April 24, 2012
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.
There are four recognized categories of income: (1) income from real estate, (1) income from movable property, (3) business and employment income, and (4) 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.
|TAXABLE INCOME, AWG (US$)||
|Schedule I||Schedule II|
|Up to 7,118 (US$3,977)||7.00%||7.40%|
|7,119 - 16,759 (US$9,363)||9.55%||10.05%|
|16,759 - 27,555 (US$15,394)||13.70%||14.45%|
|27,555 - 39,888 (US$22,284)||18.00%||19.00%|
|39,888 - 53,593 (US$29.940)||23.50%||24.80%|
|53,593 - 68,994 (US$38,544)||29.00%||30.60%|
|68,944 - 83,020 (US$46,380)||34.10%||35.95%|
|83,020 - 98,189 (US$54,854)||38.00%||40.10%|
|98,189 - 117,528 (US$65,658)||41.75%||44.05%|
|117,528 - 145,448 (US$81,256)||43.20%||45.60%|
|145,448 - 186,683 (US$104,292)||46.25%||48.80%|
|186,683 - 250,446 (US$139,914)||52.00%||54.85%|
|250,446 - 296,956 (US$165,897)||54.20%||57.20%|
|Over 296,956 (US$165,897)||55.85%||58.95%|
|Source: Global Property Guide|
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.
- tax-free allowance of AWG20,252 (US$11,314) for 2009, which is available for all taxpayers
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.
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 realized from selling real estate property, excluding the taxpayer’s principal residence, are taxed at the progressive income tax rates.
Capital gains realized on real properties that are considered business assets are taxed at progressive rates only if the gains qualify as income from independently performed activities.
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 property owners are liable to pay for the real estate tax. Properties are assessed for tax purposes for a period of 5 years. The tax is payable in four equal installments, on or before the last day of each quarter.
Property owners can request that no real estate tax be levied on the property if the property is not used and not rented for a subsequent period of 6 months. Property owners need to submit such requests within 3 months after the end of the relevant calendar year.
Corporate income tax is levied on: (1) business or trading income, (2) passive income such as dividends, interest, and capital gains. Income and capital gains earned by companies are taxed at the flat corporate tax rate of 28%. Income-generating expenses are deductible when calculating taxable income.