July 24 2006
Under the new Book II of the Civil Code, which applies to corporate entities, the transfer of a company's statutory seat is deemed to be complete once new legal status has been obtained and the company is no longer registered from the Curaçao Chamber of Commerce. The provisions of Book II allow a Netherlands Antilles naamloze vennootschap(1) (NANV) or Netherlands Antilles besloten vennootschap(2) to transform itself into a foreign legal entity, provided that civil law in the country of transfer allows for such a transformation and permits the entity to continues its existence in its new corporate identity.
The transformation of an NANV into a foreign legal entity is subject to the following conditions:
The minutes of the shareholders' meeting mentioned in the second point above are normally prepared in a notarial deed in Curaçao; the deed usually states that the NANV is not dissolved according to the law of the Netherlands Antilles. The draft of the foreign articles of association and the legal opinion from the country of transfer may be attached to the deed.
In order to complete the transfer, the Curaçao managing directors must resign after the new articles of association have been adopted, at which point the NANV must be deregistered from the Curaçao Chamber of Commerce.
The legal effect of the transfer, combined with the resignation of the Curaçao board of directors and the appointment of directors in the country of transfer, is that the company is no longer resident in the Netherlands Antilles for tax purposes. It is liable to profit tax only if it maintains a permanent establishment in Curaçao.
The NANV must therefore pay taxes on benefits which have not already been taken into account. Such benefits will be treated as a profit of the calendar year in which the NANV ceases to earn profits. In other words, the company must revalue its assets and liabilities to market value and - in principle - pay taxes on the hidden reserves.
If the NANV qualifies for the offshore regime under the transitional provisions for offshore companies, the revaluation of the NANV's assets and liabilities will not have adverse tax consequences, as offshore companies enjoy a capital gains exemption.
Contrary to the National Ordinance on Seat Transfer to Third Countries, the rules relating to the transfer of a statutory seat do not contain an explicit provision stating that conversion will not have tax consequences. This leaves open the question of whether the Netherlands Antilles tax authorities could successfully argue that an NANV remains liable to Netherlands Antilles taxes after conversion. The legislation does not mention that no taxes will be due after conversion and transfer, which is presumably a drafting error; there was nothing in its presentation to or consideration by Parliament to suggest that a material change in this respect was intended, and concept legislation has been published on the basis of which the conversion has no adverse tax consequences.
The ordinance, which was withdrawn following the introduction of Book II, has recently been reinstated for offshore companies. However, the ordinance applies only to companies which, as of March 1 2004, had a provision in their articles of association which allowed for the transfer of the statutory seat.
The ordinance contains a specific tax clause which provides that, if a legal entity's statutory seat is transferred to a territory outside the Netherlands Antilles, no tax or charges will be imposed in respect of the transfer; once transferred, an NANV is not subject to Netherlands Antilles profit tax. The procedure is basically the same as that set out in the Civil Code.
The ordinance requires that the articles of association must explicitly permit the transfer and indicate which corporate body may adopt the resolution to transfer the corporate seat, and that the resolution to transfer the seat must be adopted by the appropriate corporate body. The transfer is instituted by a resolution taken by the corporate body designated in the articles of association. The resolution comes into effect on the date stated in the resolution, provided that the conditions for obtaining legal status in the country of transfer have been met.
As soon as possible after the transfer has been completed, the managing directors of the company must submit to the Register of the Curaçao Chamber of Commerce a resolution to transfer the seat and publish the resolution in the Official Gazette. Any petitions relating to the several liability of the managing directors must be filed in court within two months of these conditions being met.
Converting an NANV need have no adverse tax consequences in the Netherlands Antilles. However, conversion is possible only if the law of the country of transfer allows it to take place and recognizes that the NANV is not dissolved as a result.
When transferring an NANV's statutory seat under the provisions of the Civil Code, the parties in question should obtain a letter from the Netherlands Antilles tax authorities stating that, as tax provisions relating to the transfer have yet to be introduced, the NANV will not be liable to profit tax in the Netherlands Antilles once it is incorporated according to the laws of the country of transfer and removed from the Register of the Curaçao Chamber of Commerce.
If the company qualifies for the offshore regime under the transitional provisions of the Profit Tax Ordinance and the articles of association (as of March 1 2004) permit such a transfer, the transfer may take place under the provisions of the National Ordinance on Seat Transfer to Third Countries. If the company's articles of association were amended to this effect after March 1 2004, the transfer must take place according to the provisions of the code.
Local tax counsel in the country in which the NANV's shareholders are resident should be consulted in order to verify whether the NANV's conversion has adverse tax consequences for the shareholders.
For further information on this topic please contact Emile Steevensz at Loyens & Loeff by telephone (+599 9 434 11 00) or by fax (+599 9 465 15 18) or by email (firstname.lastname@example.org).
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