WILLEMSTAD – The Court of First Instance of Curaçao has ruled that a resident of the Netherlands who rents out three villas on the island must be considered an entrepreneur for turnover tax purposes, rejecting his challenge against additional tax assessments covering several years.
The ruling, issued on September 1, concerns additional turnover tax assessments for 2019 through 2022, January through June 2023 and January through March 2024. The Tax Inspector imposed the assessments after an audit concluded that the villas were being commercially rented without the corresponding turnover being fully reported.
The owner has two villas at one location in Curaçao and acquired a third property in 2022. According to the court documents, the Stichting Belasting Accountants Bureau (SBAB) began investigating after authorities suspected that the properties were being offered for vacation rentals.
The investigation found the villas advertised on around ten websites, including Airbnb, Micazu, VRBO, Despegar, Tripadvisor, RentByOwner.com and Marktplaats. Because the owner did not provide sufficient information, investigators also obtained electricity and water consumption data from Aqualectra to estimate occupancy.
According to the audit, Aqualectra data indicated that the properties were occupied virtually throughout the period examined, except for several months in 2020 and 2021, which investigators attributed to the COVID-19 pandemic. Rental rates advertised online were then used to estimate revenue.
The property owner argued that the Aqualectra information should not have been used because obtaining the data interfered with his right to privacy under Article 8 of the European Convention on Human Rights.
The court acknowledged that obtaining utility consumption information constituted an interference with privacy but ruled that it was legally permitted for tax purposes. It found that obtaining the information served the legitimate economic interest of ensuring taxes are paid and was not disproportionate.
The central question was whether renting the villas made the owner an entrepreneur under Curaçao's turnover tax legislation. The owner acknowledged making the properties available for short-term rentals when he or his family were not using them and advertising them through several rental websites.
The court found that the activity clearly constituted a sustainable economic activity intended to generate recurring income. It therefore ruled that the owner qualifies as an entrepreneur and is liable for turnover tax.
The court also found that the owner had failed to respond adequately to requests for information during the tax investigation. As a result, the burden of proof was reversed and increased. The Tax Inspector's calculations, based partly on occupancy and advertised rental rates, were considered a reasonable estimate, while the owner failed to provide verifiable information demonstrating that the calculations were incorrect.
The additional turnover tax assessments therefore remain in place. They include assessments of XCG 11,773 for 2019, XCG 9,196 for 2020, XCG 10,799 for 2021, XCG 14,926 for 2022, XCG 8,884 for the first six months of 2023 and XCG 3,385 for January through March 2024.
The court did, however, reduce the accompanying penalties. The final penalties range from XCG 803 to XCG 2,003, depending on the tax period. The Tax Inspector was also ordered to reimburse XCG 2,625 in legal costs and XCG 50 in court fees.
The ruling could be relevant to other owners who rent Curaçao properties to tourists, particularly those living abroad, as the court made clear that repeatedly exploiting real estate to generate income can create turnover tax obligations in Curaçao.