WILLEMSTAD - The Curaçao government has requested urgent advice from the Social and Economic Council (SER) and the Advisory Council (RVAC) ahead of the implementation of the Pillar 2 tax reform plan. The Ministry of Finance made the announcement in a press release.
Global Tax Reform Initiative
Pillar 2 is a key component of the OECD's global tax reform framework, designed to introduce a minimum corporate tax rate for multinational companies. The primary goal is to curb tax avoidance by making low-tax jurisdictions less appealing to businesses.
Together with Pillar 1, which focuses on reallocating taxing rights for digital and cross-border activities, Pillar 2 aims to create a fairer global tax environment. Under the new regulations, companies with annual revenues of €750 million or more will be required to pay at least 15% tax on their profits.
Proposed Tax Surcharges for Curaçao
The government of Curaçao has opted to split the implementation of Pillar 2 into two specific tax surcharges. According to the Ministry of Finance, the first surcharge will allow Curaçao to tax the additional profits of low-taxed companies that do not have a parent company on the island, ensuring they pay at least 15% tax. The second surcharge will address taxes on foreign income.
In October 2023, Finance Minister Javier Silvania (MFK) established the International Compliance Task Force, led by tax and international compliance expert Germaine Rekwest. The task force's mandate is to provide recommendations on the possible introduction of Pillar 2 in Curaçao.
Stakeholder Consultations and Feedback
The task force held its first meeting in January 2024 with sector representatives, followed by a second meeting in March 2024, which included key stakeholders such as the Curaçao International Financial Association, CURINDE, International Financial Group, International Banking Association, Chamber of Commerce, the Association of Antillean Tax Advisors, and the Tax Office.
According to the Ministry, a significant majority of the participating organizations agreed on the benefits of implementing the two proposed surcharges: a domestic surcharge and a surcharge on foreign income.
In April 2024, a third round of consultations took place, during which stakeholders provided feedback on draft proposals. It was observed that multinational companies tend to prefer operating in countries that have adopted Pillar 2, as it influences their overall business strategies.
Competitive Advantage for Curaçao
If the draft legislation is enacted by January 1, 2025, Curaçao will become one of the first countries in the region to implement Pillar 2. The Ministry of Finance believes this early adoption could provide Curaçao with a competitive edge over other countries that have yet to introduce the new tax rules.
The government expects that the implementation of Pillar 2 will not only enhance the fairness of the tax system but also attract multinational businesses, thereby boosting the island's economic standing.