ARUBA: Plan di Impuesto 2023

October 4, 2022

Last week the government of Aruba announced the Plan di Impuesto 2023 (Tax Plan 2023). The Tax Plan 2023 will replace the broader integral Reforma Fiscal announced earlier this year and will include certain elements of this plan, leaving out other elements such as the introduction of a VAT. The background and intention of the Tax Plan 2023 is “un sistema simpel y husto” (a simple and just tax system).

According to the government of Aruba, the Tax Plan 2023 will allow for the financial recovery of the budget of the country Aruba by means of improvement of tax compliance and a fairer distribution of the tax burden for all citizens and visitors of Aruba. A broad range of measures are proposed to achieve this result.

BBO/BAVP/BAZV

Aruba will not introduce a VAT system per January 1, 2023, but will increase the sales tax rate (BBO rate) on goods and services provided within Aruba with 1%. There will be no deduction of input BBO/BAVP or BAZV paid by entrepreneurs, thus leaving the cumulative effect of the current system in place, and also increasing the tax burden by adjusting the tax rate (the more chains a local supply chain has, the higher the tax burden).

The government is still contemplating whether they want to impose BBO/BAVP/BAZV upon the import of goods, possibly with a limited deduction of input BBO/BAVP/BAZV.

Tourist Levy

The tax rate of the Tourist Levy shall be increased from 9.5% to 12.5%. The revenue obtained will be shared according to the following corresponding percentages between ATA (57%), the Government of Aruba (40.8%), and the Tourism Product Enhancement Fund (2.2%).

Real Estate Transfer Tax

Currently, Real Estate Transfer Tax is due on the deeds of transfer of real estate and ships. The taxable object will be extended to include the transfer of the economic ownership of a property and the transfer of shares in “real estate companies”. No further clarification has been given yet to the definition of transfer of shares and real estate companies.

Compensation for Individuals

The following measures will be introduced to further compensate individuals with regard to the increase in taxes following the above discussed:

• The tax-free amount in the Personal Income Tax will be increased from Afl. 28.861 to Afl. 30.000.
• All tax rates in the various income tax brackets will decrease by 2%.
• The General Old Age Pension (AOV) will become taxable per individual for married couples, allowing for lower tax rates in the Personal Income Tax.
• The purchasing power allowance (Reparatietoeslag) for General Old Age Pension recipients shall be increased with Afl. 45 per month.
• The tips will remain exempt from Wage and Personal Income Taxes.

Compensation for Companies

The following measures are presented as further compensation for the increase in taxes based on the above for companies:

• The Profit Tax rate shall be reduced with 3% from 25% to 22%.
• The investment allowance regime will remain unchanged.
• The tax allowable depreciation of real estate will be subject to a base value after which depreciation is no longer allowed. It is yet unclear as to what the base value shall amount to and how this will affect the tax allowable depreciation expenses (nor how this will compensate for the additional tax burden).
• Elimination of the Imputation Payment Company regime for Profit Tax purposes, currently allowing for a lower tax rate in the Profit Tax.

Other Measures

Further measures announced in the Tax Plan 2023 include:

• Introduction of a deemed market value wage for Directors-Shareholders. Certain general guidelines have been provided around the minimum wages for the Director-Shareholder, but further guidance is needed to understand the exact implications.
• Taxation on excessive loans to Director-Shareholders will be introduced. Further guidance is expected to be presented at a later stage.
• Self-administered pension plans from Directors-Shareholders will no longer be allowed. It is unclear whether it will be allowed to transfer these funds to a third party or whether the capital shall be treated as taxable wages. Further guidance is expected to be presented at a later stage.

Contact

In case you wish to receive further information or discuss your tax position, kindly contact one of our tax advisors.

Wendell Meriaan
wendell.meriaan@hbnlawtax.com
+(297) 588 6060

Jorik Julsing
Jorik.julsing@hbnlawtax.com
+(297) 588 6060

Indrah Maduro
indrah.maduro@hbnlawtax.com
+(297) 588 6060