The contingency plan is to support the immediate recovery of the Aruban economy in response to the COVID-19 outbreak. The Fiscal Emergency Plan will take effect on November 1, 2020.
Since the beginning of the pandemic in March, the government put into effect a fiscal emergency plan for April, May, and June 2020. Besides, the government has provided financial support to the commercial sector in the form of salary subsidies and financial support from AWG. 4000,- per quarter paid to small and medium enterprises to keep the economy running. Now it is time to get the economy going again, and the government hopes to do this with the second part of the Fiscal Emergency Plan.
Part 2 of the tax relief plan contains 11 action points for the commercial and private sectors and some initiatives valid for up to 3 years. The conditions of these initiatives can be found on the website of the Tax department www.impuesto.aw.
- Small companies with a maximum turnover of AWG. 84.000,- per year will be exempted from the obligation to pay BBO, BAZV, and BAVP as of 2021. The Small Business Arrangement (In Dutch Kleine ondernemingsregeling-KOR) introduced by the government in 2018 meant that small businesses with a maximum turnover of AWG. 12,000,00 per fiscal year were relieved of their payment obligations in respect of BBO, BAZV, and BAVP. As an incentive for start-ups and small entrepreneurs, the maximum turnover threshold of the small business scheme will be increased from AWG. 12.000,- to AWG. 84.000,- per year. This applies to entrepreneurs such as snack trucks, cab drivers, buses, craftsman, musicians, hairdressers, etc.
- Promising sector startups in Tourism, Knowledge-Economy, Logistics, Agricultural Economy, Circular Economy, and the Creative Industry can in the years 2020, 2021, and 2022, deduct 50% of the principal amount of their loan from their income and profit tax up to a maximum of AWG. 30.000,- per calendar year. Companies in the sectors mentioned above that have a loan from AWG, for example. 50.000,- can deduct AWG. 25.000,- . For a loan of AWG. 100,000 , can be AWG. 30.000,- can be deducted from income and profit tax.
- A deduction of 300% for training and untaxed training cost reimbursement in 2020, 2021, and 2022. The current training deduction is 100%. To be able to stimulate retraining, the costs for training and retraining of employees are eligible for an additional training deduction of 200% for the entrepreneur. This makes the total deduction of 300%. This applies to anyone who needs retraining.
- Additional deduction of 100% for marketing and promotional costs in 2020, 2021, and 2022 up to a maximum of AWG. 30.000,-. The COVID-19 pandemic has caused companies to invest more in promotion and marketing in, among other things, building or modifying their website, advertising costs, and advertising on the various social media. Now small businesses can deduct all of these costs as business expenses.
- Extension of the loss compensation with 2 additional years, for a total of 7 years. Enterprises have currently a loss compensation period of 5 years. With part 2 of the tax contingency plan, entrepreneurs can extend the loss compensation by another 2 years for a total of 7 years.
- Relaxation of the tax rate reduction policy for dividends paid up to 10%. Last year, the government reduced the rate of distributed dividends from 25% to 10%. The 10% rate now also applies to non-resident companies at the time of payment of the dividend to an Aruba-based shareholder. Previously, the 10% rate only applied to Aruba-based companies that paid dividends to Aruba-based shareholders.
- Broadening of the beneficial policy concerning the savings and provident fund scheme for the years 2020 and 2021. Concerning the amount saved in a savings and provident fund, a favorable policy is approved to allow employees to withdraw the amount saved untaxed during the years 2020 and 2021, even though these amounts have not been in the savings account for four years. This applies in the case of funerals, home purchases, children's studies, and other emergencies.
- 'Investment deduction' will be increased to 10% and money also for business assets purchased abroad. With this tax incentive, companies can buy company assets both at home and abroad as an investment in their company and apply the 10% investment deduction for the years 2020, 2021, and 2022.
- Abolition of Special tax on rental cars and rental motorcycles (BBVAM) effective the fourth quarter of the financial year 2020. As a favorable policy and in anticipation of the future repeal of the "Environmental Tax" special tax on rental cars and rental motorcycles (BBVAM), licensees or agents are this tax of AWG. 96,- per rental car and rental motorcycle regardless of whether they are rented or not, is no longer due as of the 4th quarter 2020. However, based on the current laws and regulations, licensees or agents are required to submit a nil tax return for the last quarter of 2020.
- Flex payment arrangements for businesses, individuals, and retirees-non entrepreneurs. To make the taxes payable, taking into account the situation in our country, a flexible payment arrangement has been created. The new flexible payment arrangements imply: For companies: choice of payment in 3, 6, or 12 months with a minimum repayment amount of Afl. 500. For individuals: choice of payment in 6, 12, or 18 months with a minimum repayment amount of Afl. 100. For retired non-entrepreneurs: choice of payment in 12, 18, or 24 months with a minimum redemption amount of Afl. 75,00.
- Restructuring policy in the event of a lump-sum payment of outstanding (tax) debts with a 30% discount valid until 30 June 2021.According to the remediation policy, taxpayers are entitled to a 30% discount on the payment of a lump sum of outstanding old (tax) debts. The remediation policy is valid until June 30, 2021.
Incentive in the making
The government is in the process of reforming the income and wage tax. At the beginning of 2019, these taxes were reduced in the Fiscal Reform Plan and now they are back at the table to calculate the new rates and present them to the government. Another tariff reduction in anticipation is the import duties on building materials, as the international trend foresees an increase in the prices of building materials. For these reasons, the government is considering reducing import duties.
Our economy back on track
All this fiscal stimulus should give the local economy a boost. As far as possible, the government has taken into account the proposals of the trade organizations to ensure that the economy gets back on track. Minister Maduro is grateful to everyone for their expertise and effort in creating the tax relief plan 2 and hopes that companies will make good use of this support.