ArubaTax Obligations Detailed

As of February 5, 2025, employers in Aruba have various tax obligations related to payroll, corporate income tax, and other levies. Note that tax laws and regulations are subject to change.

Payroll Taxes and Social Security

As of January 1, 2025, Aruba implemented revised income tax and wage tax (payroll tax) rates. The tax-free threshold remains AWG 30,000. The new progressive rates provide a significant reduction, particularly for lower earners, with the first AWG 64,390 effectively tax-free considering credits and deductions. Above this threshold, income is taxed according to the new progressive rate schedule. Although the exact 2025 rates were not available in the provided sources, they are officially published by the Aruban government. The employer withholds the wage tax directly from the employee's salary.

Social security contributions are also required. The employer contributes 25.05% of the employee's salary to the social security fund, while the employee contributes 6.10%. These rates are subject to annual revisions and may have changed since the last available information. Please check official resources for the most recent figures.

Corporate Income Tax

The standard corporate income tax rate in Aruba is 22%. Companies must file their corporate income tax returns electronically via the "BO impuesto" portal. The deadline for filing the return is July 31st of the following year, with a possible extension until December 2nd. For example, the 2023 corporate income tax return is due by July 31, 2024, with a possible extension to December 2, 2024.

Specific tax incentives and exemptions may apply to certain industries or activities, including agriculture, certain holding companies, and businesses operating within designated free zones (e-zones). Free zone companies can benefit from a reduced profit tax rate of 2%.

Turnover Tax (BBO/BAZV/BAVP)

Aruba levies a Turnover Tax (BBO/BAZV/BAVP) which acts as a sales/VAT tax. The standard rate is 7%. This tax applies to the sale of goods and the provision of services within Aruba. Businesses must register for the Turnover Tax and file returns monthly, with payment due within 15 days after the end of the month.

Other Taxes and Levies

Additional taxes relevant to businesses operating in Aruba include a 3% health tax levied on business turnover. A "ground tax" of 0.6% is levied annually on the value of real estate owned by corporations. There is no payroll tax as such, with wage tax serving as a pre-levy of income tax. There are also no capital duties. Import duties are generally levied, with exceptions for certain "green products." Dividends received are subject to a 10% tax, although exemptions may apply.

Expat Incentives

Aruba provides certain tax incentives for expats, including exemptions on allowances for housing (up to AWG 2,500 per month), special education for children (up to AWG 25,000 per year per child), and other benefits like tax-free reimbursement of airline tickets. A tax exemption is available for other expat allowances up to a maximum of AWG 15,000 per year.

It's important to consult with a tax professional or the Aruban tax authorities for the most up-to-date information regarding employer obligations and applicable rates.

In Aruba, employee tax deductions primarily consist of wage tax and social security contributions. Several deductions and allowances can reduce the taxable income, leading to tax savings for employees.

Wage Tax

As of January 1, 2025, Aruba implemented revised progressive income tax rates. A 0% tax rate applies to annual income up to Afl. 34,930, after which the rates are progressive, with the first bracket being taxed at 21%. The tax-free threshold of Afl. 30,000 remains in place. Thus any income up to Afl. 64.390 is either tax-free or taxed at 0% for 2025. However, social security contributions still apply to this income.

Social Security

Social security contributions are mandatory deductions covering AOV/AWW (General Old Age Insurance/Widow and Orphan Insurance) and AZV (General Health Insurance). These are deducted directly from the employee's wages and remitted by the employer.

Allowances and Deductions

Several allowances and deductions can reduce the taxable income:

• Expat Incentives: Employees who haven't worked in Aruba for at least five years and earn at least Afl. 150,000 annually are eligible for specific tax-free allowances. These include benefits in kind up to Afl. 15,000, school fees up to Afl. 25,000 per child, and housing allowances up to Afl. 2,500 per month.
• Other Allowances: Tax-free expense allowances can be provided under certain circumstances for expenses like telephone, travel, and car and representation costs.
• Deductible Donations: Donations to qualifying charities, churches, sports, cultural, scientific and public benefit organizations are deductible up to Afl. 50,000.

It's important to note that fringe benefits, including housing and tax reimbursements are generally taxable. As of January 1, 2023, the sale of shares in real estate companies and the transfer of economic ownership of real estate are subject to transfer tax. Also, as of January 1, 2023 the BBO/BAZV/BAVP tax system was initially planned to be replaced by a VAT regime, but the implementation has been postponed. The turnover tax rates were supposed to increase in 2023, with a likely VAT implementation date of January 1, 2025, or 2026. However, as of February 5, 2025, no further updates regarding these tax regimes have been officially announced. It is recommended to consult official government resources for the latest updates and regulations concerning Aruba's tax system.

In Aruba, businesses are subject to turnover tax (BBO), health tax (BAZV), and a tax on public-private partnerships (BAVP), not VAT. A planned VAT implementation has been postponed.

Turnover Tax (BBO)

• Rate: 2.5% (as of January 1, 2023)
• Scope: Levied on the sale of goods and provision of services within Aruba.

Health Tax (BAZV)

• Rate: 3%
• Scope: Levied on the sale of goods and provision of services within Aruba.

BAVP Tax

• Rate: 1.5%
• Scope: Applies to business turnover generated from public-private partnership projects.

Registration

All businesses conducting taxable sales of goods or services in Aruba, whether resident or non-resident, must register for BBO, BAZV, and, if applicable, BAVP. There's no registration threshold.

Filing and Payment

Businesses must file monthly self-assessed tax returns and make payments within 15 days of the following month's end. For example, the deadline for January is February 15th.

Exemptions

Certain exemptions exist for both BBO and BAZV, including:

• Exports
• Certain goods like water, electricity, and gas.
• Certain services like hotel rooms, casino revenues, international transport, insurance, and financial services.
• Free zone companies (under specific conditions)
• Small businesses with annual revenue up to AWG 84,000, based on a fiscal incentive plan.

Other Indirect Taxes

Other minor indirect taxes applicable in specific situations include:

• Excise Tax
• Stamp Duty
• Registration Duty
• Transfer Tax
• Land Tax (Real Estate)
• Room Tax (Tourism Levy)

Postponed VAT System

A planned VAT system, originally slated for implementation in 2023, has been postponed. While the implementation date remains undecided, it is speculated to be 2025 or 2026. The latest available proposals suggest a standard VAT rate of 12.5%, or potentially a dual-rate system with a reduced rate (e.g., 6% for food and beverages) and a standard rate (e.g., 14-18% for other goods and services).

Aruba offers various tax incentives for individuals and businesses.

Expat Incentives

• Tax-Free Allowances: Expats can receive up to AWG 15,000 per year in tax-free allowances. This applies to benefits in kind for qualifying expats.
• Education Allowance: An additional tax-free allowance for children's education expenses is available, up to AWG 25,000 annually per child.
• Housing Allowance: A tax-free housing allowance of up to AWG 2,500 per month is available, provided the employee pays for the housing and meets the required criteria.
• Other Benefits: Reimbursements for airline tickets for the employee and their family, along with household shipping costs, are tax-exempt. Net wage agreements avoid the need for gross-up calculations by the employer. These benefits are available for expats who haven't worked in Aruba for at least five years and earn a minimum of AWG 150,000 yearly.

Investment Incentives

• Investment Allowance: A 10% investment allowance is applicable on fixed assets, including purchases made abroad.
• Free Zones: Two designated free zones, including one in Oranjestad and one at Barcadera, offer tax advantages to businesses operating within them.
• Promising Sectors: Further incentives are available for businesses in promising sectors such as horticulture, agriculture, aquaculture, livestock, and beekeeping. These incentives include designated industry areas with long-lease land options, exemptions from import duties on goods used for commercial activities, and exemptions from profit tax, income tax, and turnover tax (BBO/BAVP/BAZV).

Individual Tax Relief and Exemptions

As of January 1, 2025, Aruba's tax structure includes:

• Elimination of Wage Tax: The 10% wage tax has been removed.
• Increased Tax-Free Income Threshold: Income up to AWG 64,930 is tax-free due to a combination of existing "vrije voet," or allowance (AWG 30,000) plus the elimination of the first tax bracket (AWG 30,000-64,930).
• Retiree Exemption: Retirees whose sole income is the SVB Aruba old-age pension and who earn less than AWG 30,000 annually (combined income for couples) are exempt from filing income tax returns. Those with other income sources are still required to file. There is no capital gains tax, inheritance tax, or gift tax in Aruba. The real estate tax rate is 0.4% of the property value.

Business Tax Considerations

• Tax Holidays: Tax holidays of up to 10 years are available for companies in specific sectors.
• Reduced Import Duties: Reduced import duties are offered for capital goods.
• Tax Exemptions: Specific investments are eligible for tax exemptions.
• Minimum Annual Salary for Directors-Shareholders: Legislation has introduced a minimum annual salary for director-shareholders, along with a tax on excessive loans to them.

Value Added Tax (VAT)

Implementation of a VAT is planned for January 1, 2023, replacing the BBO/BAZV/BAVP taxes. The proposed tariffs include a low rate of 6% for food and drinks (excluding alcohol), a high rate of up to 18% on other goods and services, and a 0% rate on exports. Offset mechanisms will be in place, and exemptions will apply to specific sectors, including education, medical services, banks, utilities, and hotel room revenue already subject to tourist levy.

Note: This information is current as of February 5, 2025, and might be subject to change. It is advisable to consult with a tax professional or the Aruban Tax Department for the most up-to-date details and personalized guidance.