01 Nov Formalization of beneficial tax policy
Formalization of beneficial tax policy, reduction of the corporate income tax rate, and introduction of payment of corporate income tax at filing
In our newsflash of June 2013, we informed you about a series of tax measures resulting from the Social Dialogue, introduced under the beneficial tax policy (begunstigend beleid) in anticipation of (phased) formalization into legislation. Last Wednesday the Parliament of Aruba adopted a bill to formalize certain elements of the beneficial tax policy into legislation. These measures concern the investment deduction facility, the deduction of interest relating to local participations, changes to the IPC regime, and the introduction of a reinvestment reserve facility for legal entities operating timeshare resorts. Parliament has also decided to reduce the corporate income tax rate effective January 1, 2016, and to replace the current system of levying corporate income tax by means of assessments with a system where taxpayers pay their corporate income tax when they file their returns (“VAS”) effective 2014. The main points of those measures are explained below.
Investment deduction facility
A temporary investment deduction facility was introduced on January 1, 2011 under which, if certain conditions are met, a deduction may be claimed for personal income tax and corporate income tax purposes of up to 6% of amounts invested in operating assets. One of the conditions is that the operating asset must have been acquired locally. Originally, this temporary investment deduction facility was to be offered for the years 2011 and 2012 only, however the beneficial tax policy extended the facility for investments made during the years 2013 and 2014 as well. Now the investment deduction facility has been given a legal basis for an indefinite period of time.