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Aruba - Income Tax
Aruba - Income Tax
Taxation of international executives
Tax returns and compliance
When are tax returns due? That is, what is the tax return due date?
The deadline for filing the income tax return is within two months after receiving the invitation for filing the tax return. If no invitation has been received from the Tax Inspector within 6 months after the calendar year, the taxpayer has the obligation to request for the issuance of the tax return within 15 days after this period (ultimately by July 15).
What is the tax year-end?
In principle the calendar year end, unless the tax payer request a different tax year.
What are the compliance requirements for tax returns in Aruba?
Residents
Resident taxpayers have to file an income tax return based on their worldwide income.
Non-residents
Non-resident taxpayers need to file an income tax return for certain Aruba source income (e.g. income related to real estate in Aruba, income generated through employment in Aruba, etc.)
Tax rates
What are the current income tax rates for residents and non-residents in Aruba?
Residents
Income tax table for 2016
| Disk no. | Income brackets | Rate 1 | Rate 2 | |||
| I | II | III | IV | V | VI | |
| 1 | - |
7,296 | - | 7.00% | - | 7.40% |
| 2 | 7,296 |
17,177 | 510.72 | 9.55% | 539.90 | 10.05% |
| 3 | 17,177 |
28,243 | 1,454.36 | 13.70% | 1,532.94 | 14.45% |
| 4 | 28,243 | 40,883 | 2,970.40 | 18.00% | 3,131.98 | 19.00% |
| 5 | 40,883 | 54,930 | 5,245.60 | 23.50% | 5,533.58 | 24.80% |
| 6 | 54,930 | 70,665 | 8,546.65 | 29.00% | 9,017.24 | 30.60% |
| 7 | 70,665 | 85,093 | 13,109.80 | 34.10% | 13,832.15 | 35.95% |
| 8 | 85,093 | 100,640 | 18,029.75 | 38.00% | 19,019.02 | 40.10% |
| 9 | 100,640 | 120,462 | 23,937.61 | 41.75% | 25,253.3 | 44.05% |
| 10 | 120,462 | 149,079 | 32,213.30 | 43.20% | 33,984.96 | 45.60% |
| 11 | 149,079 | 191,343 | 44,575.84 | 46.25% | 47,034.31 | 48.80% |
| 12 | 191,343 | 256,697 | 64,122.94 | 52.00% | 67,659.14 | 54.85% |
| 13 | 256,697 | 304,369 | 98,107.02 | 54.20% | 103,505.81 | 57.20% |
| 14 | 304,369 | - | 123,945.24 | 55.85% | 130,774.19 | 58.95% |
Rate 1: applies to married sole earner atxpayers
Non-residents
The same tax rates apply to residents and non-residents.
Residence rules
For the purposes of taxation, how is an individual defined as a resident of Aruba?
Residency is determined based on facts and circumstances. For example, the following facts could be taken into account (not exhaustive) for determing whether or not a person is to be considered as a resident of Aruba:
- the nature of the stay in Aruba
- the duration of the stay
- the fact if the taxpayer has a dwelling in Arubat
- the location of individual’s economic and social center of life/interests• the location of the tax payer’s family
- whether or not the individual is registered in a municipal register
Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.
No not applicable.
What if the assignee enters the country before their assignment begins?
The assignee might be regaded as a resident of Aruba as of the date of entry.
Termination of residence
Are there any tax compliance requirements when entering or leaving the country?
When entering the country the taxpayer needs to register himself with the Tax Authorities in order to obtain a tax identification number. As of that moment the normal tax compliance rules are applicable to the taxpayer. Before leaving the country an exit tax return has to be filed and all pending tax matters and taxes due should be settled. Thereafter the taxpayer could be deregistered from the database of the Tax Authorities.
Departure tax
No specific departure tax applies. A final settlement of all (Income) tax matters is required before deregistration. Kindly note that Income tax is levied from January 1 up to the date of emigration of that year.
What if the assignee comes back for a trip after residency has terminated?
If the assignee vistis Aruba as a tourist this should have no adverse income tax consequences in Aruba. Please note that non-residents could be subject to income tax in Aruba for certain types of Aruba source income (see our previous remarks).
Communication between immigration and taxation authorities
Do the immigration authorities in Aruba provide information to the local taxation authorities regarding when a person enters or leaves Aruba?
That isin principle the case.
Filing requirements
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
If the taxpayer is deregistered in Aruba and will repatriate in Aruba, the taxpayer has register himself again with the Tax Authorities when entering the country.
Economic employer approach
Do the taxation authorities in Aruba adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Aruba considering the adoption of this interpretation of economic employer in the future?
The Dutch Supreme Court has adopted an economic employer approach for the interpretation of the term employer. The Supreme Court has ruled that the host entity is considered as the employer for treaty purposes if the following conditions are met:
- The host entity holds a position of authority over the assignee.
- The host country entity bears the costs; associated employment expenses are specifically and individually traceable recharged to the host entity.
- The risks and benefits of the duties performed by the assignee are attributable to the host entity.
Due to the fact that Aruba is part of the Kingdom of the Netherlands and does not have a Supreme Court Dutch case law is also applied in Aruba.
De minimus number of days
Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
No de minimus number of days apply, the economic employer approach is in principle applicable as of day 1.
Types of taxable compensation
What categories are subject to income tax in general situations?
- Immovable property and rights to which they are subject;
- Movable capital;
- Income from business or profession
- Rights to periodical benefits.
Tax-exempt income
Are there any areas of income that are exempt from taxation in your country? If so, please provide a general definition of these areas.
Employment income or certain costs can be paid by the employer (partly) tax-free under stricts conditions, for instance a relocation allowance and extraterrioal costs.
Expatriate concessions
Are there any concessions made for expatriates in your country?
The expatriate rules are a set of favorable tax rules introduced by Aruba to attract highly qualified staff from abroad. The expatriate rules contain special provisions for calculating payroll tax and the taxability of certain expense allowances. Eligibility criteria apply in respect of the employee's place of residence, the specific expertise required and salary. Furthermore, the expat is required to train a local employee, who will to take over the proceedings after four years.
In principle, the expatriate rules apply for a four-year period, irrespective of the validity period of the work permit. It is possible to extend this period, subject to certain conditions. The main advantage of these rules is that in cases where an employer and an employee have agreed a net salary in writing and the employer is to pay the payroll tax. In this case the net salary should not be grossed up to calculate the payroll tax, which often means that significant tax savings can be made.
The expatriate rules allow an employer to provide a significant number of tax-free allowances to the expatriate, including (not exhaustive):
- salary in kind to the extent that the combined amount does not exceed Afl. 15,000 per year;
- reimbursement of education costs for children, up to Afl. 25,000 per child;
- reimbursement of rental costs of a residence (up to Afl. 2,500 per year).
Salary earned from working abroad
Is salary earned from working abroad taxed in Aruba? If so, how?
Residents, including resident individuals with the expatriate concession, are subject to Aruba income tax on their worldwide income. Relief of double taxation may be (partly) available in Aruba depending on the fact whether or not a tax treaty is in place with the country in which the services are performed or based on the national rules concerning international tax relief.
Taxation of investment income and capital gains
Are investment income and capital gains taxed in your country? If so, how?
Residents are subject to income tax in respect of their worldwide income including their income from investment activities. Capital gains related to investment activities are in principle tax exempt, unless the investment activity relates to a substantial (25%) shareholding interest (or a past substantial (25%) shareholding interest during the last 5 years) or to profit participating notes.
Dividends, interest, and rental income
Dividends, interest and Aruba sourced rental income are subject to income tax in Aruba.
Gains from employee stock option exercises
The spread (difference of the option price and the fair market value of the underlying shares at the moment of exercise) of stock options that have been granted as employment remuneration will be taxed at the moment of exercise of the stock options.
Foreign exchange gains and losses
Not taxable/deductable.
Principal residence gains and losses
Not taxable/deductable.
Capital losses
In principle not deductible, unless losses relate to substantial (25%) shareholding interests (or a past substantial (25%) shareholding interest during the last 5 years) or to profit participating notes.
Personal use items
Not taxable/deductable.
Gifts
Deductible under specific conditions.
Additional capital gains tax (CGT) issues and exceptions
Are there capital gains tax exceptions in your country? If so, please discuss.
Pre-CGT assets
Not applicable.
Deemed disposal and acquisition
Not applicable.
General deductions from income
What are the general deductions from income allowed in your country?
There are various general deductions from income allowed in Aruba. Deductions are allowed for expenses such as qualifying retirement annuity premiums, personal expenses like alimony, qualifying mortgage interest on the principal residence, gifts/ donations, etc.
Please be informed that limitations for deductible expenses could be applicable.
Tax reimbursement methods
What are the tax reimbursement methods generally used by employers in your country?
Current year gross-up.
Calculation of estimates/prepayments/withholding
How are estimates/prepayments/withholding of tax handled in your country? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
PAYE.
Relief for foreign taxes
Is there any Relief for Foreign Taxes in your country? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
Relief from double taxation for resident individual taxpayers may be provided by way of tax treaty or, depending on the circumstances, under domestic rules. Income from foreign employment is generally covered by the exemption provisions under treaties or the unilateral decree. However, please be informed that Aruba currently has a tax treaty with the different countries within the Kingdom of the Netherlands.
General tax credits
What are the general tax credits that may be claimed in your country? Please list below.
Depending on an individual’s (family) position, tax credits may apply such as:
- the general tax credit
- the labor tax credit
- the combination tax credit (for working parents)
- the single parent tax credit
- the old-age tax credit
Sample tax calculation
Income : AWG 179,000 (USD 100,000)Tax free treshold : AWG 20,252Taxable income : 158,748
Income tax due : AWG 51,752.
Exchange rate used for calculation: USD1.00 = AWG 1.79.
Other assumptions
- The taxpayer is considered to be a resident of Aruba.
- Single taxpayer (not married) with income of AWG 179,000 ; rate 2 applies.
- All earned income is generated in Aruba.
