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Curacao Overhauls Its Land Tax Regime

by Amanda Banks,, London

19 April 2013

Dutch caribbean territory Curacao has overhauled the territory's land tax legislation providing for the introduction of a new, progressive land tax regime from January 1, 2014.

Applicable land tax rates will be dependent on property value, ranging from 0.4% on properties valued up to ANG350,000 (USD195,500), 0.5% on properties valued up to ANG750,000, and a 0.6% rate thereafter. Previously, a tax rate of 0.345% had applied. The new regime includes the introduction of a new land tax law, to replace the previous one dating back to 1908, and to support debt reduction efforts.

Buildings used for the provision of public sector services, healthcare premises, and not-for-profit establishments will be exempt from the levy.

The land tax hike has been enacted after criticism from the Netherlands that the territory contravened its pledge in the past two fiscal years to maintain balanced budgets in return for independence.

Under a "formal compliance order" issued by the Netherlands government in July 2012, Curacao was ordered to present measures to achieve budget savings worth ANG153m in the 2012 fiscal year, and make good the ANG98m budgetary deficit the territory incurred in 2011.

On November 10, 2010, a new constitutional relationship between the Netherlands and its Caribbean dependencies became effective, granting greater autonomy to Curacao and Saint Maarten and dissolving the Netherlands Antilles. The Netherlands agreed to write off the two territories' debts in exchange for an agreement that the territories' authorities would prudently manage their finances.

While Saint Maarten achieved a balanced budget in 2011, Curacao registered a significant deficit, partially due to weak economic performance, which is highly dependent on the contribution of financial services, but also because of the slow progress made in healthcare reform.

TAGS: compliance | tax | Netherlands | public sector | law | financial services | budget | legislation | tax rates | Netherlands Antilles | Saint Maarten | services

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