Curaçao occupies an unusual position in international structuring. It is not a foreign country in relation to the Netherlands, and it is not part of the Dutch tax system either. It is a separate country within the same Kingdom, with its own tax legislation, its own revenue administration and its own courts, and the relationship between the two is governed by an instrument that looks like a treaty and is not one.
Most European groups either ignore the relationship or reach for it for the wrong reason. The version that gets discussed at conferences, in which Curaçao is a route to a low rate, is largely obsolete. The version that is genuinely useful is duller and narrower, and it depends on reading the arrangement’s conditions rather than its rates.
What the arrangement is
The Belastingregeling Nederland Curaçao entered into force on 1 December 2015. It is a bilateral arrangement between two countries of the same Kingdom rather than a treaty between sovereign states, and it performs the same functions: allocating taxing rights, capping source taxation and providing for the elimination of double taxation and for administrative cooperation.
It replaced, for this relationship, the older Kingdom-wide arrangement that had governed the tax relations between the constituent parts since the middle of the last century. Article 37 says so expressly: the Belastingregeling voor het Koninkrijk ceases to apply between the Netherlands and Curaçao from the day the new instrument enters into force, and survives only for tax years, tax periods and payments to which the new instrument does not yet apply.
The same pattern was followed with Sint Maarten, where an equivalent bilateral arrangement has been in force since 1 March 2016 and disapplies the Kingdom arrangement in identical terms, in its article 36. Aruba is the exception. No bilateral instrument has replaced the old one there, and the Netherlands was still listed as negotiating with Aruba in 2026, so the Kingdom arrangement continues to govern that relationship, and it continues to govern the relations between the islands themselves, which neither bilateral instrument touched.
The practical consequence of the 2015 instrument is that the relationship acquired the architecture of a modern treaty, including qualification conditions on the dividend article and a main purpose provision in article 22. That is the change that made the old planning obsolete, and it is the part that most summaries omit.
The dividend article, and the conditions people skip
Article 10 begins in the ordinary way. Dividends paid by a body resident in one country to a resident of the other may be taxed in the country of residence of the recipient, and where that recipient is the beneficial owner the source country’s tax may not exceed fifteen per cent of the gross amount.
The exemption is where the work is. The source country’s tax falls away where the recipient is a qualifying company holding directly at least ten per cent of the capital of the payer for a period of three hundred and sixty five days, and also for government bodies and for pension funds meeting the stated conditions.
The word qualifying is doing a great deal. Article 10 sets out what a company must be in order to qualify, and the tests run to listing on a recognized stock exchange, ownership to a stated extent by listed entities meeting equivalent standards, a headquarters function for a multinational group, and permanent full time employment in the country of residence for at least three resident individuals who run the company’s activities, assets and income. A separate route in the eighth paragraph exempts a company owned at least half, directly or indirectly, by individuals resident in one of the two countries, provided it holds at least ten per cent of the payer. Where none of those is met, a further provision allows relief where the company is genuinely engaged in an active business, and permits the competent authority to grant the benefit where it determines that obtaining the benefit was not the principal purpose or one of the principal purposes of establishing, acquiring or maintaining the company.
This is a limitation on benefits clause in substance, and it behaves like one. A holding company established to receive dividends and nothing else will fail the mechanical tests and will then be dependent on a discretionary determination that obtaining the benefit was not among its principal purposes. That is a difficult application to write, and it should be attempted before the structure is built rather than after the first distribution.
Interest and royalties
Article 11 and article 12 are simpler. Interest and royalties arising in one country and paid to a resident of the other who is their beneficial owner are taxable only in the country of residence of that recipient, subject to the anti-abuse provision and to the transfer pricing limitation in the fourth paragraph of the same articles. That exclusivity stops where the debt claim or the right belongs to a permanent establishment the recipient has in the source country, because the third paragraph of each article then sends the income to article 7 and the source country taxes it as business profits; the twelfth paragraph of article 10 makes the same cut for dividends.
Simplicity here is not the same as freedom. The transfer pricing limitation applies to the amount, so an excessive rate or royalty is reduced to what independent parties would have agreed, and the excess is taxed under the ordinary rules of each country. And the Netherlands has a separate domestic charge, described below, which operates without regard to the arrangement in the cases it covers.
The Curaçao side of the ledger
Curaçao levies a profit tax, and the general rate published by the Curaçao Belastingdienst is fifteen per cent on the first five hundred thousand guilders of taxable profit, an amount in the island’s own currency, not in euros, and twenty two per cent on the excess. That is not a low tax jurisdiction rate, and it is materially above what most people assume when Curaçao is mentioned.
Several special regimes sit beside it. Since 1 July 2018 the former exempt company has been converted into the Curaçao investment company, whose profit is taxed at zero per cent. Bodies treated as separate estates are taxed on a fractional basis by reference to the general rate. Companies in the economic zone were taxed at two per cent, applicable up to and including 2022. And a rate of three per cent applies to designated low-taxed activities, which are the construction, repair and maintenance of ships and aircraft, support services, storage and logistical processing, and services to investment funds. That three per cent rate is expressly not available to notaries, lawyers, public accountants, tax advisers or the provision of company directorship services.
The compliance calendar is short by European standards and catches groups that administer the entity remotely. Under the filing rules the island’s revenue administration publishes, a preliminary profit tax return is due within three months of the end of the calendar year or the deviating financial year, with the tax payable at the same time and at a minimum equal to the liability shown on the last final return. The final return is due within six months, again with payment. No extension is available for the preliminary return. An extension of the final return requires a reasoned request, on which the inspector decides within fifteen days, and if no refusal is issued within that period the deadline is extended by three months.
Curaçao is not on the Dutch list, and that is the point
The Dutch list of designated jurisdictions in force from 1 January 2026 names Anguilla, the Bahamas, Bahrain, Bermuda, the British Virgin Islands, Guernsey, the Isle of Man, Jersey, the Cayman Islands, Turkmenistan, the Turks and Caicos Islands and Vanuatu on the low tax limb, with a second limb tracking the European list of non-cooperative jurisdictions. Curaçao appears on neither.
That absence has a concrete effect. Under the Wet bronbelasting 2021 the Netherlands levies a conditional withholding tax on interest, royalties and, since 2024, dividends paid to affiliated entities in designated jurisdictions, at the highest Dutch corporate rate, which the Belastingdienst puts at twenty five point eight per cent for 2026. Payments from a Dutch entity to an affiliated Curaçao entity are outside that charge on the designation ground, where payments to the Caribbean jurisdictions listed above are not.
Two cautions belong with that observation. The designation is reviewed annually against the statutory test in article 1.2 of the Wet bronbelasting 2021, which asks whether the state leaves companies untaxed or taxes them at a rate below nine per cent, measured at 1 October of the preceding calendar year, or appears on the European list. And the zero rate applying to the Curaçao investment company is exactly the kind of feature that such a review examines, so a structure whose value rests on the current absence should be tested each year rather than assumed to be stable.
Where the relationship is used badly
Three patterns recur, and all three are versions of the same mistake.
The first is the holding company inserted purely to receive dividends from a Dutch subsidiary at nil withholding. It will not qualify mechanically under article 10, and the discretionary route requires the applicant to persuade a competent authority that obtaining the benefit was not the principal purpose or one of the principal purposes of an arrangement that has no other observable purpose.
The second is the investment company at zero per cent used as a receptacle for income that a Dutch entity generates, on the assumption that the Kingdom relationship makes the transfer benign. It does not. The arrangement excludes the Curaçao investment company by name from the dividend exemption, in the sixteenth paragraph of article 10, so far as the income comes from investments in securities, deposits or financial instruments. And the Dutch controlled foreign company rules are not what bites, since article 13ab reaches only entities resident in a state designated on that same list and Curaçao is not one. What bites is the denial of the participation exemption to a low taxed portfolio participation under article 13 of the Wet op de vennootschapsbelasting 1969, together with the arm’s length principle of article 8b and the general anti-abuse provision of article 29i, all of which operate irrespective of the arrangement. The zero rate makes the entity more visible rather than less.
The third is the entity retained after its purpose ended, administered from Europe, filing late because the three month preliminary deadline was never in anyone’s calendar. That produces penalties for no benefit and leaves a dormant company in the group chart of every transaction the group enters into.
Using it well
The legitimate uses share a feature: the Curaçao entity does something that has to be done somewhere, and Curaçao is a sensible place to do it. Groups with genuine activity in the Caribbean and Latin America, shipping and aviation businesses using the designated low-taxed activity rate for repair, maintenance and logistics, and fund service operations serving that region all fall into that description. So do family holdings with a real connection to the island, where the entity is administered locally and managed by people who live there, and which for that reason often clear the employment test or the ownership route of article 10 outright.
For those, the arrangement does what a good treaty does. It caps the dividend charge at fifteen per cent and removes it entirely for a qualifying ten per cent holder that has held for a year, it leaves interest and royalties to the residence state, and it does so within a Kingdom whose two systems share a legal vocabulary, a language and a court structure. That last point is worth more in practice than the rate. Documents drafted in Willemstad are read without translation in Amsterdam, and the professional standards are recognizable at both ends.
What the relationship no longer does is make income disappear on the way past. The 2015 arrangement built the qualification conditions and the purpose test into the dividend article precisely to stop that, and the Dutch domestic rules cover what the arrangement leaves open. Read that way, Curaçao becomes what it should have been all along: a jurisdiction to use when the business is there, and to leave alone when it is not.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.