On 19 October 2022, Curacao published the National Decree on Prevention of Double Taxation, which provides for the implementation of Article 58 of the General National Ordinance on National Taxes and establishes further rules in regard to relief from double taxation. Article 58 provides that, in order to avoid double taxation, because both Curaçao and another state (power) levy tax on the same item of income of a taxpayer, rules can be laid down by national decree containing general measures that grant a full or partial exemption or reduction of tax. The National Decree establishes a general rule that resident taxpayers can obtain relief from double taxation on foreign income through the exemption method. This applies for income from a foreign enterprise (permanent establishment), employment income, income from immovable property, and other specified income. The exemption is applied separately for each state from which foreign income is derived by granting a reduction of the income tax due. In general, the reduction is equal to the amount of tax that would otherwise be due, reduced in the same proportion as the foreign income over total income, with some adjustments.

Further, specific rules are provided for foreign income from dividends, interest, and royalties. These rules essentially provide for the application of the credit method, whereby the tax due is reduced by the lower of the amount of foreign tax paid or the amount of Curacao tax that would be due on the income, reduced by related costs. Certain conditions apply, including that the dividends, interest, and royalties are not included as general income covered by the exemption method. Similar rules are also provided for the application of the credit method where profits of a domestic enterprise are subject to tax in a foreign state. However, taxpayers may opt to not apply the credit method for profits in a financial year and instead choose to deduct foreign tax levied in that year as costs. This must be requested annually for each year with the tax return.

The National Decree is effective from 19 October 2022 and applies for:

• Personal income tax, for all years for which an assessment has not yet been irrevocably determined;
• Corporate profit tax, for all financial years beginning on or after 1 January 2020;
• Wage (payroll) tax, with effect from 1 January 2023; and
• For inheritance tax, for all inheritances and gifts still outstanding on or after 19 October 2022 and for all years for which an assessment has not yet been irrevocably determined.

Click the following link for a document containing the text of the National Decree together with an explanatory memorandum.