The Minister of Finance announced on 27 October 2020 part 2 of the (temporary) tax relief measures in connection with COVID-19 in order to re-activate the Aruba Economy. Below we provide you with the different measures introduced which are effective as of 1 November 2020. Please note that the dates of the applicability of the measures may differ. The measures are based on the publication as recently issued on the website of the Aruba Tax Authorities.
1. Increase in rate and extension of scope (dis)investment allowance
For the years 2020, 2021, and 2022 the rate of the (dis)investment allowance has been increased to 10% and contrary to the current (dis)investment allowance, the scope has been broadened and as a result, not only local purchases but also foreign purchases fall under the scope of the (dis)investment allowance. It should be noted that certain limitations are applicable.
2. Increase threshold BBO exemption for small businesses
The Government of Aruba introduced, effective from 1 July 2018, the BBO exemption for small businesses. The BBO exemption is only applicable to small businesses that realize an annual revenue of max Afl. 12,000 (USD 6,703). As of 1 January 2021, the revenue threshold has been increased from Afl. 12,000 (USD 6,703) to Afl. 84,000 (USD 46,927). Please note that small businesses are still required to complete and file the monthly BBO returns timely even with the revenue being presented as exempted.
3. Tax incentive startups promising sector
Promising sector startups that have been incorporated and registered as per 1 January 2017 at the Aruba Chamber of Commerce, Aruba Tax Authorities, and Social Insurance Bank (‘SVB’), can deduct 50% of a loan incurred in 2020 up to a maximum of Afl. 30,000 (USD 16,760) per year. The following sectors are regarded as promising:
- Tourism: cultural tourism, sports tourism, adventure tourism, medical tourism;
- Knowledge-based economy: solar-energy, ocean technology, (higher) education, IT, island-based solutions;
- Agriculture: biological food production;
- Circular economy: waste to energy, deep seawater industries, waste recycling, and reuse;
- Creative industry: music and arts, graphic design, photography, web design, art studios and fashion.
4. Broadening scope beneficial policy in connection with employee savings and provision funds
Contrary to the current requirement of 4 years for an employee to withdraw the amount saved in the savings and provide funds against no taxation, for the years 2020 and 2021 the saved amount in the funds can be withdrawn tax-free. This is also applicable in the event of an (in)voluntary severance scheme resulting in the termination of the employment.
5. Extra deduction retraining and exemption(untaxed) education allowance personnel staff
To stimulate investments in the education and/or retraining of personnel, an extra deduction of 200% (in total 300%) has been introduced for the years 2020, 2021, and 2022 for costs incurred in relation herewith. Also, the costs incurred by the personnel in connection with their education (digital and/or physical), can be reimbursed tax-free. Please note that certain limitations are applicable.
6. Extra deduction of 100% marketing and promotional expenses
Entrepreneurs can deduct an additional 100% for marketing- and promotional costs incurred. The deduction is applicable for the years 2020, 2021, and 2022 with a cap of Afl. 30,000 (USD 16,760).
7. Extension of loss compensation period with 2 years
The period for loss compensation has been extended with two (2) years for losses incurred in 2020, 2021, and 2022. We would like to refer to the below overview of the applicable loss compensation periods.
8. Abolishment of the special tax on cars- and/or motorcycle rental (BBVAM)
In anticipation of the abolishment of the special tax legislation on the car and/or motorcycle rental, with retroactive effect to 1 October 2020, license holders or authorized representatives of the car and/or motorcycle rental companies are not required to remit the special tax on these vehicles. The companies, however, must file a nil return for the last quarter of October up to December 2020. Please note that the abolishment does not influence overdue taxes and fines pertaining to the third quarter of 2020 and prior years. These must be resolved.
9. Flex payment plan companies, individuals, and retirees
As of 1 November 2020, the Aruba Tax Authorities will provide flex payment plans to companies, individuals, and retirees for their respective outstanding tax debt amounts at the Tax department. Please note that the flex payment plan is not applicable for the aid provided in the first “Alivio Fiscal 1” in connection with the monthly filing and remittance of the BBO and wage tax returns. We would like to refer you to part 1 of this newsflash for more information. The following has been mentioned as guidelines for the period and minimum repayment amount of the flex payment schedule:
10. Remediation policy outstanding (tax) debts
Taxpayers can obtain a 30% discount on outstanding amounts at the Aruba Tax Authorities provided that the total outstanding debt amount is paid at once. Please note that there are several requirements and conditions which are applicable to opt for the remediation policy. The 30% discount is only applicable for requests filed as of 1 November 2020 but before 30 June 2021.
11. Flexibility on policy dividend distribution against 10%
It is currently possible to distribute dividends from a company established in Aruba to the shareholder with a substantial interest against a 10% income tax. Under the “Alivio Fiscal 2” the 10% rate is also applicable on dividends distributed from a foreign company to a tax resident of Aruba. The 10% tax rate is only applicable on dividends which are already available in the profit reserve for the financial year ending 31 December 2019 and must be distributed in the years 2020, 2021, and 2022.
Please note that distributions from a foreign company to an Aruban resident is not subject to dividend withholding tax. However, the Aruba Tax Authorities must be notified of the dividend distribution to impose a preliminary income tax assessment for the Aruba tax resident. The notification obligation is applicable for dividend distributions carried out in 2020 and years hereafter.
12. Improvement of services by the Aruba Tax Authorities
By introducing the digital platform for the filing of the monthly tax returns via Bo-Impuesto as well as the possibility to file several requests for several documents digitally, the Aruba Tax Authorities are on the path to improve their service rendering.
13. The policy of the Aruba Tax Authorities – transparency
The Aruba Tax Authorities will keep using several social media platforms to inform the Aruba community on (tax) news and updates. The Aruba Tax Authorities will also use these platforms to identify and reach non-taxpayers. It is highly recommended for taxpayers to follow the Aruba Tax Authorities via social media platforms such as Facebook and Instagram.
Should you have any questions about the fiscal relief measures, please contact us. Our tax team is ready to assist you.
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