Curacao Private Foundation
Curacao drew its inspiration from the Liechtenstein Law and adapted that European model to create a more flexible and modern “Private Foundation”, that has evident advantages for international asset planning.
An interesting feature of the Curacao Law on “Private Foundations” is that, despite its inspiration by Latin Law, it includes certain interesting aspects that are widely used in “Anglo-Saxon Law”, as for example the adoption of a “protector” or “supervisory body”.
A Private Foundation is the combination of a corporation and a trust. In general, a Private Foundation has similarities with a corporation, the assets of this new legal entity are separate from those of its creators, it is constituted to maintain confidentiality on the ownership of assets and in order to obtain fiscal benefits, and it has similar administrative bodies. It differs from a corporation in that the Private Foundation has no owners, as it does not issue share certificates nor any other participation title, and a Private Foundation may not be used to conduct a business. However, portfolio investment and holding activities are not considered an enterprise for these purposes.
Likewise, a Private Foundation has similarities with a trust: It is a juridical institution that requires specific formalities; some of the Founder’s assets are transferred, contributed or “donated” to the Private Foundation; a Private Foundation may be revocable; it may be created inter-vivos or mortis-causa by means of testamentary provisions; it is usually created with the purpose of managing, preserving, administering or investing assets for the benefit of the donor’s close relatives, as well as to obtain confidentiality and fiscal benefits. It differs from a trust in as far as the Private Foundation is the owner of its assets since it possesses its own legal personality and there is no “trustee” but rather the figure of a “Private Foundation Council” which combines the functions of the “Board of Directors” (of a corporation) and the functions of a “trustee” (of a trust); a Private Foundation is registered at the Registry of Foundations in the Curacao. It is important that these differences be clarified in order to better understand the features of the Private Foundation, for which we shall describe this in more detail, further below.
A Private Foundation may, at the client’s option, issue Regulations that need not be registered at the Public Registry, and therefore absolute confidentiality is always maintained. These Regulations contain, among other features, the designations of beneficiaries and the manner in which the Private Foundation Assets are to be distributed.
The Curacao Private Foundation offers the following benefits:
- They are not subject to any form of taxation in the Curacao. Consequently, they are exempted from income tax, distribution withholding tax, estate tax, real estate tax, inheritance tax and sales tax.
- The Private Foundation law mandate that members of the Private Foundation council (who are also known as “Council Member”), Supervisory bodies or any persons or institutions who on account of their duties become aware of information relating to the activities, transactions or operations of a Private Foundation are required to maintain strict confidentiality, even after its termination.
- The Law does not require the names of the ultimate Founders, Beneficiaries or Protectors to be revealed.
- There is no requirement to file annual meeting of the Private Foundation Council, Founders or supervisory bodies.
- There is no limitation whatsoever as to perpetuity.
- The Private Foundation may carry out any kind of holding or investment transactions, anywhere in the world and in any currency.
- Founders, members of the Private Foundation Council and Beneficiaries may be natural persons or corporations of any nationality domiciled anywhere in the world.
- Founders need not be a Member of the Private Foundation Council
- Founders and members of the Private Foundation Council may be Beneficiaries of the Private Foundation
- There are no limitations as to the maximum number of Founders, Council Members or Beneficiaries.
- Founders and Private Foundation council Members may hold their meetings anywhere in the world and may be represented by proxy.
- Curacao forms part of the Kingdom of the Netherlands and have their highest court of appeal in The Hague in the Netherlands.
The Curacao Private Foundations are mainly used for the following:
- To own family businesses and thus avoid inheritance taxes
- To guarantee payment of money or individual asset distribution to members of one or more families for their subsistence, education and other living expenses, or as a mechanism by which their children/grandchildren may partake in their parents/grandparents’ earnings. In Europe, Private Foundations for the aforementioned purposes are known as “Family Private Foundations”.
- To make scientific, humanitarian, philanthropic, religious or charitable donations or to manage funds reserved for these purposes.
- To protect disadvantaged persons, at a risk
- For the benefit of family members, other persons or institutions. Multiple purpose Private Foundations are known in Europe as a “Mixed Private Foundation”.
- To act as the administrator of employee benefit schemes and employee pension plans.
- As a substitute for a will, thus avoiding complicated inheritance and costly probate procedures.
- To own shares, interests and stocks of private companies.
- As a vehicle for owning patents and intellectual property and for receiving royalties and other forms of associated income.
- As a vehicle for investing in time deposit accounts, stocks, bonds or other securities.
- As a vehicle for owning real estate or valuable art work.
- To mitigate and protect against political or economic instability.
- For any asset protection purpose.
Key Elements of a Private Foundation
Conceptually, The Curacao Private Foundation may be described as the endowment of a patrimony for a specific purpose (object) determined in the document whereby the foundation is created and internally organized known as the Foundation Charter. An appointed body known as the Foundation Council . is entrusted to pursuit the objects of the Foundation. The person(s) who creates the endowment is known as the Founder . and the persons who benefit from the endowment (traditionally the founder and/or members of his family) are known as the Beneficiaries. .
1. The Founder
One or more persons, whether natural persons or bodies corporate, may be the Founders.
Founders have rights and obligations where the Private Foundation Charter grants the Founder full power, the Founder shall have the right and power to adopt the Private Foundation Regulations, amend them, freely appoint and remove the Private Foundation Council, the Supervisory Board and the Beneficiaries, act as adviser, protector or beneficiary, revoke the creation of the Private Foundation or any transfer made to it, receive and demand Statements of Account , redomicile the Private Foundation and/or dissolve it.
The Private Foundation’s assets constitute an estate separate from the Founder’s personal/corporate assets.
2. The Private Foundation Council
A Private Foundation is managed by a Private Foundation Council, which is charged with the popularity of maintaining the Private Foundation’s aims and objectives. The Private Foundation Council could be a body corporate or individuals.
The Private Foundation Council has the obligation to act with the diligence and to obtain authorization from the Supervisory Board (if one is appointed) and to render account of its administration to the Founder and to the Beneficiaries.
3. The Protector
The Law on Private Foundations refers to “supervisory bodies” that are made up of natural persons. Such bodies generally consist of one or more persons referred to as the “Supervisory Board”.
In practice, the Supervisory Board is usually the client or someone that he/she trusts. The responsibilities of the Supervisory Board are specified in the Private Foundation Charter. Which include, but are not limited to, the supervision of the Private Foundation Council.
4. The Beneficiaries
The Private Foundation’s aims and objectives are generally for the benefit of the Private Foundation’s “Beneficiary” or “Beneficiaries”. Such Beneficiaries have the right to receive the earnings or other interest in the Private Foundation Assets, and to receive the Private Foundation Assets as set down in the Private Foundation Charter.
- The beneficiaries may be natural persons, bodies corporate institutions or charities.
- The beneficiaries are not the Private Foundation’s owners or creditors.
5. A Private Foundation’s assets constitute an independent estate
The contributions made to the Private Foundation and it’s earning may not be attached or be the object of any precautionary action or measure, save for obligations incurred or for damages caused upon achievement of the Private Foundation’s aims and objectives, or for the beneficiaries legitimate rights.
The Private Foundation’s assets may not be used to answer for the Founders obligations nor for those of the Beneficiaries, nor for those of any person, whether or not involved with the Private Foundation.
The Beneficiaries shall have no right to revoke the creation of or the transfers made to the Private Foundation.
6. A Private Foundation is protected against the Founder’s creditors
Assets contributed to the Private Foundation, constitute assets that are legally separate from the Founder.
7. A Private Foundation is created as a Body Corporate
Curacao grants corporate existence to a Private Foundation. Consequently, a Private Foundation may acquire and own property of all kinds, incur obligations and be a party in judicial proceedings.
8. A Private Foundation may not have business objectives
A Private Foundation may not by law engage directly in business but may carry out portfolio investment and holding activities, which are not considered an enterprise for that purpose. Thus, a Private Foundation may derive earnings from the sale of real property, it may have cash deposits, it may lend money and it may invest in shares of private companies, public companies, bonds etc.,
9. Private Foundations may be revocable
The Founder may revoke the creation of a Private Foundation.
10. A Private Foundation is exempt from all taxes
Provided that the contributions received by a Private Foundation and the income from such contributions originate outside that fiscal territory of the Curacao, a Private Foundation shall pay no taxes.
Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any errors or omissions