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Aruba: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Residents of Aruba are taxed on their worldwide income. Married couples may be taxed jointly or separately. However, spouses cannot opt for joint taxation on their incomes from employment, business, and freelance work.

INCOME TAX

There are four recognized categories of income: income from real estate, income from movable property, business and employment income, and rights on periodical payments. The taxable income of resident individuals is gross income from all sources less deductions and allowances.

There are two schedules of income tax. Schedule I applies to the following:

• A married taxpayer whose spouse do not have earned income
• A married taxpayer who has opted for joint taxation
• An employee who was married for at least 5 years but is now permanently separated or divorced
• An unmarried taxpayer who claims child allowance

Schedule II applies to all other taxpayers that do not satisfy the conditions for Schedule I. Income tax is levied at progressive rates and the tax bands are adjusted annually for inflation.

The following allowances are available to residents:

• Child allowance of AWG750 (US$419)
• AWG1,200 (US$670) for each child studying in Aruba and AWG3,600 (US$2,011) for each child studying abroad
• Old age allowance of AWG6,746 (US$3,769) for married individuals. For unmarried individuals, the actual amount is calculated by means of various variables.

Residents are allowed to deduct the following personal expenses from the taxable income:

• Annuities and periodical payments and allowances ending upon death of the beneficiary or a third person
• Pension premiums
• Interest on personal loans up to AWG5,000 (US$2,793)
• Interest on mortgage loans
• Interest on sickness insurance, old age insurance and general widows and orphans insurance premiums if these are not compensated by the employer
• Life insurance, annuity and pension premiums up to 5% of taxable income with a maximum deduction of AWG5,000 (US$2,793)
• Donations to recognized institutions up to AWG10,000 (US$5,587)
• Contributions to pensions, savings, and provisions up to AWG3,000 (US$1,676)

In addition, the following extraordinary expenses are also deductible but only to the extent that the aggregate expenses exceed 5% of gross income less personal expense allowances.

• Expenses for the financial support of close family members
• Medical and disability expenses
• Expenses for the birth of children
• Expenses for the death of the taxpayer, his spouse or child
• Educational expenses.

RENTAL INCOME
Income derived by individuals from the leasing of immovable property is taxed at normal progressive rates. Taxable income is gross rental income less maintenance costs, land tax, insurance premiums, and interest on mortgage payments.

Income from immovable property includes not only rent and lease payments, but also income from second houses, which are not rented out.

CAPITAL GAINS
Capital gains realized from selling real estate property not connected in business activities is exempt from capital gains tax.

PROPERTY TAX

Real Estate Tax (Grondbelasting)

Real estate tax is an annual tax levied on real property in Aruba. The tax is levied at a flat rate of 0.4% of the property’s rental value if it exceeds AWG60,000 (US$33,520). The resulting value is multiplied by 12.5 if the property was built before 01 March 1977. If the property was built thereafter, the applicable multiplier is 8.333.

The owner is liable to pay the tax and an assessment is always made for a period of 5 years. The tax is payable in four equal installments, on or before the last day of each quarter.

Upon request, no tax is due for a quarter if a building for a subsequent period of 6 months is not used and not rented. Such request has to be made within 3 months after the end of the relevant calendar year.

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