Aruba
originated as an offshore financial
centre in the Second World War, when
along with and as part of the Netherlands
Antilles it provided a good destination
for emigration for Dutch companies
during the German occupation of the
Netherlands. Since the war the Netherlands
Antilles government, and since the
split, the Aruban Government, have
followed a consistent policy of encouragement
towards offshore companies, particularly
in the manufacturing and trading sector
and in banking. For details of the
legal basis of key sectors see
Law of Offshore,
and for details of taxation of offshore
entities see Offshore
Legal and Tax Regime.
As
from 1st July, 2003, Aruba introduced
the New Fiscal Regime (NFR) which
abolishes its offshore regime as such,
and introduced a dividend withholding
tax and an imputation payment system,
although many companies will qualify
for 'IPC' (Imputation Payment Company)
status, which will result in an effective
11.8% taxation rate.
Companies
formed prior to the introduction of
the NFR are 'grandfathered' into the
NFR, with existing privileges continued
until the end of 2007, meaning an
effective tax rate of 2.4% to 3% for
foreign-owned companies.
The
NFR contains a specific exemption
for the Aruba Exempt Corporation (AEC),
although the exemption is disapplied
in the event that the AEC generates
profits from illegal activities, as
defined under Aruba criminal law.
In such case all of the AEC's profits
earned from the day of incorporation
will be liable to profit tax at the
rate of 35% (reduced to 28% as of
1st January, 2007).
However,
on January 1, 2006, Aruba introduced
a revised tax regime for these companies,
which offers three possibilities to
AEC companies:
-
The
AEC can continue its activities
as a fully taxed corporation,
subject to tax at the normal rate.
-
An
AEC can remain exempt if it acts
as a holding or financing company
(but not as a bank) with foreign
subsidiaries subject to a profit
tax of at least 17.5% on at least
95% of dividends. Investment activities
can also remain exempt, excluding
real estate. Licensing of intellectual
property is also permitted.
-
An
AEC can elect to be a pass-through
entity. The income of a “pass-through
AEC” would accrue directly
to the AEC’s shareholder(s)
and would be subject to tax at
the shareholder level. When electing
for transparency status an AEC
has to disclose the identity of
its shareholder(s) to the local
tax authorities, and has to file
its financial statements with
the tax authorities in Aruba within
six months of the financial year-end.
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.
The government also wants to encourage
increased investment and plans reductions
in the effective personal and corporate
income tax rates.
Aruba
Banking
The Central Bank of Aruba is responsible
for supervision of the financial sector.
Until the enactment of the State Ordinance
on the Supervision of the Credit System
(AB 1998 no. 16) the Bank (itself
created in 1986) considered that it
did not have the tools with which
to regulate banks sufficiently closely.
As a result, it has been extremely
choosy about admitting banking operations,
and there are only two offshore banks
in Aruba. See Law
of Offshore for information about
the registration of a bank in Aruba.
Offshore
banks take the form of 'offshore'
NVs and are permitted to deal
only with non-residents or with Aruban
Exempt Corporations.
The Central Bank of Aruba (CBA) is
encouraging the development of a larger
financial sector, and will consider
applications for licenses from financially
sound and reputable banks who are
subject to consolidated supervision
in their home jurisdiction. A small
number of new banking arrivals have
taken place in the last few years.
However,
to enhance the soundness of the banking
sector, the CBA further tightened
its policy rule on the admission of
credit institutions in 2009. A major
condition was added that only financial
institutions with solid financial
strength and reputation and subject
to comprehensive consolidated supervision
are allowed as a major shareholder
in a credit institution established
in Aruba.
The
minimum issued capital of an offshore
bank is 5m Aruba Florins. No withholding
taxes are levied on interest-bearing
deposits.
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Aruba Trade Marketing and Distribution
Aruba has encouraged commercial
activity and manufacturing, especially
in high technology, taking advantage
of its membership of the EU and
privileged access to the US market,
by creating the Free
Trade Zone and the Aruban
Exempt Corporation form.
Thus,
a number of companies involved in
the trading or distribution of FMCG
and other physical goods use Aruba
as a trading base for the American
and European markets. Obviously
the island is better located geographically
for American markets, but even for
Europe it is possible to locate
marketing, administrative and holding
activities on Aruba, and American-source
goods can acquire EU origin if they
undergo 'substantial transformation'
in the Free Trade Zone. Licensing
activities can also be carried out
effectively from Aruba.
Aruba
is a major distribution and transshipment
center for the region. In 1986 the
European Commission agreed to allow
products originating in any Generalised
System of Preferences country to
be trans-shipped through Aruba without
losing their originating status
provided that the goods do not undergo
any transformation other than packaging
and affixing of labels etc. The
consequence and intention behind
this waiver is that Aruba could
develop as a major trans-shipment
and distribution center since its
strategic location along international
shipping routes already gives it
a distinct advantage .
Apart
from low taxation, and exemption
from customs duties, companies in
the Free Trade Zone have access
to certain types of EU grant or
assistance. For a company importing
or trading in physical goods in
the EU, an Aruban
Exempt Corporation can be combined
with a base in the Free
Trade Zone to give a very effective
result.
Along
with other offshore jurisdictions,
Aruba is a suitable place in which
to base e-commerce
services for retail or wholesale
distribution of material or non-material
goods: see Offshore-e-com.com
for extended descriptions of how
such businesses can take advantage
of the combination of offshore and
e-commerce.
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Aruba
Aircraft Registry
In recent years Aruba has developed
a thriving aircraft registry, which
now contains aircraft of more than
30 different types, including large
commercial jets, helicopters, and
especially executive jets. The aircraft
in the registry belong to commercial
and VIP international operators,
leasing companies and private owners.
Aruba
is a CATEGORY 1 country rated by
the US FAA and ICAO. As an overseas
territory and country of the European
Union and an autonomous country
within the Kingdom of the Netherlands,
ARUBA follows the Joint Aviation
Authority (JAA) standards and its
civil aviation regulations are based
on the JAR’s. However, since
Aruba is geographically located
in the Americas Insular Territory
the Department of Civil Aviation
is well versed in the US FAR’s
regulations.
Aruba was invited to be a member
of the International Maintenance
Review Board, formed by the civil
aviation authorities of the USA,
Canada, European Union, Japan, and
Australia.
Official
personnel from the Department of
Civil Aviation of Aruba conduct
the inspection and certification
of the aircraft and its records.
The
process of registering and certifying
an aircraft normally takes from
5 to 7 working days. Documentary
requirements are:
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