Thank to Grant Thornton, who wrote the newsletter and AHATA who circulated it, let’s look at the official legislation with regard to Phase I of the Aruba Tax reform:
On December 20, 2018 the Parliament of Aruba approved the draft legislation with regard to phase 1 of the Aruba tax reform which will enter into effect on January 1st, 2019. This newsflash, Grant Thornton says, aims to provide a summary and inform us on this topic.
The changes for ground tax will enter into effect as of January 1, 2019. The rate will depend on the value of the property and previous tax-free portion of the asset, Awg 60,000 will be eliminated. According to the new legislation the following rates will apply for residents of Aruba (non-commercial property):
Property value: Awg 120,000 to Awg 250,000 = 0.2%
Awg 250,000 to Awg 500,000 = 0.3%
Awg 500,000 to Awg 750,000 = 0.4%
Awg 750,000 or more = 0,6%
Note: Current rate is 0.4% for everyone.
*example: if your property value (resident, non-commercial) is Awg 400,000 the ground tax will be Awg 400,000 x 0.3% = Awg 1,200
The above rates do not apply for non-residents and commercial property. In that situation a fixed rate of 0.6% will apply over the property value.
If you are presently subject to the ground tax, your property value will remain the same for the period of 2017 up to 2021. Meaning that as of January 1, 2019 your current property value will be used to calculate the ground tax to be paid during 2019.
Tax payers who have not received a ground tax assessment for the year 2018 should file a declaration form with the tax authorities ultimately April 1, 2019. This also applies to ground tax assessments incorrectly imposed for a low amount.
As previously mentioned, the ground tax will be a declaration system as of the year 2019. Therefore, the tax payer will have to file a declaration form starting in the year 2019 (“aangifteplicht”).
Business Turnover Tax (BBO)
As per January 1, 2019 the mentioning of the BBO/BAZV/BAVP on the invoice will be prohibited. If an entrepreneur were to mention the BBO/AZV/BAVP on their invoice the tax authority can impose a penalty up to Awg 10,000. With the new legislation it is expected of the entrepreneur to include the BBO/BAZV/BAVP within their prices.
However, the Prime Minister of Aruba, Evelyn Wever-Croes, announced that there will be a transitional period of 6 months or until the replacement of the BBO/BAZV/BAVP with a single indirect tax (phase 2). During the transitional period, the entrepreneur is still allowed to mention the BBO/BAZV/BAVP on the invoice. The policy in this regard will be published later. As soon as Grant Thornton obtains this policy, they will confirm the further details. (That deal was brokered as a result of protest. AHATA co-created and co-signed a letter to GOA, with various other private sector groups, to request NOT to implement that change for BBO/BAZV/BAVP.
Personal income tax
With regards to the personal income tax a Ministerial Decree has been implemented with the official changes. The personal income tax rates will be reduced to four brackets and only one tariff group which will be as follows:
Salary from Awg 0 to Awg 33,587 = 14%
Awg 33,587 to Awg 63,369 = 25%
Awg 63,369 to Awg 141,783 = 42%
Awg 141,783 and more = 52%
So, for example if you make anywhere between Awg 33,587 and Awg 63.369, you will page 25% tax, and 42% for anything above that and under Awg 141.783. If you make more that Awg 114.783 a year, you pay 52% income tax ☹
During the public meeting of the parliament it has also been mentioned that phase 2 of the tax reform is planned to enter into effect as of July 1, 2019. During phase 2 of the tax reform the future of Business Turnover Taxes, personal income tax and corporate income tax will be decided.