May 04, 2020

Tax consequences of leaving Curacao

Due to Covid-19 a lot of people are contemplating whether to stay on Curacao or not once the travel ban has been lifted.

This is a word of warning for those who would want to leave and has to do with the difference between wage tax and income tax.

Wage is tax in being withheld from your wages and this wage tax can be compensated against your income tax. The taxes are however calculated differently and this can play an important role when you are leaving the island especially if you do not against the end of the year.

Allow me to elaborate.
Wage tax is simply calculated on your (monthly of bi-weekly) wage. Income on your year income. The Curacao income tax however has one little very nasty rule about its calculation once leave the island. Say you intend to leave the island on July 1 and were living in Curacao from January 1 on. You have then lived exactly half a year in Curacao.

For the calculation of your income tax the tax inspector will then first calculate your income tax on the basis of a full year income and then divide that by 2. That calculation will increase the income tax due.

Why is that? Very simple because the income tax has a progressive rate. The more you make the higher the percentage. Remember the wage tax was only withheld on your monthly income. So now you may fall into a higher tax bracket which makes that your income tax may be higher than the wage tax withheld.

Something to take into consideration while pondering on staying or leaving. The AOV has a fixed monthly maximum so you do not have to worry about that one.

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