DUTCH CARIBBEAN TAXATION OF SPECIAL PURPOSE VEHICLES
Certain rulings are available
Quite often a Netherlands Antilles NV or BV (Special Purpose Vehicle or SPV) is used for securitization purposes. The Netherlands Antilles corporate taxation will depend on the kind of vehicle used for SPV. Please note that the below only applies if the SPV is a resident of the Netherlands Antilles for Netherlands Antilles corporate income tax and (if applicable) tax treaty purposes. Consequently, certain substance requirements should be fulfilled in the Netherlands Antilles.
If the SPV is a BV (private limited liability company) or NV (public limited liability company) it will generally be taxed on a profit margin. Any interest receivable by the SPV will constitute taxable income in the Netherlands Antilles, but the SPV will generally be allowed a deduction for the interest payable by it, provided the SPV retains an “at arm’s length” margin. This margin will be taxable in the Netherlands Antilles at the normal statutory corporate income tax rates (30%, including 15% Island Surcharges a total of 34.5% on Curaçao).
Where the SPV on-lends to affiliated parties, the question arises what an “at arm’s length” margin is. This is a matter on which advance tax clearance can be sought from the Netherlands Antilles tax authorities (tax ruling). Depending on the exact nature of the finance activities, the risks run by SPV and other relevant factors, different rulings regarding the taxable base can be obtained, for example:
- A financing ruling under which SPV should report a gross profit margin over the funds borrowed and on-lent of at least 0.25% per year. This margin can be reduced if the amounts increase substantially.
- A cost-plus ruling under which SPV should report a profit mark-up of in general 5% or more on all costs that are connected with the activities carried on by NV in the Netherlands Antilles. This ruling is only available in case that either the liabilities, or the receivables are to/from affiliated persons and that the activities take place in such a manner that (on balance) no risks are incurred in respect of these activities or, where the activities do give rise to risks, that such risks have been satisfactorily hedged or covered by a person that has the financial credit-worthiness required to cover such exposure.
- An informal capital contribution ruling.
- A hybrid debt instruments ruling.
- A securitization ruling under which SPV should report a profit mark-up of in general 5% or more on all costs (except those with a disbursement character) that are connected with the activities carried on by BV in the Netherlands Antilles. This ruling is only available in case the shares in BV are held by a foundation, trust or other entity or person that is not related to the parties with whom BV transacts.
Please note that the rulings mentioned above can only be obtained in case certain conditions have been met, e.g. conditions regarding substance in the Netherlands Antilles or regarding a minimum equity required for the activities.
Please also note that all rulings explicitly state that the competent tax authority of the Netherlands Antilles may, subject to its obligations under international agreements covering exchange of information, in its own discretion, exchange any and all information contained in those rulings.
Karel Frielink
Curacao-based Attorney (lawyer) / Partner
