the level of taxation of such active business income of the Curaçao subsidiary. 

Based on the foregoing, we conclude that as from January 1, 2011, Curaçao will once again enhance its structuring possibilities. Over the years Curaçao’s infrastructure has become one of the best in the entire Caribbean region. As a Netherlands protectorate, known for its stable political and legal climate, and with a legal system based on civil law similar to the Netherlands’, Curaçao offers a unique stable environment for setting up business. For more than 80 years, Curaçao has developed itself as an established, secure, reliable and responsible international financial centre. A variety of international companies are managed in Curaçao, including investment companies, finance companies, holding companies, mutual funds, offshore banking institutions, intellectual property holding companies, private foundations, hedge funds, e-zone companies and many other. 

In addition Curacao has now become an even more tax efficient base for Canadian-owned foreign operations. The pro active spirit of Curacao is proved by the fact that it is one of the first jurisdictions with a TIEA with Canada, entering into force within a very short term. Because of being one of the first, Curaçao will have an important competitive edge over a number of Caribbean jurisdictions for the favorable tax structuring for Canadian (multinational) groups.

For further information please contact Gerard Jan van Spall on +(599 9) 736 6044.

For more information please contact Thomas Snoeckx on +32 475 94 15 14