Tourist & Environmental Levy

The Tourist Levy replaced the old room tax system. The tourist levy is paid by the hotel guest, but is collected and paid by the hotels to the Aruba Tourism Authority, which uses the funds for a.o. marketing purposes. As per August 1, 2013, an environmental levy (“bijzondere belasting verblijf”) was introduced.

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.

VBA

On January 1, 2009, a new corporate entity was introduced in the Aruba laws, the limited liability company (comparable to the LLC, hereinafter: VBA). The VBA is a very flexible corporate entity that is especially useful if the voting rights and profit rights of shares need to be separated.

Wage Tax

Wage tax is levied on the employment income of an individual, and is a pre-levy to the individual income tax. The social security is levied in connection with the wage tax (we refer to our “highlights social security”).

Turnover Tax

Subject to turnover tax (“belasting op bedrijfsomzetten”), hereinafter: BBO, and health tax (“bestemmingsheffing AZV”) are entrepreneurs that in the course of their enterprise supply goods or render services in Aruba. The taxable base consists of all remunerations (in cash or in kind) received by the entrepreneur for the supply of goods or the rendering of services in Aruba. The rate is set on 1.5% for BBO and 2% for BAZV. Although it are different taxes, their tax bases and other characteristics are similar.

Transparency Regime

Aruba exempt companies (AVV), corporations (NV), and the limited liability company (VBA), can opt to become transparent, i.e. for corporate income tax, individual income tax and dividend withholding tax purposes the AVV, NV, or VBA is treated as a partnership. In case the AVV, NV, and VBA has foreign shareholders, the shareholders will only be subject to Aruba taxes if the shareholders have a taxable presence on Aruba via either a permanent establishment or a permanent representative.

Social Security

Social security premiums are levied in connection with the wage tax. Aruba knows six (6) different social security taxes, being (i) Old age pension and widow & orphans pension insurance, (ii) Mandatory Pension for employees, (iii) General health insurance, (iv) Sickness insurance, (v) Accident insurance and (vi) Cessantia.

Penalty System

Aruba’s penalty system is quite strict and can be divided into three categories. Penalties for omissions are generally mild and increase as the number of occurrences increase. Penalties for gross negligence or intent, taking into account the circumstances, can go up to 100% of the tax due. Penalties for non-compliance with any information obligation or for not cooperating with the authorities can be imposed, which however needs to be done by the Public Prosecutor.

Imputation Payment Company

An imputation payment company (hereinafter: IPC) is a corporation (NV) or limited liability company (VBA) which focuses on specific, designated, activities. A transitional regulation is applicable for all IPC’s existing per June 28, 2013, which was the date of the regime change. The IPC is subject to a flat rate of 10% and an exemption from dividend withholding tax.

Personal Income Tax

If an individual is considered to be a resident of Aruba – residency to be determined by the circumstances – the individual is subject to personal income tax on his world-wide income. If the individual conducts an enterprise, different regulations apply to determine the taxable income, which regulations are similar to the corporate income tax (we refer to our “highlights corporate income tax”). A non-resident of Aruba is only subject to personal income tax on Aruba over certain sources of income.

Ground and Transfer Tax

Ground tax is due when an individual or entity owns the legal title of a real estate in Aruba. Upon the transfer of real estate, transfer tax will be due. This is not the case if the shares in a company that owns the real estate are sold; in that event no transfer tax is due.

Gaming Tax

The gaming tax is due on all games of chance, including slot machines, table games and bingo. Lottery tickets are excluded. Although there are different discussions ongoing to change it from a tax based on the drop to a tax based on the win, due to a specific formula for slot machines it is essentially already a tax based on the win. The casino’s and organizers of the games of chance are responsible for the payment of the gaming tax, although such licenses are generally held by the hotels.

Free Zone Company

The free zone is a special designated area on Aruba for activities abroad (export). It is however possible for services to be situated outside the designated areas by special decree, but no exemption from import duties can then be obtained.

Filing and Paying Dates

Aruba’s tax system is based on two different systems, each with their own stipulations for filing the returns and paying of the taxes due. These systems are the “assessment” taxes and the “filed return” or “self-assessment” taxes.

Foreign Exchange Commission

Foreign exchange commission (hereinafter: FEC) is due when a resident makes a payment abroad. The rate is set at 1.3% of the payment abroad.

Exempt Company

The exempt company is company that if the activities are restricted to certain pre-defined areas, the profits generated with these activities are tax exempt on Aruba. An Aruba exempt company (AVV), a corporation (NV) or a limited liability company (VBA), are all eligible for this regime. The exempt company remains subject to corporate income tax, i.e. a corporate income tax return needs to be filed if issued, but its profits are exempt.

Dividend Withholding Tax

Upon distribution of a dividend, in principle 10% dividend withholding tax is due. The rate is 5% in case the shares of the paying entity or the shares of the shareholder are directly, for at least 50% of the shares and voting rights, listed at a qualified stock exchange. The rate is 0% if the shares form a participation for the shareholder as per the corporate income tax law, if the profits are derived by a qualifying IPC or a free zone entity, or in case it relates to dividends received from a tax holiday period.

Corporate Income Tax

Corporate income tax is levied over the profit of an enterprise conducted in Aruba in the form of either an Aruba legal entity (via for example a corporation or a limited liability company) or a permanent establishment/ permanent representative of a foreign entity. The corporate income tax rate is 25%.