September 12, 2019

Curacao policy on prevention of double taxation

Curacao has an enormous lack in treaties on double taxation. For many years we have tried to convince our government that we should draft a unilateral policy where Curacao would provide for tax relief in cases where otherwise double taxation would occur. Drafts were made but never presented to our parliament. It seems that a judge has now created a unilateral policy via a verdict.

This is actually spectacular good news and may bring a lot of investments and investors to Curacao.

This is what happened:

A Curacao resident received income for work executed in the United States. On that income federal tax was paid upon filing of his US tax return.
On his Curacao income tax return he asked for relief as his income was already taxed in the United States. The Curacao tax inspector however gave no relief to which he objected.

His objection was denied by the tax inspector so he took his case to the tax court.

His case was represented by a lawyer. This lawyer made reference to a case that was brought to the Curacao tax court in 2015.

That case we know quite well as I was the lawyer who took that case to the court.

I made the case in 2015 that there is unpublished policy from the tax authorities addressing these kind of situations.

I could substantiate this by showing emails from the tax inspector making reference to this policy.

As a consequence the tax inspector in this 2015 case did not deny the existence of such policy so the court ruled in favour of our client.

In this year's case the tax inspector strangely enough never appeared in court in and never made a case against tax relief.

So it was now judged that there is indeed unpublished policy in place and taxpayers can avail themselves of this policy.

The judge even took it one step further by stating as we have this policy we need to adhere to the OECD Model Tax Convention for further elaboration of the prevention of relief from double taxation.

There is a unpublished policy which nobody outside the tax authorities has obviously ever seen and this judge now builds a complete theory on how to deal with these situations based on OECD policy. It is a very interesting and daring verdict indeed.

And I am elated about the outcome of this court case. The tax inspector may of course appeal the outcome of this case but they must do so before October 16 2019.

The current situation is however that when it comes to double taxation it seems that we can now use the OECD Model Tax Convention to prevent double taxation.

Based on the verdict at hand I would like to make the case that the whole OECD Model Tax Convention now forms part of our tax legislation. If the tax inspector however appeals and wins then we are back to where we were. Let us therefore hope that this verdict stands thus preventing a lot of uncertainty for persons and companies with double taxation issues. From an economic perspective it definitely good news.