On 22 May last, the parliament of Aruba passed a legislative bill entitled “introduction of a crisis levy and other tax measures”, which provides for amendments to a number of tax ordinances. The amendments serve two purposes: first, they are intended to generate additional tax revenue (through a “crisis levy”), and second the amendments form part of the phased modernization and simplification of the Aruba tax system.The most important amendments are summarized below. They are mostly scheduled to enter into force on July 1, 2018.
Sales taxes (BBO, BAZV and BAVP)
- A “PPP projects additional funding tax” (Belasting Additionele Voorzieningen PPS-projecten) will be introduced, called BAVP, which will be charged at a rate of 1.5%.
- The BAZV rate will be raised from 2% to 3%. This increase, together with the introduction of the BAVP, is described as a “crisis levy”. This will bring the total sales taxes (BBO/BAZV/BAVP) to 6%.
- In cases of passive lease, for example letting out commercial real estate, the qualification as a “business” can be open to discussion (given that it involves little labor), and consequently it is unclear whether sales tax is payable. The changes will remove any possibility of discussion: the definition of a “business” will be expanded to include, for BBO/BAZV/BAVP purposes, all situations where an asset is commercially operated with a view to acquiring long-term revenue.
- Sales tax is payable by the business supplying the good or service. In practice, this can cause complications for foreign businesses, given their limited presence in Aruba. These complications will be eliminated (at least in part) with the introduction of the possibility for the Minister in charge of finance to determine that in some cases the BBO/BAZV/BAVP will not be payable by the foreign business, but by the domestic client (“reverse-charge mechanism”).
- An arrangement will be introduced for “small businesses”, i.e., businesses whose operating sales total less than AWG 12,000 per calendar year. These small businesses may apply for dispensation from paying BBO/BAZV/BAVP.
- The exemptions for particular services supplied by banks and for forming and performing insurance contracts will be revoked; however, this does not extend to the formation and performance of pension or life insurance contracts.