WILLEMSTAD - Curaçao has drafted legislation to implement a minimum tax rate of 15% for multinational corporations with annual revenues of at least 750 million euros. This measure, based on international guidelines from the OECD, aims to combat tax avoidance and is part of the BEPS 2.0 project, which focuses on curbing base erosion and profit shifting.
Understanding Base Erosion and Profit Shifting (BEPS)
Base erosion refers to strategies where companies reduce their taxable income by leveraging deductions, losses, or other tax facilities, thereby artificially shrinking the taxable “base.”
Profit shifting occurs when companies move their profits to jurisdictions with low or no tax rates. This is often done through complex mechanisms such as registering intellectual property, attributing profits to subsidiaries in tax havens, or manipulating internal transfer pricing.
While these practices are legal in many cases, they are considered unfair and harmful to countries that lose out on significant tax revenues. The OECD’s BEPS project aims to address these issues by harmonizing international tax rules and promoting transparency.
The Draft Legislation
The draft “National Ordinance on Minimum Taxation 2024” is expected to take effect on December 31. Curaçao will be among the first countries in the region to implement such regulations. This initiative is projected to generate additional tax revenues and strengthen Curaçao’s position as a financially compliant jurisdiction.
According to the Ministry of Finance, this legislation sends a strong signal to the international financial community.
Under the new rules, multinational corporations subject to the legislation can file a single OECD-compliant tax return under Pillar 2 regulations. This means that if a multinational pays less than 15% tax in a particular jurisdiction, other countries can “top up” the difference through additional taxes. The objective is to make tax avoidance less appealing and ensure a level playing field for all companies, regardless of where they operate.
Business Anticipation
The Ministry of Finance in Curaçao has published the proposed legislation and explanatory notes in the official “Landscourant” (National Gazette). This allows businesses operating in or planning to establish themselves in Curaçao to anticipate the implications of the new rules well in advance.
By implementing this legislation, Curaçao aligns with global tax standards, reinforcing its commitment to fairness and transparency in international taxation.