During the presentation it was explained the the fiscal reform will include a two years transition time, in order to properly execute the fundamental changes into the tax system.
- Phase 1 will deal with the personal taxes like income tax, wage tax and ground tax. It also includes taxes on products that can have a negative impact on consumers, like alcohol and on product that can cause health issues like tobacco, in order to reduce its use. These are called: “Sin taxes” The first phase will be executed as per January 1st 2019.
- Phase 2 will be the indirect taxes, like BBO, import taxes and more “Sin taxes”
- Phase 3 includes commercial taxes like profit taxes, dividend taxes and the reform on income taxes.
- Phase 4 will be the implementation of tourism related taxes like room tax, car rental tax etc.
Phase 1 includes a reduction of the loan tax and income tax rates, making this fairer. This current rate is split in 14 brackets, with the reform this will be reduced to only 5 brackets. A 0% tax rate will apply to incomes up to Awg. 27.751,00 per year. This means that anybody with an monthly income of Awg. 2.300,00 (Awg. 27.751,00 yearly) will not pay any income taxes. Additionally the maximum rate will also be reduced from 58.95% to 52%. This will have a positive impact on all the 55 thousand income and loan tax payers on the island. About 30 thousand will not pay any income or loan tax anymore, which are mainly pensioners and all receiving income lower than the Awg. 27.751,00 yearly bracket. Additionally the 25 thousand tax payers will profit from the rate reduction.
The rate for ground tax, a tax paid by home and or property owners will also be adapted. The changes will be based on the value of the property; the lower the property value, the lower the rate, the higher the property value the higher the rate. A new and higher rate is also introduced, for foreigners not residing in Aruba and companies owning commercial properties. This will make the ground tax rates more reasonable. A rate reduction for a single home owner while increasing the rate for those owning more properties or high valued properties. The current rate is 0.4% for everybody, residents or non-residents owning condos in Aruba-
The rate changes include a 0% tax rate for property valued up to Awg. 120.000,00
Those owning a property valued between Awg. 120.000,00 and Awg. 250.000,00 will notice an reduction of 50%, from 0,4% to 0,2%.
Those owning a property valued between Awg. 250.000,00 and Awg. 500.000,00 will receive a reduction of 25% from 0,4% to 0,3%
Property owners with a home valued between Awg. 500.000,00 and Awg. 750.000,00 will see no changes in their ground tax rates, however since the Awg. 60.000,00 current reduction will no longer be applied, it will cause an increase of Awg. 240,00 per year.
Homeowners with a home valued above Awg. 750.000,00 will see an increase in their ground tax with 50%, from 0,4% to 0,6% This group will on the other hand see a bigger reduction of their loan tax as stated previously. Meanwhile, those not residing in Aruba, but have properties like condominiums, will also notice an increased rate to 0,6%. These companies will be compensated with a reduced rate on their dividend tax.
The impact of the reform will be vast; 12.000 homeowners will no longer pay any ground taxes, 16.000 homeowners will see a reduction on their rate, 1.800 non-residents will see an increase and 2.100 homeowners with property valued over Awg. 500.000,00 will see an increase while enjoying a reduction of their wage taxes. About 1.800 companies will notice an increase but will also be compensated with the reduction of their dividend tax from 25% to 10%
Import taxes and excise duties
There will be an increase of the import taxes and excise duties for tobacco products and alcohol containing beverages.
The task of the fiscal reform will continue in the upcoming months.