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Aruba Presents Two-Year Fiscal Reform Plan — Orbitax Tax News & Alerts

On 3 December 2018, Aruba's government presented its fiscal reform plans, which will be implemented over a two-year period beginning in 2019. As provided in a government release (English language), the plan includes four phases as follows:

  • Phase 1 will deal with income tax, wage tax, and ground tax. It also includes "sin taxes" on products that can have a negative impact on consumers, like alcohol and tobacco, in order to reduce use. The first phase will be executed as from 1 January 2019.
  • Phase 2 will deal with indirect taxes, like business turnover tax (BBO), import taxes, and more "sin taxes".
  • Phase 3 will deal with commercial taxes like profit taxes, dividend taxes, and the reform of income taxes.
  • Phase 4 will deal with the implementation of tourism-related taxes like room tax, car rental tax, etc.

Phase 1 includes a reduction of the loan tax and income tax rates. This includes a reduction in the number of income tax brackets from the current 14 to 5 brackets as follows:

  • up to AWG 27,751 – 0%
  • over AWG 27,751 up to 61,338 – 14%
  • over AWG 61,338 up to 91,120 - 25%
  • over AWG 91,120 up to 169,534 – 42%
  • over AWG 169,534 – 52%

With respect to ground tax, a tax paid by home and property owners, a new rate structure based on property value will be introduced to replace the current 0.4% flat rate. The planned rates are as follows for resident owners of non-commercial property:

  • Property value up to AWG 120,000 – 0%
  • Property value over AWG 120,000 up to 250,000 – 0.2%
  • Property value over AWG 250,000 up to 500,000 – 0.3%
  • Property value over AWG 500,000 up to 750,000 – 0.4%
  • Property value over AWG 750,000 – 0.6%

For commercial property and non-resident owners of any property, a flat 0.6% ground tax rate will apply. However, for companies, this increase is to be offset through a reduction in the dividend tax rate from 25% to 10%.

According to the release, the task of fiscal reform will continue in the upcoming months. Additional details will be published once available.