Starting January 1, 2021: income and payroll tax tariff reduction

ORANJESTAD – Starting on January 1, 2021, the Tax Department will introduce a reduced income and payroll tax tariff. The tariffs for both the income and payroll tax are identical. 

Building Tax DepartmentThis tariff is very important for both the individual as the business owner. This tariff reduction means that individuals and business owners will pay less in income and payroll taxes in 2021. Employees will certainly notice a smaller payroll tax amount retained by their employer, meaning the employees will receive more on their paycheck.

 Considerations 

The tariff reduction is an essential part of the Fiscal Reform that the Minister of Finance, Economy and Culture and the commission in charge of the implementation of the tariff simplification system, have been introducing since 2019, including the increase of the tax-free limit to Afl. 27.751,00

In 2020 they continued with the planned changes and have again increased the tax-free limit to Afl. 28.861. 

In 2020, the Covid-19 pandemic caused a serious social-economic emergency that took the Government time to get out of. Many households suffered considerable income losses. Meanwhile, the Government initiated the economic recovery process and it was considered appropriate to reduce the income and payroll tax tariffs to provide some financial relief for its contributors. These tariff reductions will also provide relief in the purchasing power of each person and create stability in the economy.

The new income and payroll tax table 2021: 

With an income of more than
the amount mentioned in
column I, but not more than
the amount stated in 
column II

is the tax for the amount
listed in column III plus
the amount calculated by
the percentage given in column IV
from the portion of the income that
exceeds the amount specified in column I.

I II III IV
1. - 34.930 - 12,00%
2. 34.930 65.904 4.191,60 23,00%
3. 65.904 147.454 11.315,62 42,00%
4. 147.454 - 45.566,62 52,00%
Explanation
Tax free sum  Afl. 28.861 (remains the same as the year 2020) 
Income categories 

- For all 4 income brackets the amounts mentioned in column III are reduced. 

- For income bracket 1, the percentage mentioned in column IV is reduced to 12% (this was 14%).

- For income bracket 2 the percentage mentioned in column IV is reduced to 23% (this was 25%).

How to calculate your tax amount??

Examples:

  • Before applying the tariff table to calculate the tax amount, the tax free sum of  Afl 28.861 must be deducted.
  • At the end the tax amount is rounded.
Example: 1
Taxable income
Tax free sum

Afl. 68.864
Afl. 28.861  -/-

Amount on which the table is applied
Subtract the amount listed in column II
(income bracket 2)

Afl. 40.003
Afl. 34.930  -/-     
→ (See income bracket no. 2)  

Balance Afl. 5.073

Tax on Afl. 34.930 according to column III
(income bracket 2)
Tax on Afl. 5.073 at 23% according
to column IV

Afl. 4.191,60


Afl. 1.166,79

Total tax owed Afl. 5.358,39
Owed Income tax or payroll tax   Afl. 5.358 (per year)

The Tax Department has an Excel file calculator ‘Berekening IB-LB 2021’ which all their clients can use to automatically calculate their taxes.

Ministerial Decree

In order to execute article 25 paragraph 3 and 4 of the income tax law, the tariff changes have been formalized in the Ministerial Decree issued on December 28 2020 (AB 2020 no. 207).   

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