Aruba: Tax Plan 2023 part 2 – BBO/BAVP/BAZV on import of goods

April 5, 2023

The Tax Plan 2023 has been introduced in December 2022.
Upon introduction of the plan, the Minister of Finance briefed on the intention to also implement plans for imposing BBO/BAVP/BAZV on the import of goods.
On March 31, 2023, the Director of the tax authorities presented the “Plan di Impuesto 2023 – part 2” to the parliament and explained that the draft legislation was sent to the Advisory Council. The main part of this plan consists of the introduction of BBO/BAVP/BAZV on the import of goods with limited possibilities to offset these taxes.

In this Tax Instant News, we will provide you with a brief summary of the presentation. Please note that the legislation has yet to be published and may contain changes to the information currently available. Introduction of BBO/BAVP/BAZV on import Within the Kingdom of the Netherlands various systems for indirect taxes are applicable. The tax authorities conclude that in Curaçao and the Netherlands Sales Tax and VAT are levied on the import of goods, whereas in Aruba only import duties are levied. It may be good to notice that in the Caribbean Netherlands, no import duties apply (but General Expenditure Tax is levied on the import of goods) and that in the Netherlands the VAT imposed on import can be offset as is accustomed in a VAT system.

They conclude that the lack of sales tax on imports may incentivize people to import their own goods rather than buy the goods from local businesses. The Director of the tax authorities goes on to conclude that the current BBO/BAVP/BAZV system leads to cumulation of taxes if goods pass through multiple stages in the sales process and thus the consumer is confronted with the ultimate cumulative tax burden. They, therefore, wish to introduce a tax system that lowers this cumulation within various steps. Despite this effect, the tax authorities conclude that they will introduce another taxable stage in the sales process and wish to introduce taxation of BBO/BAVP/BAZV on the import of goods, where entrepreneurs in Aruba are able to deduct this BBO/BAVP/BAZV from their BBO/BAVP/BAZV payable if the goods imported are “trade goods.” This would mean that in these situations the BBO/BAVP/BAZV needs to be pre-financed by the entrepreneur but should ultimately not lead to additional costs according to the tax authorities.

Trade Goods

Trade goods will be defined as goods meant to be sold to another party in Aruba or goods/raw materials used to assemble or adapt new goods in the course of the normal business of the entrepreneur. This would include for instance products used in restaurants to produce the dishes, raw materials used in factories to produce goods, building materials if the course of the business is construction, etc. More importantly, trade goods do not include assets or parts used in the assembly process that are not part of the new product such as: – Machines and installations; – Kitchen equipment; – Furniture and fixtures in hotels and restaurants; – Office furniture and equipment; – Vehicles; – Spare parts of all the above. For all the goods mentioned above the BBO/BAVP/BAZV on import will lead to an increase in the costs of production and may also lead to an increase in the sales prices to consumers.

Practical aspects

There will be no grandfathering rules with regard to this legislation, any goods formally imported in Aruba before June 1, 2023, are exempt from BBO/BAVP/BAZV and the tax will be imposed on any goods imported after that date (which includes goods that are kept in the customs depots until after that date). The refund only applies to trade goods imported by entrepreneurs for BBO/BAVP/BAZV purposes in Aruba. Currently, Aruba has 12 different rates for custom duties. The tax authorities have proposed to limit the number of different rates but have yet to provide information about the exact changes in the custom rates. Conclusion Based on the above we would advise looking into opportunities to import goods before June 1, 2023, when possible, and to assess which goods can be considered to be “trade goods” for BBO/BAVP/BAZV purposes.

HBN Law & Tax is happy to assist you with any queries.