Following legislation introduced on 1 January 2012, it is now possible to establish a trust in Curacao. The concept is similar to the trust in Anglo-Saxon common law jurisdictions; however, the Curacao trust is based on civil law.
Key elements of a Curacao trust
Under a Curacao trust, a settlor of the assets/property transfers their legal ownership to a third party (trustee) who carries out the administration of the assets/property for the benefit of other persons (the beneficiaries). Instructions to the trustee by the settlor on the administration of the trust are laid down in the articles of incorporation and in a letter of wishes.
A Curacao trust is created by notarial deed and its main characteristics are:
- The trustee is the legal owner of the assets of the trust
- The assets of the trust and the assets of the trustee are legally separated
- The assets of the trust constitute separate capital
A Curacao trust is primarily used for:
- Charitable purposes
- Estate planning
- Structuring, by pension funds or investment funds
- To set aside capital for children’s upbringing, maintenance or education;
- Protected or segregated cell trusts (for example, used as an umbrella fund)
Taxation of the trust
The Curacao trust is considered to be a tax resident of Curacao. However, the trust is not subject to a profit tax of 22% if:
- Trust activities involve passive income
- The trust does not carry out a business.
A trust can also choose to apply for taxation at a profit tax rate of 10% (no specific conditions apply) to meet the ‘effectively being taxed’ criterion used by other countries to conclude whether a trust should be considered a transparent entity or not. In these circumstances, a Curacao trust is subject to profit tax and can benefit from investment allowance participation exemption, depreciation and loss compensation.
Receipt from and distributions to a non-resident are not subject to Curacao gift tax. Curacao transfer tax may be due on the transfer of, for example, real estate situated in Curacao or ships registered in Curacao to or by the Curacao trust.