Aruba's Banking and Finance System
The Profit Tax Ordinance contains favorable provisions granting thereby
special tax rates to investment companies.
With these provisions the Government aims at developing Aruba into an
international financial services center.
Offshore companies, based on the nonresident status of their
shareholders, are exempted from foreign exchange control.
Offshore Trading Companies
For offshore trading companies the Profit Tax Ordinance creates the
possibility of having offices of a company incorporated in Aruba to organize, invoice and
administer the company's foreign transactions. If the proceeds of these companies are
generated from operations taken place outside Aruba, the Inspector of Taxes may provide
tax rulings leading to a profit tax rate of 2.4% for profits until Af 100,000 and 3.0% for
profits exceeding that amount.
Offshore Banking Companies
An offshore bank is a foreign banking institution incorporated in Aruba
exclusively for offshore transactions. These companies are licensed by and under
supervision of the Central Bank to conduct international banking transactions with
customers who are non-residents of Aruba and with offshore companies domiciled in Aruba as
well. Profits of offshore banking companies including profits from investment and interest
income operations, according to the Profit Tax Ordinance will be taxed at 2.4% and 3%.
Other foreign source income is taxed at the rates of 24% and 30%, unless the Inspector of
Taxes rules that the lower tax rates are applicable.
Investment and Holding
Companies
According to Article 14 of the Profit Tax Ordinance an investment
company is defined as an Aruban based company, of which the objective is primarily to
invest its assets in "securities", such as shares and other certificates of
participation, bonds or other interest bearing claims under whatever name and form.
The term "securities" does neither include bills of exchange,
promissory notes, acceptances and other claims on debts, originating from commercial or
credit transactions within Aruba, nor claims on debts which are secured by mortgage rights
to real property located or established in Aruba.
The profits of the Aruban based company are taxed according to a
special regime, which compared with the one applied to ordinary business companies is
advantageous.
The net proceeds from such securities, except the benefits resulting
from an increase in value or the alienation of assets, are taxed at 1/10 of the prevailing
guaranteed rates of 24 and 30%.
The benefits resulting from an increase in value or alienation of
assets are exempted from taxation.
Finance Companies
Finance companies are taxed in the same manner as investment companies.
However, interest paid by a finance company will be deductible from the taxable profits
under the provisions of Article 14, if the interest is paid to a bank or similar finance
company.
Interest paid to third parties can also be deducted if it is
established that this is paid conform the arms-length-principles. In such cases it is
advisable to obtain a ruling from the Inspector of Taxes.
Royalty Companies
The Profit Tax Ordinance defines a royalty company as a company based
in Aruba, of which the objective is primarily to derive:
