TY - JOUR
AU - Starreveld, Jeroen
AB - Abstract This article contains an analysis of the Curaçao Private Foundation, the Curaçao Trust, and the Dutch Private Foundation from a privacy perspective. It compares and contrasts which information is publicly available with a view to the above entities and also which information needs to be made available in case foreign tax authorities submit a request for information. Introduction A private foundation or a trust is often used for asset protection and privacy purposes. This article analyses how private the Curaçao Private Foundation, the Curaçao Trust, and the Dutch Private Foundation actually are. Since 10 October 2010, the Kingdom of the Netherlands has consisted of the following countries: The Netherlands, Aruba, Curaçao, and Sint Maarten. The islands Bonaire, Saba, and St Eustatius, also referred to as the BES Islands, are, although situated in the Caribbean, part of the Netherlands. Curaçao and Bonaire (the latter although part of the Netherlands) have their own legislation, the laws of which are substantially the same as the laws of the former Netherlands Antilles, the country that ceased to exist on 10 October 2010. On 1 January 2012, new legislation entered into force according to which it is now possible to set up a trust similar to Anglo-Saxon common law jurisdictions in Curaçao. The corporate laws of Curaçao as well as the corporate laws of Bonaire make it also possible to incorporate a Private Foundation. The corporate laws of the Netherlands do not include the possibility to incorporate a Private Foundation. However, with the constitutional changes, it is now possible to incorporate a Dutch Private Foundation: the Private Foundation will be incorporated under the laws of Bonaire (which is part of the Netherlands) and will have its management and address in the Netherlands. For the characteristics of the Curaçao and Dutch Private Foundation, we refer to our contribution in Private Foundations: a world review in 2010.1 And for the characteristics of the Curaçao Trust and a comparison with the Curaçao Private Foundation, we refer to our contribution in Private Foundations: a world review in 2012.2 This article will answer the questions to what extent information in relation to the Curaçao Private Foundation, the Dutch Private Foundation, and the Curaçao Trust is available on public registers or otherwise. Incorporation of the Private Foundation and settlement of the trust Curaçao Private Foundation and Dutch Private Foundation (together also referred to as the ‘Private Foundation’) The Curaçao Private Foundation and Dutch Private Foundation are legal entities incorporated by notarial deed executed before a Curaçao, respectively, Bonaire civil law notary. The articles must include the name of the Private Foundation, including the words ‘Private Foundation’ as part of the name, the objectives of the Private Foundation, the manner in which the members of the Foundation Council are appointed and dismissed, the place where the Private Foundation has its seat, and the allocation of any liquidation surplus in the case of a dissolution of the Private Foundation or the manner in which its allocation will be determined. For the remainder, a founder is free to organize the articles of association according to his or her wishes and preferences, for example, with respect to the corporate bodies of the Private Foundation. It is common practice to have articles of association of a more general nature and to include more specific wishes of the founder in a so-called letter of wishes (and/or bylaws) of the Private Foundation. The letter of wishes also includes the wishes of the founder with respect to distributions and in the letter of wishes the beneficiaries may be appointed. The use of a letter of wishes is often preferred by a founder as such document is easier to amend as it does not require a notarial deed. The articles of association have to be filed with the Chamber of Commerce and are therefore public whereas the letter of wishes and bylaws are not public. Hence, for privacy purposes the use of a letter of wishes and/or bylaws is recommended. Natural persons as well as legal entities may act as the founder. A nominee founder is permitted; it is common practice that a trust service provider acts as the founder and that the so-called founders rights are transferred to the founder after incorporation of the Private Foundation. Curaçao trust The Curaçao Trust must be set up by a notarial deed executed before a civil law notary in Curaçao. The trust deed must contain the trust provisions including at least: (i) the appointment of a beneficiary or a certain purpose, (ii) the appointment of at least one local trustee and the acceptance of such role, (iii) a provision to ensure that there shall be a local trustee at all time during the existence of the trust, (iv) a description of the trust assets, and (v) the name of the trust (this must contain the word ‘trust’). Future amendments or a cancellation of the trust also requires a notarial deed. More specific wishes of the settlor with respect to distributions can be included in letters of wishes, provided that such distributions are not incompatible with the provisions of the trust deed. Natural persons as well as legal entities may act as the settlor. A nominee settlor is also permitted. Registration with the Chamber of Commerce Curaçao Private Foundation and Dutch Private Foundation A Private Foundation has to be registered with the Chamber of Commerce. The excerpt of the Chamber of Commerce will show the following information: the name of the Private Foundation, the date of formation, the date of amendments to the articles (if applicable), the address, the purpose clause of the Private Foundation, and the names of the member(s) of the Foundation Council and Protectors (if applicable). Only the following personal information with respect to the members of the Foundation Council and Protectors, being natural persons, are made public: date and country of birth and nationality. The addresses of natural and legal persons are not made public in Curaçao, whereas an excerpt of the Chamber of Commerce in Bonaire (for the Dutch Private Foundation) does include the address information. An excerpt is available online. The deed of incorporation and a deed of amendment with respect to the Curaçao and Dutch Private Foundation have to be filed with the Chamber of Commerce and are therefore public. Curaçao Trust Registration of the Curaçao Trust with the Chamber of Commerce is required, together with an extract of the trust deed (so not the full text of the trust deed) stating, at least, the date of settlement of the Curaçao Trust, the name of the Curaçao Trust, and the details of the trustee(s). Any amendments to the trust deed and, to the extent required, any other changes of information shall be filed as well, but different than with the Private Foundation only the information of the deed of amendment mentioned above has to be disclosed. It is possible to limit the powers of the trustee and in this respect it is advisable to also include the limitations on the trustee’s power of disposition in the registration. The trustee of a Curaçao Trust has absolute power of disposition over the trust assets, unless such power has been limited in the trust deed. Hence, the settlor may structure the trust at his discretion. Any limitation to the power of disposition of the trustee shall also apply to a third-party transferee, provided that such transferee was aware or is deemed to have been aware of the limitations applicable to the trustee’s power of disposition, therefore protecting the trust assets from a property law perspective. Only bona fide third parties are protected. The mala fide transfer of trust assets is null and void and the assets may be recovered from the transferee. The trust assets shall remain segregated even during adverse possession. An extract of the trust deed is filed with the Chamber of Commerce and a third party should make sure to review the extract of the trust deed for the exact scope of (the limitations of) the trustee’s power. Likewise, the settlor should make sure that all limitations on such powers are adequately addressed in the extract filed with the Chamber of Commerce. Knowledge of the existence of a trust implies knowledge of the limitations on the power of disposal to the extent these limitations are filed with the Chamber of Commerce, unless the limitation is so unusual that a transferee should not have expected this to be included therein. Commercial register The National Ordinance on Commercial Registers in Curaçao as well as in Bonaire mentions that the Commercial Register and the documents filed with the Commercial Register pursuant to statutory provisions are available for inspection by each person against payment of a certain fee. The Chamber of Commerce shall also provide a copy of the excerpt or the documents that have to be filed pursuant to statutory provisions against payment of a fee. Annual accounts Curaçao Private Foundation and Dutch Private Foundation The board of directors of the Curaçao or Dutch Private Foundation have a duty for administrative purposes to keep a record of the financial condition and everything relating to the activities of the Private Foundation according to the requirements to which such activities give rise, and it must keep the books, documents, and other data carriers in respect thereof in such a manner that the rights and obligations of the Private Foundation can be ascertained therefrom at any time. Each director has a right to inspect the records and books, documents, and other data carriers pertaining thereto. The board of directors has a duty to annually, within 8 months from the end of the financial year, draw up the annual accounts, consisting of at least a balance sheet and a statement of income and expenditure. There is no obligation to file the annual accounts with the Commercial Register. Curaçao Trust The trustee has the right and obligation to manage the trust assets. The trustee shall have to fulfill its management duty in accordance with the law and the provisions of the trust deed. The trustee has the legal obligation to segregate the assets that belong to a trust from the other trusts and his private assets. A trust should be administered separately and the books, records, and other data need to be stored in such a way that the composition and the proceeds and expenses of a trust can be determined on the basis of the administration at any given time. Unless the trust deed provides otherwise, the trustee is required to account for its management to the beneficiaries on a yearly basis. There is no statutory obligation to draw up annual accounts and there is no statutory requirement to file documents relating to the administration of the trust with the Commercial Register. Land registry Curaçao Private Foundation and Dutch Private Foundation In case the Curaçao Private Foundation or the Dutch Private Foundation owns any real estate in Curaçao, Bonaire, and/or the Netherlands, this will be recorded in the land register held by the land registry (kadaster) of that area. An extract from the land register includes information with respect to the persons entitled to the property, the land registry details, the purchase price, date that the property has been bought, the area, rights in rem (including rights of mortgage), and possible impediments. Curaçao trust Unless the trust deed contains provisions to the contrary, the trustee shall also register the existence of the trust in: (i) the relevant public registers to the extent the trust assets consist of property which needs to be registered (eg real estate); (ii) the shareholders register to the extent the trust assets contain registered shares in the capital of a (public) limited liability company; and (iii) the trade register to the extent the trust asset is an enterprise or a share in a partnership. General tax system Curaçao and BES Iislands Curaçao Private Foundation and Curaçao Trust Both the Curaçao Private Foundation and Curaçao Trust are fully exempt from Curaçao profit tax, unless genuine business activities are performed. The latter rarely is the case. Note that the Curaçao tax authorities may request the Curaçao Private Foundation and Curaçao Trust to file a tax return every 5 years. This is to confirm that no genuine business activities are performed. Contributions made to and distributions made by the Curaçao Private Foundation and Curaçao Trust are fully exempt from Curaçao tax as well, as long as the persons making the contribution and receiving the distribution are not residents of Curaçao. Dutch Private Foundation As of 1 January 2011, gift tax and profit were fully abolished. Contributions made to the Dutch Private Foundation are therefore tax exempt and no tax is due on profits. However, a distribution tax is due of 5 per cent on distributions made by the Dutch Private Foundation only if based on facts and circumstances, the Dutch Private Foundation is considered a resident of the BES Islands. Information available to the tax authorities Curacao tax authorities With respect to the Curaçao Private Foundation and the Curaçao Trust, only limited information needs to be made available to determine the profit tax position. As indicated, both the Curaçao Private Foundation and the Curaçao Trust are exempt from profit tax and only need to file a tax return every 5 years. If assets are transferred to the Curaçao Private Foundation or the Curaçao Trust by a resident of Curaçao, gift tax could be due by the Curaçao Private Foundation or the Curaçao Trust. Furthermore, if distributions are made by Curaçao Private Foundation or the Curaçao Trusts, personal income tax could be due by the recipient of the distributions in case of a resident. Hence, only in case of gifts made by or distribution made to Curaçao residents an obligation arises to file a (gift or personal income) tax return. The General Tax Ordinance of Curaçao describes which information needs to be submitted to the Curaçao tax authorities (upon their request). The obligation to submit certain tax-related information applies to the Curaçao Private Foundation; however, with respect to the Curaçao Trust this is not fully clear. One may argue that only a Curaçao Trust opting for an effective tax rate of 10 per cent falls within the scope of the General Tax Ordinance apply.3 BES Islands tax authorities The Dutch Private Foundation falls within the scope of the general obligations, which apply to taxpayers on the BES Islands. This means that all potential relevant information needs to be submitted to the BES Islands tax authorities. This could include information relating to third parties. The Dutch Private Foundation needs to submit an annual report every year within 9 months after the end of the accounting year. Furthermore, in case of distributions a tax return needs to be filed within 15 days after the distribution was made. International exchange of information Curaçao Private Foundation Curaçao has concluded more than 20 tax information exchange agreements.4 The OECD model tax information exchange agreement forms the basis for most of the agreements concluded by Curaçao. Furthermore, Curaçao has concluded agreements with EU Member States relating to the EU Savings Directive, based on which information relating to savings can be exchanged. In principle, the latter agreements should not be applicable to the Curaçao Private Foundation. In addition to the rights and obligations as described in the tax information exchange agreements, the General Tax Ordinance contains rights and obligations as well as which tax information can be exchanged by the Curaçao tax authorities. However, the General Tax Ordinance conditions strict guidelines to safeguard the rights of the parties involved. The Curaçao tax authorities need to notify the person to whom the request to exchange information is addressed. In principle, the requested information will only be exchanged after a period of 2 months. This enables the person to whom the request was addressed to file an appeal, which needs to be filed within 30 days after the receipt of notification. Please note that the appeal does not automatically suspend the exchange of information. Hence, if the Curaçao tax authorities already have the information requested by the foreign authority in their possession, then the exchange could be executed immediately. Note that, in principle, the Curaçao tax authorities do not have information available with respect to beneficiaries. The Curaçao tax authorities will not exchange information if (i) the obligation does not originate from international law, (ii) the disclosure would jeopardize the public order, (iii) the exchange of information would be in conflict with Curaçao laws, (iv) the requesting country has not used the possibilities locally to obtain the information requested for, (v) the requesting country cannot assure the confidentiality of the information requested, and (vi) reciprocity with respect to the information requested is not applicable. This means that if the Curaçao tax authorities request to provide similar information to the requesting party and the requesting party would deny the exchange of information, the Curaçao tax authorities will deny the exchange as well. Only recently the Curaçao tax authorities did not exchange any information with foreign tax authorities, because of the fact that based on the information provided by the directors of the Curaçao Private Foundation, the Curaçao tax authorities concluded that the information provided could not lead to a tax obligation abroad. Request for information by tax authorities should always be examined carefully by the director or trustee. If, for instance, inheritance tax is not included in the tax information exchange agreement or in case of fishing expeditions, the director or trustee should not be too cooperative. Dutch Private Foundation The tax laws of the BES Islands differ from the Curaçao laws since the Netherlands Antilles ceased to exist on 10 October 2010. However, all tax information exchange agreements concluded by the Netherlands Antilles still apply to the BES Islands as well. Furthermore, as of then, the Netherlands tax treaty policy also includes the position of the BES Islands. Recent double tax treaties concluded by the Netherlands included the BES Islands as well. In addition, the BES Tax Law is also applicable in case the Netherlands receive a request for information relating to the BES Islands under a tax treaty, even if the BES Islands have not been incorporated in the tax treaty. This means that with respect to the exchange of information, countries with which the Netherlands have concluded a tax treaty may request for information relating to the BES Islands as well. A major expansion. The articles in the BES Tax Law relating to the exchange of information to a large extent have been brought in line with the provision in Dutch law, which are, among others, based on the EU directives. Important to note is that the BES Tax Law does not contain the possibility to file an appeal against a notification in which the exchange of information is announced. Conclusion In this article, we explored to what extent information in relation to the Curaçao Private Foundation, Dutch Private Foundation, and Curaçao Trust is publicly known. Information has to be filed with the Chamber of Commerce but as the use of nominee founder/settlor is permitted and a fiduciary trust service provider will normally be used as board member/trustee, the information publicly available is very limited and only relates to the existence of the Private Foundation or the Curaçao Trust. We may therefore conclude that the Curaçao Private, Dutch Private Foundation, and Curaçao Trust are very private. Under the Curaçao and BES Islands tax laws, the rights of parties involved are safeguarded in case of a request for tax information by foreign tax authorities. In case the Curaçao Private Foundation, Dutch Private Foundation, or Curaçao Trust is used for privacy purposes, it is ascertained that no information will be exchanged if, for instance, the requesting party cannot assure the confidentiality of the information requested. Under circumstances, one may even file an appeal to prevent the exchange of information. Maike Bergervoet, Attorney at Law, Partner, Spigt Dutch Caribbean. Email: maike.bergervoet@spigtdc.com Jeroen Starreveld, Attorney at Law, Tax Advisor, Partner, Spigt Dutch Caribbean. Email: jeroen.starreveld@spigtdc.com 1. M Bergervoet and J Starreveld, ‘The Netherlands Antilles Private Foundation in International Privacy and Asset Protection Structures’ (2010) 16 Trusts & Trustees 496–502. 2. M Bergervoet, D Mansur and T Stienstra, ‘The Curaçao Trust—a Common Law Trust in a Civil Law Jurisdiction—a Comparison with the Curaçao Private Foundation’ (2012) 18 Trusts & Trustees 535–542. 3. Based on the wording of the applicable article in the General Tax Ordinance, a tax exempt Curaçao Trust does not fall within the definitions. 4. Note that several are not yet in force. © The Author (2013). Published by Oxford University Press. All rights reserved.
TI - How private is the Curaçao Private Foundation, Curaçao Trust, and the Dutch Private Foundation?
JF - Trusts & Trustees
DO - 10.1093/tandt/ttt080
DA - 2013-07-01
UR - https://www.deepdyve.com/lp/oxford-university-press/how-private-is-the-cura-ao-private-foundation-cura-ao-trust-and-the-G8ZW9fbKsH
SP - 577
EP - 583
VL - 19
IS - 6
DP - DeepDyve
ER -