Special Zone San Nicolas

Highlights Special Zone San Nicolas

With retroactive effect to January 1, 2013, a special zone has been created in San Nicolas, a town located in the south-east of Aruba and home of the former refinery. This special zone intends to stimulate the area of San Nicolas with certain tax incentives. We note that the special zone in San Nicolas is based on Policy from the Minister of Finance, Utilities and Energy and needs to be incorporated into the law still. The law may deviate from the below-mentioned.

1. Advantages special zone San Nicolas

A special zone will be created in San Nicolas with the following advantages:

  1. Corporate income tax rate is reduced to:
    1. 2% for the following activities:
      1. Reinsurance;
      2. Sustainable development, provided that at least 75% of the turnover is generated locally;
  • Green energy, provided that at least 75% of the turnover is generated locally;
  1. Agriculture, provided that at least 75% of the turnover is generated locally.
  1. 10% for the following activities:
    1. Hotels;
    2. Export, provided that at least 75% of the turnover is generated abroad.
  2. 15% for all other activities.
  1. No dividend withholding tax;
  2. Reduction of 50% of the ground tax due for a period of five (5) years, while the Minister of Infrastructure can also reduce the taxable base for investors;
  3. No BBO or, upon approval from the Central Bank of Aruba, foreign exchange commission, on the supply of goods or rendering of services to entrepreneurs abroad;
  4. Additional investment allowance of 10% on all investments (not only local investments) exceeding
    AWG 50,000 a year;
  5. The expat regulation also applies in the special zone, we refer to our highlights wage tax.

 

2. License special zone San Nicolas

The conditions to receive a license for the special zone are:

  1. The entrepreneur needs to be established in the designated area and needs to obtain a license (AWG 500) from the Aruba Financial Center;
  2. Except for reinsurance companies with a license from the Central Bank of Aruba, a minimum investment of at least:
    • AWG 150,000 for e.g. retail, services, light industries, small tourism related activities, food & beverage industry, and agriculture, except if the entrepreneur is already established in the special zone;
    • AWG 1,000,000 for tourism related activities (like hotels and/or golf courses) and heavy industries.

The qualifying investments include investments in real estate, machinery, equipment, renovations, and inventory. Excluded are investments in motor vehicles and personnel.

  • Maintenance of at least AWG 30,000 a year over a period of five (5) years if a property is owned;
  1. Except for reinsurance companies with a license from the Central Bank of Aruba, per AWG 1,000,000 turnover at least 3 employees, unless the Minister of Finance has provided an exemption of this criterion. For tourism related activities and heavy industries the minimum number of employees is 9 and increases with 3 employees every additional AWG 1,000,000 in turnover.
  2. Annual contribution of AWG 1,200 per year (for entrepreneurs with 9 employees or less) or AWG 2,400 per year (for all others) to the San Nicolas Business Association for cleaning, security, maintenance and such of the special zone;
  3. For hotels additional criteria apply:
    • An earth check or similar certificate (of the lowest category);
    • Annual investment of AWG 90,000 for hotels with more than 100 rooms, divided into 1/3rd for green energy, 1/3rd for training of people and 1/3rd for purchase of companies situated in San Nicolas;
    • Annual investment of AWG 45,000 for hotels with less than 100 rooms, divided into 1/3rd for green energy, 1/3rd for training of people and 1/3rd for purchase of companies situated in San Nicolas.

3. Anti-abuse measures (to be incorporated into the law)

The anti-abuse measures in case of providing incorrect information and/or misuse of the special zone are:

  • Monetary penalty of AWG 1,000,000;
  • Corporate income tax rate of 37.5% (2016: 150% of 25%);
  • Ground tax rate of 0.08% (200% of 0.04%);
  • In order to avoid profit shifts between the special zone and elsewhere in Aruba, specific allocation measures are applicable which are based on the amount of the investment (50%), the m2 (30%) and the number of employees (20%). An example to illustrate:
Investments in Thousands M2 Personnel
San Nicolas 2,000 30 10
Elsewhere 8,000 80 40
Total 10,000 110 50
Ratio SN / Total 20% 27% 20%
Weighting Factor 50% 30% 20%
Profit allocation factor 10% 8% 4% 22%

In other words, the profit that can be allocated to the entity in the special zone is 22% of the total profit.

We specifically note that these anti-abuse measures can only be applied after they have been incorporated into the law. Based on the current Policy, these anti-abuse measures have no legal validity and thus cannot be enforced.

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