Living in Curacao
Curaçao is often described as ‘a tropical island without weather forecasts’. It’s an island located in the southern Caribbean Sea, off the Venezuelan coast. Curaçao has a warm and sunny climate with an annual average temperature of about 27 degrees Celsius (around 80 degrees Fahrenheit). Refreshing trade winds bring cooling during the day. The average temperature difference is only 2.5 degrees Celsius (36.5 degrees Fahrenheit) between summer and winter and the sea temperature is warm and varies little from its annual average temperature of 26.8 degrees Celsius (around 80 degrees Fahrenheit). Curaçao’s climate is characterised by a wet season (October, November and December) and a dry season (January to September). The warmest months are August, September and October and it tends to cool down a little during the months January and February. The total annual rainfall averages only 570 mm (22 inches). Curaçao lies outside the hurricane belt, which means it’s only very occasionally affected by hurricanes and sometimes affected by pre-hurricane tropical storms. Curaçao is the largest island of the former Netherlands Antilles, has a surface area of 444 square kilometres (171 square miles) and has 151,000 inhabitants.
Curaçao has lots to offer: sun-drenched beaches, a pleasant climate, nice hotels, a varied nightlife and excellent snorkelling and diving opportunities to discover the wonderful underwater world. Curaçao has a large number of cultural and historical monuments which are spread all over the island. First of all, there’s the capital city of Curaçao, Willemstad, with its natural harbour and the pretty pastel-coloured merchant houses. The historic city centre of Willemstad has been declared a UNESCO World Heritage Site. Next, there are the multiple impressive forts (such as Fort Amsterdam and Fort Nassau). Furthermore, there’s the pontoon bridge, officially the Queen Emma bridge. This bridge is also known as the ‘Swinging Old Lady’, because the bridge swings open to grant ships access to the port. There’s also the Queen Juliana Bridge, with a height of 56 metres (185 feet) the highest bridge in the Caribbean, which offers a breath-taking view. There’s the floating market, there’s the more than three centuries old synagogue and there are several museums. In the countryside, you can discover impressive country houses, the beautiful Christoffel National Park, small cunucu-houses and the Hato Caves.
The pensionado scheme…
In the late eighties of last century, in imitation of a country such as Switzerland, the former Netherlands Antilles introduced a special tax scheme for new immigrants. This arrangement became famous as the pensionado scheme and is a favourable tax regime designed to stimulate wealthy Dutch (and other foreigners, of course) to immigrate to the Antilles. After all, the local economy (also) benefits from such a special tax scheme. After the dissolution of the Netherlands Antilles, Curaçao maintained the special tax incentives for foreign pensioners who chose to reside on the island. This arrangement offers the foreign pensioners a special tax treatment with regard to their foreign income. If a pensioner meets all the conditions, the pensioner’s worldwide income from foreign sources (such as pensions, dividends and interest) is taxed at a flat income tax rate of only 10%.
As a pensioner, you can choose between two options under the pensionado scheme. On the one hand, you can choose for a flat tax rate of 10% levied on your worldwide income (but not derived from business or employment within Curaçao). This worldwide foreign income includes pensions, dividends and interest, as well as income derived from an offshore company, interest on deposits with local banks and any rental income. The taxable amount for pensioners is calculated in the same way as for non-pensioners. On the other hand, one can also choose to be taxed on a fixed amount of foreign income (USD 281,000). The foreign income is fixed at USD 281,000 and then taxed at the normal progressive income tax rates. The bottom line of this second option is that you pay, on a yearly basis, an amount of USD 152,000 personal income taxes no matter how high your worldwide income.
Curaçao doesn’t levy wealth tax on the assets of its residents. Both inheritance tax and gift tax apply (rates vary between 2% and 24%) to the assets of a resident of Curaçao (but there are possibilities to avoid these taxes of course).
How to become a pensionado?
The conditions to become eligible for the pensionado scheme are as follows:
– The individual applying for the pensionado status shouldn’t have lived in Curaçao or the other former Netherlands Antilles jurisdictions in the five years prior to applying for the pensionado scheme;
– The pensioner should be at least 50 years old;
– Within 2 months after registration as a resident, the pensioner must notify the local tax authorities that he/she wishes to be taxed according to the pensionado scheme;
– Within 18 months after registration as a resident, the pensioner must own a house in Curaçao with a value of at least USD 255,000.
As you can see, meeting these requirements isn’t impossible. In the case the pensionado earns local income, that income is taxed at the normal progressive income tax rates (up to 49%) and not at the flat tax rate of 10%. However, it’s important to know that pensioners who obtained the pensionado status may not conclude any employment contract with a company if they don’t own at least 40% of the shares of that company. The pensioner risks losing his pensionado status if he does conclude such an employment contract.