Fee reduction on dismissal compensation

ORANJESTAD –After evaluating the current economic situation and the effects international political circumstances have on our labor force, the Minister of Economics, Finance and Culture Xiomara Ruiz Maduro has approved a temporary reduction on the fiscal weight on dismissal compensation.

This reduction will benefit a large group of employees in Aruba who can lose their jobs and who will have difficulty finding a new job.

The fee as stipulated in article 24, paragraph 5, of the National Ordinance Income-tax (AB 1991 no. GT51) has been reduced to 15% and is only valid for dismissal compensation payments that take place during in 2019.

Dismissal compensation is granted, as stated in the article 11, paragraph 1, section a, of the National Ordinance Income Tax (AB 1991 no. GT51) to those fired directly. This policy is valid since its publication in the Official Journal (Landscourant) AB2019No.07 on March 29, 2019 and is valid until December 31, 2019.

Administrative process.
In the event of dismissal and the fired employee is entitled to the compensation, the employee can request the special rate of 15% in writing at the Tax Office.

All documents regarding the compensation should be submitted together with the request for the special rate.

Once this is submitted the tax inspector will give a final decision in writing to the employee who in turn should forward this to the former employer. Only with a request of the employee, an evaluation will be made to see if the employee is entitled to the special rate based on the compensation. In the event the employee does not request the special rate, the employer has the obligation to apply the regular rate. Keep in mind that the special rate of 15% is not mandatory and does not always benefit the employee.