Real Estate Tax: The Value of Checking the Valuation

The Curaçao National Ordinance on Real Estate Tax 2014 entered into force on January 1, 2014, stipulating that an annual tax is levied on the value of real estate located in Curaçao. It is very important to check the accuracy of the valuation as mentioned on the (provisional and final) assessment real estate tax. The valuation depends on many factors and directly affects the amount of real estate tax due. In principle, the valuation is indisputable for the next five years once the objection period of the final assessment 2014 has expired.

TEXT MARJOLEIN N.H.M. VAN DEN BERG MSC LLM, TAX CONSULTANT KNOWLEDGE MANAGEMENT AT KPMG MEIJBURG & CO CARIBBEAN

Former Land Tax
The National Ordinance on Real Estate Tax 2014 replaces the former Land Tax Ordinance 1908. The legislator chose to introduce a new Ordinance instead of amending the former Ordinance due to numerous changes. The changes concern inter alia an increase of the tax rate, the introduction of a progressive tax rate up to 0.6% and a change in the valuation method(s) to determine the taxable amount.

Taxpayer
The real estate tax is generally an owner’s tax. The person who enjoys the real estate based on ownership, possession, or a limited right at the beginning of the calendar year is subject to real estate tax. In principle, this will be the person who is registered as such at the Cadaster, unless it appears that someone else enjoys the real estate.

If the enjoyment transfers from one person to another during the year, only the person who enjoys the real estate on January 1st is subject to real estate tax. The persons involved can only share costs if they have contractually agreed upon this. In the case that several persons enjoy the real estate on January 1st (shared enjoyment), the tax will be levied jointly on these persons.

An exception to the aforementioned situations occurs when a building is situated on top of land owned by the country of Curaçao and no right of superficies has been established (rental of land). In that case, the real estate tax regarding the value of the building is levied from the tenant instead of the owner.

Taxable Real Estate
In general, real estate tax is levied on the value of all immovable real estate located in Curaçao. The term real estate has a wide range of applications. Not only are certain (privately owned) houses affected by taxation, but also office buildings, warehouses, restaurants, shops, grocery stores, petrol stations, (vacant) land, et cetera. On the other hand, certain real estate is explicitly exempted from real estate tax, such as certain hotels, hospitals and cemeteries.

In general, real estate tax is levied on the value of all immovable real estate located in Curaçao.

Valuation
In principle, the market value of real estate is considered the taxable amount. The value will be determined for a five year period starting from January 1, 2014 (which is the value reference date). The taxable amount is generally the value of real estate in case the full unencumbered ownership could be transferred and the acquirer could start using the real estate immediately and in full extent. Therefore, the establishment of a right of superficies or rental does not affect the value of real estate.

Several valuation methods are allowed by the Ordinance under certain conditions. The value of real estate is determined by systematic comparisons in case sufficient market data is available (mainly used for houses). When there is not enough market data available, the value will be determined by the rent-value-capitalization method or the discounted- cash-flow method (mainly used for current non-houses). In specific situations, it is also possible to apply the corrected- replacement-value method (mainly used for incurrent non-houses).

Provisional Assessment
Since the valuation method recently changed with the introduction of the new Ordinance, the Curaçao Tax Authorities appointed several appraisers to determine the value of all taxable real estate located in Curaçao. It will take a while to finish all the valuations. In the meantime, taxpayers can expect a provisional assessment for real estate tax purposes that is probably based on the former valuation method (as used to determine the amount of land tax due). As soon as the provisional assessment is imposed, the amount of real estate tax principally has to be paid to the Curaçao Tax Authorities. The payment can be completed in as many equal terms as there are months left in the calendar year after the date of the provisional assessment.

If you have any questions or need assistance with regard to real estate tax, please feel free to contact the tax professionals of KPMG Meijburg & Co Caribbean. You can also send the real estate tax assessment for a quick scan to meijburgcaribbean@kpmg.com.