Aruba’s Tax Changes in 2023: What You Need to Know
The Government of Aruba recently announced part two of the Tax Plan 2023, comprising significant changes, which include the implementation of the BBO (Turnover Tax) on import, a simplification and adjustment of import duties rates, and the continuation of the 10% investment allowance for both local and foreign investments. These measures aim to modernize the tax system, promote economic growth, and encourage investment on the island.
BBO on import
On July 5, 2023, the Government of Aruba approved the BBO (Turnover Tax) on import legislation, which takes effect on August 1, 2023. Both entrepreneurs and non-entrepreneurs will be subject to the BBO on imported goods. The tax is due at the time of import and on the customs value of the goods. An exemption from the BBO on import applies if the goods are already exempt from import duties. However, a 0% rate for import duties does not qualify for this exemption. Goods declared and imported duties paid before August 1, 2023, will not be subject to the BBO on import. Entrepreneurs operating in industries, such as hotels and restaurants that are characterized by a series of elements and actions, of which the direct sales of imported goods to consumers are no more than a part and in which the service aspect is largely predominant, cannot deduct the BBO/BAVP/BAZV paid on imports.
The Government of Aruba intended to simplify and modernize the import duties concurrent with the BBO (Turnover Tax) on imports. However, they could not implement the necessary legal amendments. To address the potential cost increase resulting from the introduction of the BBO on imports, the Minister of Finance has issued a beneficial policy through a Ministerial Decree. This policy allows for a reduction in the import duties rates at the same time the BBO on import takes effect. This policy will remain in effect until they amend the formal law to reflect the intended changes for the import duties. This reform aims to modernize and streamline the import duties process.
The investment allowance of 10% will remain applicable for local and foreign investments. This policy seeks to encourage economic activity, attract foreign investments, and promote overall growth and development in Aruba. Businesses, investors, and individuals considering investment opportunities in the country may benefit from the continued application of this investment allowance.
Tax Plan 2023 Part I
The Government introduced several significant legislative changes that came into effect on January 1, 2023. Here are the main changes:
- Increase in the combined BBO/BAVP/BAZV rate from 6% to 7%
- Increase in the tourist levy rate from 9.5% to 12.5%
- Reduction in the profit tax rate from 25% to 22%
- Restriction on depreciation for real estate
- Abolishment of the IPC regime with a grandfathering until January 1, 2026
- Abolishment of self-administered pension schemes
- Introduction of a minimum annual salary for director-shareholders
- Implementation of a tax on excessive loans to director-shareholders
- Investment allowance of 10% is applicable to both local and non-local investments
- Real estate transfer tax on sale/transfer of economic ownership of real estate
- Real estate transfer tax on the sale/transfer of shares in real estate companies
- Adjustment in income tax bracket and tax rate
- Increase in tax-free income to AWG 30,000.00
- Increase in the recovery allowance with AWG 45 monthly for retirees
- Individual taxation of AOV pension for married retirees
- Tips will not be subject to wage tax/income tax
Please note that this publication serves as guidance and does not constitute professional advice. ARINA does not hold liability for reliance on the information provided. For access to this information in Dutch, please click here.