One of the goals of the “Administration Wever-Croes” for 2019 is to enforce a fairer, simpler tax system, where the government of Aruba can acquire its fair tax share more efficiently. Therefore, a conference on the tax legislation of Aruba regarding the various changes that will come into effect on January 1, 2019 was held on November 23rd, 2018. In this newsflash we will present the amendments introduced during this conference.
Phases of the tax reform
In order to achieve the above-mentioned goal, The Aruba Government will reform the tax system of Aruba in four phases, namely:
- Phase 1: Lower personal tax, wage tax and ground tax (as per January 1, 2019);
- Phase 2: Reform indirect taxes (BBO and import duties) (Pending date coming into effect);
- Phase 3: Reform of taxes paid (profit tax and dividend tax) by entrepreneurs and businesses and changes on the personal income tax
(Pending date coming into effect);
- Phase 4: Reform of taxes paid by tourists (tourist levy, car rental tax, green tax etc.)
(Pending date coming into effect).
The proposed amendments that are official and will go into effect are the personal income tax, ground tax, turnover tax (BBO), excise taxes on import of alcohol and tobacco and tax benefits for pensioners.
Personal income tax
The current personal income tax system has a tax-free amount of Afl. 20.455, – . This amount will be increased to Afl. 27.751, –
Furthermore, the current top rate is 58,95%, this tax rate will be reduced to 52%. Moreover, the current tariff structure of the personal income tax will be reduced to only five tax rate brackets. Additionally, there will only be one tariff group. The idea is that the personal tax rate that an individual is subject to in the case that dividends are received will be reduced from 25% to 10%.
The personal income tax reform as per 1-1-2019 in a table:
At this moment the ground tax system is composed of a fixed tax rate of 0.4% over the economic value of a property minus a general exemption of Afl. 60.000, – Moreover, the ground tax is currently levied in the form of a yearly assessment. The changes that will be implemented regarding the ground tax system are as follows:
- The fixed tax rate will be changed to a proportional tax rate, meaning that the tax rate will be determined by the value of the property. The ground tax rates will vary from 0% to 0.6%. This will only be applicable for the residents of Aruba;
- A fixed rate of 0.6% will be imposed on non-resident taxpayers and on commercial properties;
- The yearly assessment will be eliminated and the taxpayer will have to file a return form (aangifteplicht);
The ground tax rates that will apply for residents of Aruba with non-commercial property, are as follows:
Business turnover tax (BBO)
As of January 1, 2019 the BBO may not be mentioned on invoices. The goal of the new tax reform of the BBO is to provide transparency and consistency on the market prices.
Import and excise duties
Tax reform on import and excise duties will occur as per January 1, 2019 on tobacco and alcohol. Detailed information regarding this tax reform was not provided.
The following amendments were introduced for pensioners* on July 1, 2018:
- The rate of the AZV premium for pensioners was lowered to 4%;
- The small income allowance (“reparatietoeslag”) was increased with a sum of Afl. 25, –
The following changes will go into effect as of January 1, 2019:
- Unmarried pensioners will receive an increase of Afl. 25, –
- Married pensioners will receive an increase of Afl. 42, – on their pension.
*In principle the pension age is 65, however, until 2024, exceptions are applicable. Please contact us for more detailed information.
Our Tax Team is happy to assist in ever changing times