Welcome to Curaçao, a tropical paradise with a friendly local community and a warm climate year-round. If you’re over 50 and looking to retire, the penshonado scheme could be perfect for you. This is a tax scheme that provides benefits to foreign nationals who have emigrated to Curaçao.
So, what exactly is the pensioner “penshonado” scheme?
The penshonado scheme is a scheme that can provide tax benefits for foreign income and has two forms. The core of both schemes is that, under certain conditions, income from abroad can be taxed at a rate of 10%. You can also choose to tax a flat-rate foreign income of ANG 500,000 at the normal rate, regardless of the foreign income received.
Who can apply for the penshonado scheme?
The scheme is open to any foreign national who is over the age of 50 and who receives income from abroad, that has bought a property in curacao and that has recently become a Curacao’s resident.
What are the conditions for the penshonado scheme?
You will need to meet the following conditions to be eligible for the scheme:
- Be 50 years or older.
- Have lived outside Curaçao for at least 60 consecutive months
- Submit a request to the Inspector of Taxes to be regarded as a penshonado within 2 months after registration in the population register
- Own a home for your own use with a minimum value of ANG 450,000 in Curaçao within 18 months after registration in the population register. This property may not be rented out. Alternatively, you can own a protected monument with a minimum value of ANG 450,000, which can be rented out for up to 4 months in any 12-month period.
- You may not perform an employment relationship, self-employed profession, or other activities in Curaçao. If you are married, your partner may not perform any of the afore mentioned either. However, exceptions may apply here. Persons who have settled in Curaçao before January 1, 1998, can still use the old scheme provided they have submitted a request in the past and are resident in Curaçao.
What kind of foreign income is covered by the penshonado scheme?
The following net income is classified as foreign income:
- Income from existing or past employment or from other work performed by you outside Curaçao (Reference to the exceptions)
- Income from a business carried on by you, provided you do not run this business in Curaçao, but for example through a permanent establishment, permanent representative or an authorized representative
- Income from immovable property located outside Curaçao
- Income from receivables and bank balances, except mortgage loans established on real estate located in Curaçao. As well as claims that you have against a natural person residing in Curaçao or a company established in Curaçao
- Income from profit shares from a foreign company
- Income from shares or profit-sharing certificates from an NV, BV or other type of foreign legal entity established abroad
- The profit from the sale of the shares or profit-sharing certificates belonging to a substantial interest of an NV, BV or other type of foreign legal entity established abroad
- Income from entitlement to regular payments that you receive from a foreign debtor
- The interest included in the capital payment from a life insurance policy that you receive from a foreign natural legal entity.
- All other income that does not fall under the penshonado rate is taxed at the normal progressive rate.
What tax options are available under the penshonado scheme?
If you meet the eligibility conditions for the scheme, you can choose between two options:
- A scheme without notional income, which means that the actual income from abroad will be taxed at a rate of 10%.
- A scheme with a fixed foreign income of ANG 500,000, regardless of what income you received
If you opt for the fixed income, you cannot make use of the provisions for the prevention of double taxation of the Tax Regulations of the Netherlands Curaçao. You are therefore not entitled to the prevention of double taxation.
When you submit your request to the Inspector of the Tax and Customs Administration, you choose between the two options. If you opt for the scheme in which the actual income is taxed at 10%, you can only opt for the flat-rate income option after 3 years.
When does the penshonado scheme expire?
If you, or if you are married to your partner, receive income in a year from local employment, self-employment or other activities, your entitlement to the pension scheme will lapse for that year. The normal rate then applies to your entire income, including your foreign income. If, for the above reason, you lose your entitlement to the pension scheme for two consecutive years, the entitlement to this scheme will lapse in its entirety. You will then no longer be entitled to the penshonado scheme. Your entitlement to the scheme will also lapse if you have submitted your tax return incompletely and/or on time for two consecutive years. Finally, your entitlement to the scheme lapses if you have not purchased a home with a minimum value of ANG 450,000 for your own use for more than six months.
What are the Penshonado Scheme benefits for expats in Curacao?In addition to the tax benefits mentioned above, one of the most significant benefits of being selected for the penshonado scheme is the granting of an indefinite residence permit. This is especially advantageous for individuals who have a different nationality than Dutch or American, as they would typically only receive a one-year residency permit that must be renewed for 10 years before being eligible for an indefinite permit. The penshonado scheme simplifies the process and provides a more stable living situation for those looking to retire in Curacao.
Do I need expert assistance when applying for pensioner scheme?
Applying for the pensioner scheme can be a complex process, involving many different rules and regulations. Additionally, the application window for the scheme is often limited, making it important to act quickly if you are interested in applying. Due to these complexities, it is highly recommended that you seek expert financial assistance before applying. An experienced financial advisor can help evaluate whether the pensioner scheme is a good fit for your financial goals and needs and can guide you through the application process.
Although the application process for the pensioner scheme may be complex, the long-term benefits it offers are worth the effort. If you would like assistance with evaluating the pensioner scheme, please don’t hesitate to ask us. We work with experts from different industries that we can refer in case you need professional assistance.
Thanks to Living in Paradise, my husband and I were able to obtain 5-year residency permits as investors. I can confidently say that without their expert guidance, it would have been nearly impossible for us to navigate the complicated and bureaucratic process on our own. They assisted us every step of the way, dealt with government instances, and fought for us. We couldn’t have done it without their expertise and dedication. Highly recommended!
Val and Jean Yves
CHECKLIST: A Comprehensive List
Before applying for a residence permit you have to make sure the following things otherwise you may face some difficulties:
- Passport in original with minimum date with six months
- One recent passport-size colour photograph depicting full face
- Copy of a national Id card
- Bank statement of last six months with sufficient balance
- A particular priority date
Required Items for Submission
Living in Paradise has worked in this sector since 2013 and we know that the residence permit application process is dynamic. Since we have been working in this sector since 2013 it is easier for us to understand what is the best way to get a residence permit easily and get permission. If you look at our success rate then you will understand our capabilities. .
So if you think that we can help you, don't hesitate to communicate with us. We are here to help you all the time for your better success.