Tax-Insight Curacao, Xandra Kleine-van Dijk

Penshonado Curaçao

Curaçao the former Netherlands Antilles

The Curaçao “penshonado” regulation provides for a favourable personal income tax regime for individuals who take up residence in Curaçao, a Caribbean island that was part of the former Netherlands Antilles and is still part of the Kingdom of the Netherlands. Also St. Maarten has become a country within the Kingdom of the Netherlands, while the Caribbean islands of Bonaire[1], Saba and Statia have become a special municipal of the Netherlands. This change was enacted on October 10, 2010.

The local civil status of a retiree is that of a full resident (not some kind of non-domiciled or special expatriate status).

Provided certain conditions are met, retirees will be subject to 10% tax on all foreign-source income. Capital gains on portfolio investments are not taxable income. Any Curaçao-source income will be subject to tax at the ordinary progressive personal income tax rates, with a maximum of 49% on taxable income exceeding ANG 125,200 (approximately US$ 70,000).

An election can be made to have the foreign-source taxable income fixed at ANG 500,000 (approximately US$ 280,000). In that case, the ANG 500,000 taxable income will be taxed at the ordinary progressive personal income tax rates, resulting in a tax liability of approximately ANG 218,772 (US$ 122,500). If an election has been made to tax the actual foreign income, the election for fixing the taxable income at ANG 500,000 cannot be made for the next two immediate succeeding years. Foreign-source income fixed at ANG 500,000 is not eligible for benefits from the Tax Arrangement for the Kingdom of the Netherlands.

In order to qualify for the penshonado-facility, the retiree must meet the following conditions: 

Prior to the first taxable year in which the penshonado-facility will be applicable, the retiree must have been residing outside Curaçao for a consecutive period of at least 60 months. 

The retiree must have a Curaçao residence permit for an indefinite period of time (in general this permit will be granted automatically to persons with a Dutch nationality).

The retiree must register with the public register of birth, death and marriages. At the moment of registration in this public register, the applicant must be at least 50 years of age. 

The retiree may, in general, not be active in the labour market of Curaçao. However, the facility will still be granted if the retiree is employed by an entity in which he has directly or indirectly at least a 40% shareholding. Furthermore, the retiree may be a member of the supervisory board of an entity resident in Curaçao.

The employment income generated from these local sources however will not be entitled to the 10% income tax rate, but will be subject to the ordinary progressive personal income tax rates. 

The retiree must own a house for personal use in the Netherlands Antilles, with a minimum value at the moment of acquisition of at least ANG 450,000 (approximately US$ 252,000)[2]. This house must be put to use within 18 months after registration with the public register. There are no requirements as to the number of days the house should be used on an annual basis as personal residence.  It is not allowed to rent the house to others.

The retiree must apply for the penshonado facility within 2 months after registration with the public register.

Owning more than 5% of the shares in a company with a capital divided into shares is considered to be a substantial share interest. Dividends received from or results realised upon sale of a substantial share interest in a foreign company are subject to Curaçao income tax at the penshonado income tax rate of 10%.

Article 8A, 8B, 14 and 14A PTO companies (so-called Curaçao offshore companies) are not considered Curaçao resident companies for the purposes of the penshonado regime. A step-up to the fair market value is applicable for determining the taxable basis (being in principle the cost price) of the shares at the moment of taking up residence. Some other relevant Curaçao tax-related considerations are: 

The retiree is not allowed to deduct personal allowances from his foreign source income. 

The inheritance/gift tax rate (in a parent/children relationship) is progressive 2% up to 6% for amounts above ANG 1,024,000 (approximately US$ 572,000). The maximum inheritance/gift tax rate (non-family relationship) is limited to 24%. Under the Tax Arrangement for the Kingdom of the Netherlands, Dutch gift taxes will not be imposed on gifts made after having taken up residence in Curaçao for an uninterrupted period of 12 months.

Taxable income is liable to social security contributions, i.e. old age pension contributions (until age 60[3]) of 14%, with a maximum of ANG 13,450 (approximately US$ 7,500), special sickness contributions of 2% and the standard sickness insurance of 12% that is enacted on February 1, 2013 with a maximum of ANG 12,000 (approximately US$ 6,700).


Curaçao 27 February 2013 – Xandra M. Kleine-van Dijk

[1]As of January 1, 2011 the penshonado regime is no longer applicable on Bonaire, Saba and Statia.

[2]The government is reviewing the conditions and a value of ANG 750,000 (app. US$ 419,000) is being mentioned.

[3]This age limit will become 65 as of March 1, 2013