Introduction
In 1998 the former Netherlands Antilles introduced a new type of legal entity, the Private Foundation (“Stichting Particulier Fonds”). The “Stichting” or foundation is a legal entity incorporated by notarial deed. A Private Foundation is registered in the Curacao Chamber of Commerce’s Foundation Register. Traditionally, it has been utilized almost exclusively for holding funds for charitable contributions to third parties.
The Private Foundation
The difference between a traditional Foundation and the Curaçao Private Foundation is that the Curaçao Private Foundation is allowed to make distributions to beneficiaries, without the requirement that such distributions have to be of a charitable nature. A private foundation has no shareholders, members or the like. It keeps its assets and liabilities in its own name. The transfer of assets from non-residents into a Private Foundation are exempt from Netherlands Antilles gift taxes. A Private Foundation does not pay any profit taxes over its income. There is no succession duty. A Private Foundation is not allowed to conduct business or enterprise with profit motive. Asset management (except for third parties) or acting as a holding or investment company is not considered as a business activity.
There is no minimum capital requirement and the capital does not have to be mentioned in the Articles of the Foundation. The private foundation may employ its funds to make all possible kinds of investments
These characteristics make the Private Foundation more than a regular civil law foundation, attractive for the useful control over family assets. In addition, a Private Foundation can be seen as a civil law alternative for the Anglo-Saxon Trust. It should be taken into account that in some cases the contributor shall have to pay gift tax in his/hers country of residence.
Founders/Directors
A Curacao Private Foundation must have at least one resident Director which is in the possession of a valid license from the Central Bank of Curaçao & St Maarten. In most of the cases a Curaçao based trust company will act as a founder and as resident managing director. The trust company also provides the local registered address and office.
Uses of the Private Foundation
The essence of a Private Foundation is the separation of control from ownership. The person who transfers his/hers assets to the foundation (and who becomes the beneficiary of the foundations assets), no longer thereafter owns the assets which he/she has put into the foundation. The name of the beneficiary does not appear in the Private Foundation’s Articles. His/hers nomination is rules in a separated amendment based on art. 11 of the Articles of Incorporation. The resident managing director guards the foundation’s assets and is personally liable for his actions. He has to obey to the instructions given by the beneficiary.
In many cases the Curaçao Private Foundation may be an attractive vehicle for private investment purposes.
Benefits of using a Private Foundation
- Control vehicle for assets during lifetime;
- Investment vehicle;
- Limited liability;
- Minimal taxation on income and estate;
- Minimalize taxes on deposito’s in countries where’s no source tax;
- Possession of shares;
- Possession of real estate;
- Possession of copyright, patents etc. and license the rights and powers to third parties;
- Protection of family assets against for instance economical risks;
- Possibility of changing the beneficiary of the Stichting ( heir questions);
- Absence of the duty to publish the financial status of the Stichting;
- Confidentiality in respect of the identity of the beneficiary for instance in competition questions
The beneficiary’s assets will be transferred to the Private Foundation by means of a trust-management agreement between the Private Foundation and the beneficiary or by appointing a beneficiary’s fiduciary as a Member of the Board of the Private Foundation, control over the assets will remain with the beneficiary.
At the beneficiary’s decease the Private Foundation will distribute the assets in accordance with the beneficiary’s wishes, but distribution may also be postponed till a future date. If requires properly structured full confidentiality of the beneficiary’s identity under Curaçao legislation is ensured.
If you have any other questions concerning the above, please do not hesitate to contact us.