February 9, 2022
Spoiler: if an R&D-declaration is obtained and the innovation box can be applied, income allocable to the innovation box is taxed at 0% profit tax.
The innovation box regime was introduced for Curaçao profit tax purposes in 2018. This regime allows for a tax incentive when profits are generated with qualifying intangible assets. To apply the innovation box regime, the intangible assets should result from R&D-activities for which an R&D-declaration (‘speur- en ontwikkelingsonderzoek verklaring’) was obtained from the competent authority. To date, R&D-declarations have not been issued yet, because it was unclear for which activities such declaration could be issued. The Minister of Finance now issued additional rules on February 4, 2022, which should allow the competent authority to issue R&D-declarations shortly. Subsequently, the taxpayer can apply the innovation box if conditions are met.
In this Tax Instant News, we discuss for which R&D-activities an R&D-declaration can be obtained. Additionally, the most important conditions to apply the innovation box regime and relevant considerations in relation thereto are discussed. Also, a practical checklist for conducting a high-level internal review if the innovation box may be relevant for your company can be found here.
An R&D-declaration is a statement by the competent authority that certain activities qualify as ‘research and development activities’ (‘speur- en ontwikkelingswerk’) aimed at technical-scientific research or the development of a technical new (component of a) tangible asset, manufacturing process or software. The declaration will include a description of the qualifying R&D-work, the period when the activities were conducted and whether the R&D-activities were outsourced or not.
It is unclear how to deal with continuing R&D activities. It could be considered to divide a large R&D project in multiple annual R&D projects and request an R&D-declaration annually.
Large companies (defined below) are obligated to provide proof that the intangible asset is legally protected (e.g. a patent, registered trademark or similar legal protection). In case of software, this should be a statement from a Curaçao attorney-at-law confirming:
1° that, and by whom, and in what way the software has been made public;
2° the extent to which the source or object code bears the original character of the maker; and
3° the notarial deed in which the source or object code has been recorded and registered with the Inspector in accordance with the Registration Ordinance 1908, or deposited with the Intellectual Property Office in an i-Envelope.
Upon request, small companies are not obligated to provide proof of legal protection and can suffice with indicating in what way the intangible asset is novel, inventive (non-obvious) and has industrial application (useful).
After an R&D-declaration is obtained, the taxpayer is allowed to opt for the application of the innovation box for profit resulting from the qualifying intangible asset(s).
Innovation box regime
Under the innovation box regime, profit attributable to self-developed intangible assets that result from qualifying R&D-activities for which an R&D-declaration is obtained, are subject to a profit tax rate of 0%. Specific conditions should be met before the innovation box can be applied. Please find the most relevant conditions and other considerations below.
It is recommended to conduct a high-level internal assessment of the potential opportunity to apply the innovation box before taking steps to file the application. Our checklist can be used to conduct this initial assessment.
We would like to emphasize that the above described is general information and may not be considered as tax advice for any specific case.
Our tax professionals will be glad to assist you at any time with any questions you may have.