Aruba Tax Authorities – Cost Allowances and Fringe Benefits

December 22, 2025

The Aruba Tax Authorities have announced a Ministerial Decree in which they have rewritten most of the Ministerial Decree for the Tax Treatment of Cost Allowances and other Fringe Benefits (“Regeling Fiscale Behandeling Secundaire Arbeidsvoorwaarden”) effective as per January 1, 2026.

Fringe Benefits
The Ministerial Decree regarding the Tax Treatment of Cost Allowances and other Fringe Benefits is a decree focused on elements of remuneration that are not considered basic wage components and provides employers with practical guidance regarding the provision of fringe benefits. The government of Aruba sought to review whether the Decree still matches the socio-economic reality and has modernized it by updating certain amounts and conditions, as well as by introducing new fringe benefits. More specifically, this new Decree also provides for changes to the so-called “Expatriate regime”.

Definitions and conditions
Article A has been amended to provide clearer definitions of the terms used in the Decree. Furthermore, the Decree has been amended to include a new article B, which provides general conditions under which benefits and allowances are not included in the taxable wages of the employee.

These conditions include:

• The benefits and allowances should cover business expenses incurred by the employee;
• The expenses are caused by the employment and are an integral part of the employment activities;
• The payroll administration records the expenses and allowances provided;
• Any benefits in kind are valued in accordance with the National Ordinance Wage Taxes.

Although the conditions are not uncommon, they have not been laid down in writing before.

Expatriate regime
The new Ministerial Decree also includes changes to the Expatriate regime. It includes changes in the amount of tax-free allowances and benefits as well as changes in the conditions to be considered an expatriate for wage tax purposes.

The conditions to be considered for the Expatriate regime have been changed. The old conditions of the minimum annual wage of Afl. 150,000 and the provision of proof that the expertise of the employee is not (or limited) available in Aruba have remained, but as an addition an employee is also considered to be an expatriate if they are able to present proof that:

• They have completed at least a program of higher professional education at a University of Applied Sciences (“HBO”);
• They have at least five years of relevant work experience; and
• They enter into an employment contract with the employer that is commensurate with higher professional education in terms of remuneration and duties.

For this category no proof of availability or minimum income requirements shall be required.

The employer may now provide for tax-free allowances for refurbishment costs for a maximum amount of Afl. 20,000 (was: Afl. 15,000), three months of temporary housing and car rental (was: two months).

Furthermore, the expatriate may be offered a tax-free sign-on bonus with a maximum of one month’s wage amounting to Afl. 10,000, provided the bonus is paid in one instalment not later than three months after the start of the employment.

The tax-free annual fringe benefits that may be provided to expatriate employees have been amended to also allow payments in cash, and the amount has been adjusted to Afl. 20,000 (was: Afl. 15,000).

The maximum tax-free rental cost allowance has been increased to Afl. 3,500 (was: Afl. 2,500) per month.

Company car
The legislation for the provision of a company car has been amended to include a discounted addition to the wages for the private use of the car of 10% of the new value of the car for hybrid cars and 5% of the new value of the car for fully electric cars, whereas the normal addition to the wages is 15% of the new value of the car.

The tax-free cost allowance for the business use of a private car will be doubled to amount to Afl. 1.20 per kilometer that the private car is used for company purposes. Please note that the conditions for a tax-free cost allowance per kilometer have not changed:

• the employee should provide a complete record of all kilometers (private and business) driven in the car per year;
• the cost allowance should be recorded in the payroll administration and commuting between home and work remains private use of the car.

  Monthly Cost Allowances
  The Decree contains a table of fixed amounts of certain cost allowances an employer is allowed to provide to an employee who is considered to be a tax-free cost allowance and therefore do not require any further substantiation. The old table included representation costs and car cost allowances per group of employees (management, salesperson, accountant/advisor, and other functions). The new table also includes fixed allowances for the use of a private telephone and internet.

  Company housing
  The provision of company housing results in private savings for the employee. The legislation regarding the calculation of the savings has been amended to provide a better representation of the economic benefits.

  Upon provision of company housing, the benefit is still considered to be 8% of the value of the property, but this is capped at 15% of the total annual wages of the employee. Any payments made by the employee towards the rent are deducted from the above.

  Furthermore, please note that if the housing is provided furnished, the amount of benefit is considered to be 10% of the value of the property, with a maximum of 20% of the annual wages of the employee.

  Other Fringe Benefits
  The amounts payable for work anniversaries and special occasions have been amended and increased to reflect the economic value of these benefits.

  Within these allowances, a new tax-free allowance has been included. The employer is allowed to provide for a tax-free allowance of Afl. 125 for costs to improve the employee’s health and well-being, which includes costs of membership of a fitness club, meditation, yoga or mindfulness courses, and costs of books, apps as well as courses regarding health and well-being.

  Furthermore, the new Decree provides guidance regarding fixed amounts payable per day for business travel (“daggeldvergoedingen”). If the amount does not exceed Afl. 225 per day, no further substantiation of the actual costs is required to be held in the payroll administration. Any additional amounts the employer wishes to provide should be substantiated by benchmark research within the company over a period of no less than three months, to be conducted at least every three years.

  If an employer provides meals to employees, the amount of the fringe benefits is based on a fixed amount per meal. Due to higher costs, the amount of the benefit has been increased from Afl. 5 (was: Afl. 2.50) per breakfast or lunch provided, and to Afl. 7.50 (was: Afl. 5) per dinner provided.

  The new Decree also provides further guidance regarding the provision of company clothing, and more specifically the conditions such clothing should meet. This includes:

  • clothing that can only be worn at work (for example: uniforms);
  • clothing with a visible logo of at least 70 cm²,
  • clothing that is associated by third parties with the employment due to color combinations or recognizable features;
  • clothing that remains at the workplace;
  • safety clothing and accessories.

  Finally, certain cost allowances for volunteers have been formalized in the new Decree. Employers are allowed to provide volunteers with tax-free cost allowances for transportation costs between their home and the place of volunteer work, up to a maximum of Afl. 1.20 per kilometer and may provide a meal if the volunteer works for at least two consecutive hours during regular mealtimes.

  Conclusion
  Important changes have been made to the fringe benefits and cost allowance regime in Aruba. Our advisors would be pleased to discuss the implications and opportunities these changes may include for your organization. Please do not hesitate to contact any of our specialists below.

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