Introduction

On September 30, 2022, the Minister of Finance and Culture presented the outlines of the “Fiscal Plan 2023” for the upcoming year. The intention of the Fiscal Plan is to replace the Aruba Tax Reform that was announced earlier this year. In this newsletter we will provide you with a short summary and explanation of the Fiscal Plan 2023 that was presented. Please bear in mind that there is not an official publication yet regarding the Fiscal Plan 2023.

Latest news

Reduced tax rate for buyouts self-administered pension

According to the Fiscal Plan 2013, self-administered pension will be abolished as of January 1, 2023. Following up on this, the Minister has announced in the Official Gazette of November 4, 2022, that buyouts on self-administered pension is permissible at an reduced fixed tax rate of 15%. The reduced tax rate is also applicable for accrued pension in professional insurance companies. The buyouts at this reduced tax rate must take place between November 7, 2022, and December 31, 2022. The wage tax and social premiums must be paid on time.

Reduced tax rate for dividend distribution

The Minister has also announced in the Official Gazette of November 4, 2022, an extension of the reduced personal income tax rate from 25% to 10% on distribution of dividends in fiscal years 2022 and 2023 from the retained earnings (reserves) as at December 31, 2022.

Increase BBO rate

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.

‍In total this will result in 7% BBO/BAZV/BAVP (2,5% BBO - 1,5% BAVP - 3% BAZV) when purchasing goods or receiving services in Aruba. The increase of the BBO rate is to replace the value added tax (VAT) that previously would have been introduced by 2023.

Tourist Levy

The tourist levy rate will be increased from 9,5% to 12,5%

Investment allowance remains

Contrary to previous publications the investment allowance will not be eliminated and will remain at the regular rate of 6%. When a company invest in fixed assets minimum amount of AWG 5.000 an investment allowance of 6% of the purchasing amount (including customs, freight charges and installation costs) can be claimed.

Please bear in mind that in “The fiscal relief plan 2” the investment allowance has been temporary increased to 10% for the year 2020, 2021 and 2022.

Depreciation on real estate

The customary depreciation method on real estate is a fixed percentage (2,5% or 2%) of the purchasing value 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. We have not heard any further elaboration on this limitation.

Elimination on IPC regime

The regime of the imputation payment company (IPC) in which certain companies were subjected to a lower corporate income tax rate and exemption from the levy of dividend withholding tax, will be abolished.

Introduction of taxes over “excessive loans”

Directors that have shares in a company, will need to pay themselves a minimum salary (“gebruikelijk loon regeling”) for tax purposes. The director’s salary has to be 50% of the revenue of the company to a maximum revenue of AWG 100.000 per year.

Minimum salary for directors with shares in a company

Excessive loans between directors or shareholders and the company will be taxed. The Minister has not given any elaboration regarding this taxation nor on the definition what should be considered as excessive. We highly recommend setting up a loan agreement to record transfer of funds between the director or shareholder and the company.

Transfer 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).

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. If you need additional information please contact us.

Taxes will not be charged on tips

Earlier this year it was announced that tips will be classified as part of the salary and will be taxable for the wage tax and social premiums. However, in the last press conference the Minister has announced that taxes and social premiums will not be charged on tips.

Compensatory measures

• The corporate income tax rate will be reduced from 25% to 22%;
• Married couples that receive the general old age pension (AOV) will be taxed separately;
• The small income allowance for pensioners that receive a general old age pension will increase with AWG 45 per month;
• The tax-free amount for the personal income tax will be increased from AWG 28,861 to AWG 30,000;
• In each tranche of the progressive personal income tax rate, the rate will be reduced with 2%.