Real estate and taxes in Curaçao: how it works

What about real estate and taxes in Curaçao? How much tax do you have to pay when you rent out real estate? How can you benefit from owning real estate on the island?

In this Burbach Insights, we guide you through the process so that you know where you stand and how the Curaçao tax system works for purchasing and renting out real estate.

Curaçao is popular with real estate investors, but the tax rules differ slightly from what we are used to in the Netherlands. Much will also be roughly the same. When purchasing real estate in Curaçao, you must pay transfer tax.

Your first encounter with the tax authorities takes place at the notary. When you buy a home or commercial property in Curaçao, you are liable for transfer tax.

In contrast to the fluctuating rates we have seen in the Netherlands in recent years, Curaçao applies a fairly straightforward rate of 4%. This percentage is calculated on the sale price or market value (whichever is higher).

Are you buying a new-build home ‘Vrij op Naam’ (freehold)? Then the tax (in the form of OB) is often already included in the price and you do not pay transfer tax. You can read more about OB later in this blog.

As a homeowner in Curaçao, you pay annual property tax. The amount of this tax depends on the appraised value of the property (the registered value). The registered value is the official valuation of a home by the government and is mainly used in Curaçao or islands in the Caribbean Netherlands (Bonaire, Sint Eustatius, and Saba).

The system in Curaçao is progressive, which means that the percentage increases as the value of the property increases. You can roughly take the following scales into account:

• Value up to XCG 350,000: 0.4% tax
• Value from XCG 350,000 to XCG 750,000: 0.5% tax
• Value above XCG 750,000: 0.6% tax

This is the part that raises the most questions for many investors. What if you rent out that beautiful villa or apartment to tourists or expats? What if you live in the Netherlands but rent out property in Curaçao? And what if you live in Curaçao and rent out a property there? We are happy to explain the difference.

Do you live in the Netherlands and own real estate in Curaçao? Then real estate is usually taxed in the country where the property is located (the sitos principle). This means you pay income tax in Curaçao on the rental income.

The good news is that you do not pay tax on 100% of the rental income. The tax authorities in Curaçao allow you to deduct 35% of the rental income for maintenance and costs, regardless of whether you have actually incurred these costs. You therefore pay income tax on the remaining 65% of the rental income. This is then taxed at the progressive income tax rate.

What are the income tax brackets in Curaçao?

Are you renting out your property to tourists on a short-term basis, i.e. as a vacation rental? If so, the tax authorities will consider you an entrepreneur for sales tax purposes. This applies to vacation rentals, i.e. rentals of less than 90 days.

You must then charge your guests 7% sales tax (lodging tax). You pay this 7% periodically to the tax authorities in Curaçao. This sales tax does not usually apply to longer-term rentals (usually longer than one year) to residents.

For short-term rentals (longer than 90 days and shorter than 1 year), you pay 6% sales tax. If you rent out your house or apartment for 1 year or longer, you pay 0% sales tax to the tax authorities.

If you are not renting out a home, but a commercial property, factory, retail space, office, storage space, or other (commercial) property, you pay 6% sales tax.

For serious investors, there is an interesting tax structure in Curaçao: the Private Fund Foundation (SPF). This is a legal form that is often used for asset management and real estate.

Placing your real estate in an SPF can yield considerable benefits. An SPF is exempt from income tax (under strict conditions). You do pay a fixed, relatively low amount of tax when you set up the fund and annually thereafter, but you avoid the high income tax on the return.

Setting up an SPF is a customized process. The rules for Dutch residents have been tightened in recent years to prevent tax avoidance (the APV scheme). Always seek advice on this from a tax specialist who specializes in the relationship between the Netherlands and Curaçao.

The Netherlands and Curaçao have made agreements in the Tax Treaty for the Kingdom (BRK). The main purpose of this is to prevent you from paying tax twice on the same income.

As a rule, the following applies:

• You pay tax on the real estate and rental income in Curaçao.
• In the Netherlands, you declare the real estate in Box 3 (assets), but you then receive a reduction (deduction to prevent double taxation) because it has already been taxed in Curaçao.

As a homeowner residing in Curaçao, it is important that you pay income tax on the proceeds from renting out real estate (houses, apartments, commercial properties, or land). The income from renting is combined with any other income, such as income from employment, pensions, and entrepreneurship, to determine your total income.

The income tax due is then calculated on the combined income. It is important to know which income you must declare and which you do not. Consult a local tax advisor when filing your tax return to ensure that everything is done correctly.

Investing in real estate on Curaçao gives you the opportunity to make your dreams come true. In addition to being able to enjoy your house or apartment on the island yourself on a regular basis, renting out real estate can be fiscally advantageous.

The fixed cost deduction of 35% for rentals is a pleasant arrangement, but don’t forget the 7% sales tax on vacation rentals.

Make sure you hire an experienced real estate agent with local knowledge of the island, as well as a local tax specialist. This will allow you to enjoy the full benefits of investing in real estate on Curacao.

At Burbach Roycroft, you will find only exclusive, residential, and spacious homes or apartments on the island, perfect for investment. View our exclusive listings here. Would you like to know more about the possibilities? Personal attention is our top priority. Feel free to contact us.