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12th of December 2017
   
Home arrow Investing in Aruba arrow Fiscal Incentives
Fiscal Incentives

A. Manufacturing industries
B. Imputation Payment Company
C. Special Zone San Nicolas
D. Green Zone
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To encourage investments in specific industries the Government offers tax incentives on a selective basis. These fiscal incentives are for the purpose of the broadening of the economic base.
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A. MANUFACTURING INDUSTRIES
Manufacturing industries are allowed to import packing materials, raw materials, semi-manufactured products and components to be used in the production process free of customs duty.

B. IMPUTATION PAYMENT COMPANY
The shareholders of an Aruban N.V., hereinafter called the Imputation Payment Company or IPC, which performs qualifying activities, are entitled to receive imputation payment from the tax authorities upon the payment of dividends.


Which activities qualify?

  • Quality hotel business operations (one of the conditions to be met is that the average room charge should be at least Af 354 per day);
  • International air and sea transportation (with each seperate vessel having a minimum net tonnage of 2.500 tons);
  • Developing, acquiring, keeping, maintaining and licensing of patent, copyrights, video rights, music rights and trademark rights;
  • The development, acquisition and exploitation of information and communication technology;
  • Captive insurance activities;
  • The financing of other enterprises and companies whether or not inter company, but excluding banking activities;
  • Qualifying holding and 'passive' investment activities;
  • A company aimed towards generating renewable energy;

How does the imputation system work?
An IPC is subject to the ordinary profit tax rate of 28%. However after the company distributes dividends, the shareholder becomes entitled to an imputation payment of 26/72 of the dividend. Assuming the IPC's profit is 100 and the IPC paid 28 as profit tax, 72 is available for distribution. If the IPC pays a dividend of 72, the shareholder becomes entitled to an imputation payment by the Government of Aruba of 72*26/72=26. This means that the effective profit tax rate of an IPC is only 2 %.

The IPC has to withhold dividend tax of 10% on both the dividend and the imputation payment: 10% of (72+26)=9.8. If the ultimate parent company or the IPC itself is quoted on an acknowledged stock exchange, the dividend withholding tax will be reduced to 5%. The rate may also be reduced to 5% on the basis of the Tax Arrangement for the Kingdom.
Contact: www.siad.aw 
C. SPECIAL ZONE SAN NICOLAS 
Introduction
As of July 1st, 2013 introduction of a favorable policy;
Package of tax products to stimulate the economy
Stimulus for San Nicolas in the form of a Special Zone in San Nicolas for a period of at least 10 years.
Tax Incentives
A reduced profit tax rate:
-15% for activities aimed primarily at the local market;
-10% for hotels and activities of which more than 75% is aimed at export;
-2% for captive insurance companies;
-2% for qualifying activities such as projects concerning sustainability, green energy, knowledge and sustainable agriculture;
-The reduced profit tax rate for projects concerning sustainability, green energy and agriculture is only applicable if at least 75% of the taxpayer's revenue is generated locally;
-Exemption from dividend withholding tax;
-Exemption from BBO insofar the revenue is generated with the sale of goods or services abroad;
-Exemption from foreign exchange tax as long as the payments are made in connection with the export of services and products;
-A 50% discount on the land tax for a period of 5 years;
-The possibility that the Minister of Infrastructure can establish a lower land value;
-The Expatriate regulation is applicable;
-An additional investment allowance of 10% on all investments (local as well as foreign investments). This additional investment allowance is additional to the temporary investment allowance of 6%;
-For companies already established in San Nicolas as of January 1st, 2013, a minimum investment of Afl. 50,000 is required for the additional investment allowance to be applicable.
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Eligibility to the Special Zone
N.V., V.B.A., Aruba Exempt Company (A.V.V.), Limited partnership with shares, Foundation, Association, Cooperative, and Mutual Insurance Society that conducts its business in San Nicolas and near surroundings;
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Permit obtained from the Aruba Financial Center (AFC):
Upon submission of an application;
After consultation with the San Nicolas Business Association (SNBA);
Provided that all conditions are met by the entrepreneur;
Cost Afl. 500
The AFC has the task to yearly control whether a business with the special zone status still meets the requirements.
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Requirements
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Investments:
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-A minimum investment of Afl. 150,000 is required;
-For heavy industry and large hotels with 100 rooms and more a minimum investment of Afl. 1 million is required;
-Qualified investments: e.g. purchase of the business premises, long term lease agreement, investment in machines and inventory. Investments in vehicles do not qualify!
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Employment:
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-The business must employ at least 3 employees (3 FTE) if its revenue is less than Afl. 1 million.
 For every additional Afl. 1 million the business must employ 3 more employees;
 For heavy industry and the tourism sector a minimum of 9 employees should be employed;
1 FTE =40 working hours per week
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Maintenance:
At least Afl. 30,000 over a period of 5 years should be spent on maintenance of the (owned) business premises;
Contribution to the SNBA:
-Afl. 1,200 yearly for businesses with <9 employees;
-Afl. 2,400 yearly for businesses with >= 9 employees,
The SNBA has the responsibility to keep the special zone clean and safe.
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Additional requirements for hotels:
-The hotel should be in the possession or at least prove that it has started the process of acquiring an earth check certificate or a similar certificate (a certificate of the lowest category);
-Yearly investment in the community of San Nicolas and its near surroundings:
  For hotels with > 100 rooms: Afl. 90,000
  For hotels with < 100 rooms: Afl. 45,000
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The investment should be allocated as follows:
-1/3 in green energy projects,
-1/3 in education;
-1/3 in the purchase of local products
The investment is fully deductible from the profit of the company.
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Deviation for Captive Insurance companies:
Investment and employment: the captive insurance company should prove that it meets the conditions stipulated by the Central Bank of Aruba.
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Transitional arrangement
-Businesses that already were established in San Nicolas before January 1st, 2013 are deemed to satisfy the investment requirement. However, they must still meet the employment and maintenance requirements.
-The transitional arrangement will apply for only a year.
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Anti-abuse provisions
Anti-abuse provisions will apply if a company intentionally provides false information or otherwise abuses the facilities of the Special Zone.