Taxes in Aruba

Transfer Tax

When an immovable property is legally transferred (when a property changes hands through a purchasing agreement, inheritance, a gift, etc.), you have to pay a property transfer tax to the government. The notary public has the legal obligation to withhold the transfer tax for the government at the time of transfer.

The transfer tax rate is a percentage of the highest value (determined by the notary public) between the appraised value of the Tax Department and the transaction (economic value) value (if applicable). The property transfer is taxed at 3% of the value of the property, if the value of the property being transferred is less than USD. 142,860.00 (Awg 250,000.00). If the property value is equal or more than USD. 142,860.00 (Awg. 250,000.00), the property tax is 6% of the value of the Property.

BBO Tax (Sales Tax)

The Turn Over Tax called “Belasting op Bedrijfsomzetten” (BBO) or Business Turnover Tax is an indirect tax, introduced as of January 2007.
BBO is levied on the operating revenues realized by entrepreneurs (in the broadest sense) within the framework of their business or profession when supplying goods and/or rendering services on Aruba.

A surcharge of 3% is added to all your purchases made on Aruba. It is either included in your pricing or is added as a surcharge to your final purchase amount.

Update:
Since the first of January 2010 the BBO has been reduced to 1.5%. So a surcharge of 1.5% is added to all your purchases made in Aruba.

Property Tax

If you own a real estate property, each year, you have to pay real estate property tax.

The Tax Department appraises the value of your property (your house and land), deducts $33,707.00 (fixed deductible) from the appraised value, and taxes 0 .4 % (4 pro-mille) from the balance.

Example:

House appraised by Tax Department at: $ 250,000.00

Deductible: 33,707.00

Total: 216,293.00

0.4% of total: $ 865.17 (per year)

The property taxes in Gold Coast Villas varies, from the entry level to the most expensive property, between USD. 966.00 to USD. 3,805.00 per year.

Please see below, an approximation of yearly property tax payable to the Tax Department for each model home. Yearly property taxes indicated below are only approximations. The Tax Department will assess the definite yearly property tax. The Tax Department reviews real estate property tax every 5 years.

Capital Gains Tax

Capital gains are not taxed unless :
The gain results from business activity, or unless it results from the sale of shares of a company of which the individual concerned, together with certain specified types of relative, owns or has owned 25% or more in the last 5 years.

So if you own a property and it is registered under your name (not under a company’s name) you will not be taxed on capital gains on that property.

Vehicle Tax

If you own a car (for personal use) in Aruba, you have to pay a vehicle tax each year.

The rates are applied on the CIF (cost insurance and freight) value of the car landed on Aruba. The rates for a personal car (fueled by gasoline not diesel) are applied as follow:

You have to pay yearly

If the car’s:

Custom Duties

The tariff system in Aruba is a single schedule of duties that applies to goods from all countries.

The duties are based on the most favored-nation treatment. The standard rate of import duty is 12 percent, while higher tariffs are applicable for some goods, depending on their luxury.

Electrical appliances, lamps, household articles (except furniture) has a rate of 12%. Furniture, matress, beds, etc has a rate of 22%. Clothing has a rate of 12%. Most food items has a rate between 0% and 6%.

You could become exempted from duties on your belongings (including cars) when you move to Aruba:

1. If you can show a proof of Aruban residency,
2. Proof of registration in the census of Aruba (Bevolking),
3. Proof that you registered out of the country of origin.

For your car to become exempted:

1. You have to show receipt and title to the car (prove of ownership),
2. Insurance documents, to show that the car has been used,
3. Prove that you own the car for at least six months (ad 1. and ad 2. apply),
4. Car cannot be on a company name. Some restrictions may apply.

If your car is not exempted from import duties, the following rates apply to the CIF (Cost Insurance and Freight) landed on Aruba value:

Liability For Taxation

For taxation purposes, an individual is either resident or non-resident, and nationality is not a factor in determining tax status.

Residence for tax purposes is determined by taking into account the location of an individual’s permanent home, their habitual place of actual residence, and their centre of economic and social interest. Residents are taxed on their world-wide income under the following headings:

• Income from a business or profession
• Income from employment
• Income from property (real estate)
• Income from capital
• Certain periodic receipts.

Fringe benefits are mostly taxable, including housing allowances and reimbursement of taxes. Capital gains are not taxed unless the gain results from business activity, or unless it results from the sale of shares of a company of which the individual concerned, together with certain specified types of relative, owns or has owned 25% or more in the last 5 years.

Non-residents are taxed on certain specified types of income arising in Aruba, including the following:

• Income from a business or profession carried on within the islands personally or through a representative or agent (activity lasting less than three months may be exempted)
• Income from employment (if such lasts less than three months, there is the possibility of an exemption, but this is seldom granted)
• Income derived from a position as manager or director of an Aruban company
• Income derived from property (real estate) in Aruba, or from a mortgage on such property. Note however that there is no withholding tax in Aruba.

All individuals are entitled to various deductions, up to specified limits, including:

• Business expenses, such as moving and travel expenses, entertainment expenses, and automobile expenses
• Medical expenses
• Life insurance and pension plan payments
• Charitable contributions
• Interest
• Social security contributions
• alimony

Income from dividends, royalties and interest is taxable whatever its source for residents; for non-residents only local-source income is taxable. Tax credits on foreign income are not accepted unless they are covered by a specific tax treaty. Foreign taxes actually paid as such are however deductible.

Self-employed individuals calculate their taxable income on the same basis as for corporate taxation generally. They are entitled to accelerated depreciation on the purchase of fixed assets of 33.33% per annum.