De Privé Stichting
The Netherlands Antilles Private Foundation (also known as SPF)
A relatively new instrument available to professionals concerned with international tax and estate planning is the Private Foundation, introduced by the Netherlands Antilles legislature as a flexible variant of the longexisting "common" foundation.
As mentioned, the private foundation is a specific and flexible form of the legal entity foundation, which has been described above. Therefore a private foundation neither has shareholders, members or the like. Even beneficiaries do not have to be appointed if such appointment is not desired. In other words, the private foundation is a separate legal entity, with assets and liabilities in its own name.
While the purpose of a common foundation may not be the making of distributions (except distributions of an idealistic or social nature) to the incorporators or to others out of its income or out of its assets, a private foundation is allowed to do so.
Therefore, the purpose of a private foundation may include the making of distributions to incorporators and or others, such as children or grandchildren, without serving an ideal or social purpose. To whom distributions can be made, can be described in the articles of incorporation, in very general or very specific terms. The purpose clause could for instance only authorize the foundation to make gifts as and when the (supervisory) board considers this appropriate.
Another major difference between common and private foundations is that the private foundation's purpose may not be to run a business or enterprise for profit. Managing its assets (investments, equities etc), and to act as a holding corporation, will however not be regarded as "running a business". The foundation may, and should invest its assets, and may do so actively. There are no limits on the type of investments.
Taxation of the private foundation
By creating the private foundation, the Netherlands Antilles wanted to launch a product that could compete with certain products of other jurisdictions, like the Anglo-American trust. It has been the intention that there would be a minimum of formalities to be coped with. It is not necessary to make annual financial reports or statements summarizing the assets. The private foundation however is not allowed to include in the purpose clause of its articles of incorporation: "to generate profits by running an enterprise".
The private foundation is tax exempt if:
- The private foundation is tax exempt if its articles of incorporation include a statement that it is a private foundation. In addition, the purpose clause may not include to generate profits by running an enterprise.
- In principle the private foundation should not receive an annual tax return. The Inspector of Taxes has the right to still send a tax return. If a tax return is received it has to be completed and subsequently filed, stating that it concerns a private foundation.
Incorporation of the private foundation
A private foundation is incorporated as such by deed executed before a Netherlands Antilles civil-law notary and is then registered in the Register of Foundations. The Articles of Incorporation must regulate the appointment and dismissal of the members of the board. The authority to appoint and dismiss board members can be granted to the board itself, the incorporator or to any other specific person or group of persons. The board must manage the assets of the foundation, and make distributions or gifts, in accordance with the Articles of Incorporation.
Applications for the private foundation
This rather new concept of the foundation has proved to appeal to clients and practitioners from both civil law and common law countries who consider it in their overall tax, estate and/or asset planning structures and opportunities and use it instead of an Anglo-American Trust. Needless to say that a private foundation is for instance an ideal vehicle to protect and preserve family wealth or art collections. Examples of the use of a private foundation are:
- Asset protection;
- Holding of shares;
- Deferral of income;
- Minimizing wealth taxes;
- Preservation of family assets;
- Minimizing taxes on future growth;
- Estate planning.
Source: Website Curaçao International Financial Services Association (CIFA)
