Executive summary

On 25 July 2024, the Treaty was made public in the Kingdom of the Netherlands' treaty series. While it generally adheres to the Organisation for Economic Co-operation and Development's Model Tax Convention on Income and Capital (OECD-MC) of 2017, the Treaty introduces innovative approaches to certain questions in international tax law.

The Treaty is currently progressing through the legislative stages and therefore has not yet come into effect. Updates on the developments will be monitored closely and provided as they become available.

Detailed discussion

Key aspects of the Treaty are discussed below.

The Treaty includes a unique provision for collective investment vehicles. Qualifying collective investment vehicles may elect to be treated as transparent, providing their participants direct access to the treaty between their country of residence and the source country, if applicable.

The definition of pension funds includes investment entities that operate exclusively or almost exclusively for the benefit of pension funds. Different from the regular provisions usually seen in treaties, pension funds of third countries may participate in such an entity if their country has a treaty with the source country that provides for similar benefits.

For dual-resident entities, the pre-2017 OECD-MC approach has been maintained by looking first at the place of effective management of the entity. If the place of management cannot be established, the competent authorities of Curacao and Suriname shall settle the matter by mutual agreement.

In the article defining the term "permanent establishment," the examples from article 5, paragraph 2 of the OECD-MC have been expanded to include drilling platforms, farms and agricultural land, and fishing boats.

Article 5, paragraph 3 of the OECD-MC provision, which normally deals with construction and installation projects, has been expanded significantly and now includes:

• The performance of building, construction, installation, assembly, excavation, mining, dredging or clearance activities or other similar activities, or supervisory activities connected therewith either lasting more than three months within a period of 12 months or as part of work that is performed consecutively by different enterprises lasting a total of more than three months within a 12-month period
• The performance of building, construction or assembly work on machines and industrial installations or supervisory activities connected therewith, either lasting more than three months within a period of 12 months or as part of work that is performed consecutively by different enterprises lasting more than three months within a 12-month period
• The provision of services, including consultancy services, by an enterprise via employees or other personnel engaged for such a purpose, but only if activities of that nature for the same or a related project are continued within Curaçao or Suriname for a period or periods that total more than three months within a 12-month period
• Activities concerning the stocktaking of natural resources, including activities that support nature

The allocation of profits to permanent establishments (PEs) expressly provides that no deduction will be allowed for amounts the PE pays (other than to reimburse actual expenses) to the head office or any of its other offices as (1) royalties, fees or other similar payments in return of the use of patents or other rights or (2) interest on non-bank loans to the PE. Similarly, these payments shall also not be attributed to PEs.

The definition of "international traffic" included in the Treaty for purposes of the shipping articles, including the article regarding employment on board a ship or aircraft, follows the 2010 OECD-MC. Therefore, international traffic means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in Curaçao or Suriname, except when the ship or aircraft is operated solely between places in the other country.

The dividend article provides for an exemption from withholding tax for dividend payments to recognized pension funds and other companies (other than a partnership) that (1) own at least 10% of the capital of the company paying the dividends for a period of 365 days, including the day of payment of the dividends, and (2) can be regarded as the beneficial owner of the dividends. Other entities (other than a partnership) owning at least 10% of the capital of the dividend-paying company and qualifying as the beneficial owner, may be taxed at 5%. All other persons may be taxed at 10%.

Interest income and royalty income may only be taxed in the receiving company's country of residence, unless the debt-claim or the right or property for which the interest or royalty is paid is effectively connected with a PE that the income recipient holds in the source country.

Entertainers and sportspersons are exempt from source-country tax if annual gross receipts do not exceed US$30,000. If this amount is exceeded, the source-country tax may not exceed 15% of the gross receipts. However, income generated by the personal activities of an entertainer or sportsperson in his capacity that accrues to another person may be taxed in the country in which the activities of the entertainer/sportsperson are performed, unless it is established that neither the entertainer/sportsperson nor persons related thereto participate directly or indirectly in the profits of that other person.

The pension article allows for source-country taxation on pensions and similar payments (whether or not made under the social security legislation).

The "other income" article reintroduces the concept of the professional services, akin to the text of article 14 in the OECD-MC until 29 April 2000. Under this provision, income derived by an individual who is a resident of one of the countries and performs professional services or other activities of an independent character shall be taxable only in the country of residence, unless the income can be attributed to a fixed base that is regularly available to this individual in the source country for the purpose of performing the activities.

Where any item of income may be taxed in Suriname under the Treaty, Curaçao provides relief for double taxation through a credit or an exemption, depending on the type of income. In contrast, Suriname only provides its residents a tax credit for items of income that may be taxed in Curaçao. Moreover, the "elimination of double taxation" article provides for a kind of tax-sparing provision under which tax exemptions or reductions to stimulate investments in the countries will be ignored and credit will be provided at the general tax rate.

The Treaty incorporates a Principal Purpose Test (PPT) aimed at preventing treaty abuse. Additionally, it features a most-favored-nation clause within the PPT provisions. This clause permits residents to substitute the Treaty's anti-abuse measures with those from another treaty entered by Curaçao or Suriname with a third country, assuming these alternate provisions align with the criteria set forth in Article 7 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, dated 24 November 2016.

Implications

The Treaty represents a significant development in the tax landscape between Curaçao and Suriname, with implications for international tax law and cross-border economic activities. However, note that this information is of a general nature only — for advice in respect of specific situations, affected entities should contact their tax advisors.