Aruba
Tax Obligations Detailed
Discover employer and employee tax responsibilities in Aruba
Employer tax responsibilities
In Aruba, employers have significant responsibilities towards various social premiums for their employees. These include:
Old Age Pension (AOV)
Employers contribute 10% of the employee's gross salary.
Widows' and Orphans' Pension (AWW)
Employers contribute 1% of the employee's gross salary.
General Health Insurance (AZV)
Employers contribute 8.9% of the employee's gross salary.
Sickness Insurance (ZV)
Employers contribute 2.65% of the employee's gross salary.
Accident Insurance
The rate varies between 0.25% and 2.5% of the employee's gross salary, depending on the industry and risk level.
Severance Pay (Cesantia)
Employers contribute a fixed amount of AWG 40 per month for each employee.
Payroll Tax
Aruba does not have a specific payroll tax levied on employers based on total wages. However, employers are responsible for withholding income tax from their employees' salaries and filing regular payroll tax returns with the Aruban tax authorities.
Employee tax deductions
Aruba uses a progressive income tax system, meaning the tax rates on income increase as income levels rise. Certain deductions and allowances may be available to reduce an employee's taxable income. Examples could include mortgage interest and specific work-related expenses.
Progressive Rates
The tax rates and brackets can be found on the Aruban Tax Authorities website.
Allowances
Deductions and allowances may be available to reduce an employee's taxable income.
Employees in Aruba have a portion of their wages deducted for several social insurance programs. These include the Old Age Pension (AOV), Widows' and Orphans' Pension (AWW), and General Health Insurance (AZV). The exact deduction rate for these programs is calculated based on a percentage of the employee's gross salary, up to a salary ceiling.
Social Premiums
Old Age Pension (AOV)
The deduction rate is calculated based on a percentage of the employee's gross salary, up to a salary ceiling.
Widows' and Orphans' Pension (AWW)
This deduction rate is also calculated as a percentage of gross income, up to a salary ceiling.
General Health Insurance (AZV)
The contribution is calculated as a percentage of the employee's gross salary, up to a maximum ceiling.
Employers are responsible for calculating the correct amounts for income tax and social premiums, withholding these amounts from their employees' salaries, and remitting the withheld taxes to the Aruban Tax Authorities.
Calculation and Withholding
Employers are responsible for calculating and withholding the correct amounts for income tax and social premiums.
Social premium deductions generally have maximum salary ceilings upon which they are calculated. These ceilings are updated periodically. If you are self-employed in Aruba, you will be responsible for calculating and making your own tax and social premium payments directly.
Important Notes
Salary Ceilings
Social premium deductions generally have maximum salary ceilings upon which they are calculated.
Self-Employed Individuals
If you are self-employed in Aruba, you will be responsible for calculating and making your own tax and social premium payments directly.
VAT
Aruba imposes a turnover tax on the supply of goods and services within its territory. The combined rate of turnover taxes, which includes BBO (Belasting op Bedrijfsomzetten), BAZV (Bestemmingsheffing AZV), and BAVP (Belasting Additionele Voorzieningen), is currently 6%. The BBO is 1.5% on the turnover of a business, the BAZV is 3% for the general health insurance, and the BAVP is 1.5% for financing public-private partnership projects.
Services Subject to Turnover Tax
The majority of services provided in Aruba are subject to the 6% turnover tax. These services encompass a wide range, including consulting, legal services, accounting, marketing, design, and technology services.
Place of Supply
The location of supply determines where a service is deemed taxable. In Aruba, the general rule is that services are taxable where they are performed or effectively used.
Exemptions
Certain specific services are exempt from turnover tax in Aruba. These can include financial services, medical services, and educational services.
Compliance
Businesses that provide taxable services in Aruba may need to comply with several requirements. These may include registering with the Aruban tax authorities if your turnover exceeds a certain threshold, charging turnover tax on supplies of goods and services at the standard 6% rate, issuing invoices that comply with Aruban regulations, filing periodic turnover tax returns, and paying the tax owed to the tax authorities.
Tax incentives
Businesses established in one of Aruba's designated Free Zones can take advantage of several tax incentives. These include a reduced corporate income tax rate, exemption from turnover tax, and exemption from import duties.
Free Zones
Companies in the Free Zone are generally subject to a 2% corporate income tax rate on profits from qualifying activities. Furthermore, there is an exemption on goods and services exported from the Free Zone. No import duties are levied on goods imported into the Free Zone for qualifying business activities.
Investment Allowance
Businesses in Aruba can claim a 10% investment allowance for the purchase of new business assets. This applies both within and outside of the Free Zones.
Other Incentives
Tax incentives may apply to new hotel and timeshare developments. Approved projects can receive tax holidays and reductions for a specific period. The government of Aruba may consider offering fiscal facilities, which could include various tax holidays and reductions for specific industries and business activities. These facilities are typically evaluated and negotiated on a case-by-case basis.
