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ARUBA THE
NETHERLANDS TAX TREATY
- ARUBA OTHER
INTERNATIONAL AGREEMENTS
While
it was part of the Netherlands Antilles, Aruba
at one time had treaties with a number of
prominent countries, including the US and
the UK. Most of these treaties have lapsed,
and the only significant treaty is the 'BRK'
tax agreement with the Netherlands. After
negotiations to continue the US treaty failed
in 1987, the remaining 'mini-'Treaty' continues
to give advantages to Aruban exporters into
the US.
In
December 1999, along with the Netherlands
Antilles, Aruba adopted new legislation under
the heading of The New Fiscal Regime (NFR).
The NFR involves the abolition of the distinction
between offshore and onshore companies, at
least for new formations, the introduction
of a 10% withholding tax on dividends, and
a rationalisation of profits tax rates.
The
NFR is intended to modernize Aruba's fiscal
legislation in line with generally accepted
standards set by the Organization for Economic
Cooperation and Development (OECD), and to
allow it to conclude Double Tax Treaties with
OECD countries.
As
of mid 2009, Aruba remains on the OECD 'grey
list' of countries which have committed to,
but not yet substantially implemented, the
internationally-agreed standard on tax transparency,
which, at the time, meant entering into at
least a dozen Tax and Information exchange
Agreements. Aruba at this time had 4 such
agreements.
Aruba
The Netherlands Tax Treaty
Provisions
under the NFR and a revised 'BRK' (tax treaty
with the Netherlands) came into effect from
July 1, 2003. They include:
-
dividends from a Dutch corporation to
Aruba corporate shareholders, who own
at least 25% of the shares in the Dutch
corporation, will be exempted from Dutch
dividend withholding tax, provided that
the dividend is subject to Aruban tax
at a rate of at least 8.3%.
-
the Dutch corporation will have to withhold
8.3% dividend withholding tax from the
gross dividend. The 8.3% which has been
withheld upon the dividend distribution
in the Netherlands can be credited against
tax in Aruba.
- dividends
and capital gains derived from shareholdings
in a Netherlands corporation will be exempted
from additional profit tax in Aruba provided
that the shareholding amounts to at least
25% and that 8.3% Aruba tax is paid on
the gross amount of dividends received
- dividends
paid by Dutch corporations to Aruban corporations
unable to take advantage of the participation
exemption will be subject to 15% Dutch
dividend withholding tax. Existing Aruban
offshore corporations may elect for the
new dividend treatment.
- for
Aruban coporations incorporated before
December 2002, subject to profit tax and
having a book year which ends before 1st
July 2003, the grandfathering rules with
respect to the offshore regime will remain
applicable until 2007 as long as the company
continues to have substantial business.
Aruba Other
International Agreements
Mutual
Assistance Treaties: Aruba has mutual co-operation
treaties with a number of foreign states. In
the particular case of the USA, co-operation
includes information relating to tax matters,
but this is not true generally.
Independently of treaty procedures the local
law broadly permits requests for information
relating to tax evasion, specifically under
a newly-legislated Code of Criminal Procedure.
Aruba has no specific bank secrecy laws. Local
professionals try to maintain confidentiality
on behalf of their clients, but can be required
to disclose beneficial ownership and other details,
even for Aruban Exempt Corporations, which are
not obliged to enter such information into the
Commercial Register.
Tax
Information Exchange Treaty The United States
Treasury announced in November 2003 that it
had signed a new agreement with the Kingdom
of the Netherlands which will provide for the
exchange of tax information between Aruba and
the US. Treasury Secretary at the time, John
Snow praised the close and cooperative relationship
between the two countries in matters of law
enforcement and tax evasion, and explained that:
"We
have an obligation to enforce our tax laws,
because failing to do so undermines the confidence
of honest taxpayers in the fairness of the US
tax system. Access to needed information is
vital to our efforts to ensure full and fair
enforcement of our civil and criminal laws."
He
went on to add: "This new tax information exchange
agreement we are signing today is the ninth
such agreement the United States has signed
with a significant financial center in the last
two years. It is the first such agreement that
I will have the privilege to sign, and I do
not intend it to be the last. I hope that Aruba's
cooperation with the United States will serve
as an example to other financial centers in
the region and around the world."
In
September, 2004, the US Treasury Department
announced that the United States and Aruba had
exchanged diplomatic notes bringing the tax
information exchange agreement into force.
The US-Aruba Tax Information Exchange Agreement
is consistent with the standards for an exchange
of information agreement described in the Internal
Revenue Code. The Code generally allows US taxpayers
to claim a tax deduction for expenses associated
with a convention held in certain beneficiary
countries with tax information exchange agreements
with the United States to the same extent as
a convention held in the United States.
As of September 13, 2004, Aruba is considered
part of the ‘North American area’ for purposes
of determining whether US taxpayers may deduct
expenses incurred in attending conventions,
business meetings and seminars in Aruba.
Convention expenses that are incurred by US
taxpayers for meetings in geographical areas
considered part of the North American area and
that otherwise are deductible as ordinary and
necessary business expenses are allowed as deductions
without regard to the additional limitations
applicable to deductions for expenses associated
with foreign conventions.
In
July 2008, a trilateral MoU was signed between
De Nederlandsche Bank, the Bank van de Nederlandse
Antillen, and the Central Bank of Aruba agreeing
to "develop activities throughout the full
range of their organizational structures and
duties in a framework of mutual cooperation."
These activities include the exchange of information,
mutual assistance, and provision of technical
assistance.
The
Kingdom of the Netherlands, including Aruba,
is party to the 1988 U.N. Drug Convention, a
member of the Financial Action Task Force (FATF),
6 and has an MLAT agreement with the United
States. The United States–Netherlands
extradition treaty of 1980 extends to the Government
of Aruba, and provides for the extradition of
nationals. Aruba also has criminal procedure
code that allows for the extradition of Aruban
nationals, subject to their serving any sentences
imposed in Aruba. In addition, Aruba is a member
of the CFATF.
Aruba
has a Financial Intelligence Unit (FIU), known
as the Meldpunt Ongebruikelijke Transacties
(MOT), and is a member of the Egmont Group,
an international group of FIUs.
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