Introduction

‍We are very proud to present to you our first edition of our Newsletter.

In our first edition we will inform you briefly about the tax reform that has been announced in the media and provide you with an update on this matter.

In our next edition we will provide you an overview of accounting packages that are available that are able to handle the intended implementation of VAT.

Update on Tax Reform of 2023

In the beginning of this year the Authorities had meetings with stakeholders regarding the tax reform that, according to their planning, will be implemented as per January 1, 2023.

Some of the tax reforms that were mentioned, will have significant impact on the cost of doing business. In this newsletter we will discuss some of the changes that have been mentioned in the past few months. We emphasize that all these matters mentioned in our newsletter are tentative and it is not clear if they will be introduced as of fiscal year 2023 considering that we are already in August, expect for the postponement of the introduction of VAT. In addition we are not aware of BBO will be collected at import of the merchandise as has been requested by “Commerciantenan Uni”.

Elimination of the investment allowance

When a company has invested in assets (for at least an amount AWG 5,000) an investment allowance (deduction) for 6% of the purchasing amount can be claimed. The fiscal relief plan 2 has increased the investment allowance to 10% for the year 2020, 2021 and 2022. The investment allowance has been announced that it will be eliminated as of January 1, 2023.

Minimum salary for directors of a company with majority of the shares

A director of a company with majority of the shares, will have to be granted a salary (“gebruikelijk loon regeling”). Until now, a minimum salary of AWG 5,000 per month has been mentioned. We are expecting that if a company cannot afford to pay this amount, that a lower amount will be accepted by the Tax Authorities by providing them with the financials of the company. Please be aware that this will not be applicable to each entity pertaining to a group of companies but will be assessed on a jointly basis.

Transfer of economic ownership of a real estate

When transferring the ownership of a real estate, transfer tax is due (3% over a value of AWG 250,000 and 6% over a value higher than AWG 250,000). However, until now the transfer of the economic ownership is not taxable for the transfer tax. As of January 1, 2023, transfer tax will be due when transferring the economic ownership of a real estate. This is also applicable if the shares of a real estate company are being sold or exchanged. 

Value added tax (VAT)

The VAT enables, for example a retail company, to deduct the VAT that has been paid to its suppliers, with the VAT that consumers has paid. In the VAT return the company must declare the paid and collected VAT and only has to pay the difference. VAT will be charged when importing goods while the import duty will remain in place.

A low VAT rate (6%) and a high VAT rate (14%) have been mentioned. The low rate will be applicable for food and beverages (except alcoholic beverages). And the high rate will be applicable for other goods and services.

The BBO/BAZV/BAVP will be eliminated when the VAT is implemented.

UPDATE

The government of Aruba has announced on August 18, 2022, that the introduction of the VAT will be postponed until further notice. Due to inflationary consequences of the war in Ukraine, it is not feasible to introduce this by January 1, 2023.

Increase BBO rate

The current BBO rate is 1.5%. In addition to the announcement of August 18, 2022, the government of Aruba has informed us that since the introduction of the VAT will be postponed, the BBO rate will be increased with 1% or 1.5%. 

In total this will result in 7% or 7,5% (2.5% or 3% BBO – 1.5% BAVP - 3% BAZV) over the income when supplying goods or providing services in Aruba.

Self-administered pension

In 2020 the Tax Authorities granted a period to buy off self-administered pension in a company at a lower (fixed) rate. As of January 1, 2021, the pension buy offs are being taxed at a progressive tax rate.       

Self-administered pension will be abolished as of January 1, 2023.

Depreciation on real estate

The customary depreciation method on real estate is a fixed percentage (2,5% or 2%) of the purchasing amount or construction cost deducted with the residual value (10%) over a period of 50 or 40 years. The depreciation on real estate will be limited as of January 1, 2023.

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There are still deliberations taking place regarding the content and implementations of the tax reform. We will keep you informed.