The fundamentals
Aruba has three turnover taxes, being the BBO (“belasting over bedrijfsomzetten”), the BAZV (“bestemmingsheffing AZV”), and the BAVP (“belasting addidionele voorzieningen PPS-projecten”). Although it are different taxes, their tax bases and other characteristics are exactly the same.
Subject to turnover tax are entrepreneurs that in the course of their enterprise supply goods or render services in Aruba. The taxable base consists of all remunerations (in cash or in kind) received by the entrepreneur for the supply of goods or the rendering of services in Aruba.
As per August 1, 2023, the same taxes also apply on all imports of goods, unless an exemption for import duties exists which is based on the law. A 0% rate is not considered an exemption! The taxable base is the customs value of the goods imported.
Rate
The rate is set on 2.5% for BBO (2010 through 2022: 1.5%), 1.5% for BAVP and 3% for BAZV for a total of 7%.
Export
Export of goods to buyers residing or situated outside of Aruba will be exempted from BBO/BAVP/BAZV as long as the entrepreneur can make credible that the sold goods are send or transported by him to a destination outside of Aruba. Specific conditions apply.
Import (as per August 1, 2023)
- A tax on import (TOI) will be charged at a combined rate of 7%.
- The taxable base of the TOI is the customs value as per the State Ordinance Import, Export and Transit.
- TOI is due at the moment the goods are brought into the economic exchanges. Or in other words, once the goods have left the supervision of customs.
- A deduction of TOI is available for entrepreneurs, but for the import of trade goods only.
- The TOI is automatically filled in on the monthly BBO/BAVP/BAZV returns. In BoImpuesto (BOi), the entrepreneur needs to select from the import documents which goods are trade goods (TOI can be deducted) and which ones are not (TOI cannot be deducted).
- If in any month the TOI is greater than the BBO/BAVP/BAZV due, the DIMP will issue a refund decree. Any refund will however first be offset with any taxes owed. The remainder will be paid out.
- If an entrepreneur is exempt from import duties (article 128 State Ordinance Import, Export and Transit), or has an exemption (article 128c State Ordinance Import, Export and Transit), no TOI is due.
- Entrepreneurs that fall under the small entrepreneurs regulation (i.e. those with a turnover less than AWG 50,000 a year) have no right to deduct the TOI.
- No transitional regulation has been introduced.
- goods intended for sale in a business, where these goods have not been altered materially when being processed within the business of the entrepreneur importing the goods. One can think of repackaging in smaller quantities, or slicing of e.g. cheese;
- parts assembled or processed to create a new trade good in the business of the entrepreneur importing the goods, if these new trade goods are sold in a business. One can think of assembling an E-bike from different parts;
- any processing or alteration of goods with regard to food and beverages, if these goods are intended to be sold in a business, insofar the sale of the goods is the main purpose of the business activities (e.g. fast food restaurants and snack trucks), and the business is not mainly providing services (e.g. sit down restaurants).
Entrepreneur
An entrepreneur is defined as any person or entity that conducts an enterprise, as well as the person that leases out an asset with the goal to generate a long-term yield. The latter is for example an individual that rents out a property, warehouse or office.
Good and services
Goods are defined as all physical objects as stipulated in the Aruba civil code, but also include water, gas and electricity. Services are defined as all activities, except the supply of a good, rendered against a payment.
Payment
All income received that relates to the supply of a good or the rendering of a service is considered a payment. If the payment received is not arm’s length or non-monetary, the taxable base is the fair market value of the good supplied or the service rendered. An exception is made for own products, for which the payment is determined on the cost of the good.Since the cash system is the general system for BBO/BAVP/BAZV purposes, offsetting amounts is also deemed a payment. Furthermore, the amount in Accounts Receivable that is outstanding for more than two (2) years is also considered a payment.
Supply of goods
Goods are in principle supplied at the moment of transfer of ownership via an agreement. There are some exceptions however, in which cases from a legal point of view no supply has taken place yet but for BBO/BAVP/BAZV purposes it has. In case in connection with the supply the goods are shipped or transported, the taxable event is there where the transportation of the good started, unless an installation supply is deemed present.In all other cases the taxable event is there where the goods physically are. An example to illustrate. If X Inc., situated in the US, sells a water scooter to an Aruba hotel, X Inc. is not subject to BBO/BAVP/BAZV since the transportation of the water scooter (in connection with the supply) starts in the US.
Rendering of services
If services are rendered, the taxable event is there where the entrepreneur is established or has a permanent establishment from which the services are rendered. Exceptions are made for services mentioned in article 7, paragraph 2:- immovable property, including construction, maintenance, cleaning or installation work, architects and other experts, as well as services aimed at the preparation or coordination of the execution of construction work, which are performed where the property is located;
- the transport of persons or goods, which are performed at the place where the actual act of transport is performed;
- cultural, artistic, sporting, scientific, educational, entertainment or similar activities, which are performed where the activities actually take place;
- loading, unloading or similar activities related to transport, which are performed where the activities actually take place;
- activities, including expert investigations, with regard to movable property, which are performed there where the work actually takes place;
- electronic, and telecommunication services, which are performed there where the recipient of the service lives or is situated.
Reverse charge rule
A reverse charge rule (in Dutch: “verleggingsregeling”) exists where a non-resident entrepreneur providing specific services as mentioned in article 7, paragraph 2, to a resident entrepreneur will lead to the resident entrepreneur being considered as the tax payer for BBO/BAVP/BAZV purposes and also responsible for payment of the BBO/BAVP/BAZV due.Fiscal unity
If the parent company owns 100% of the shares in the subsidiary, which subsidiary should be incorporated under the law of Aruba and with its factual place of management in Aruba, upon request the turnover generated with transactions between the entities participating in the fiscal unity is exempt from BBO/BAVP/BAZV. The fiscal unity enters into effect in the month the request is filed (and the conditions are met).Cash or invoice (accrual) based
The BBO/BAVP/BAZV is levied on a cash basis. Upon request however, an entrepreneur may opt for an invoice (accrual) based BBO/BAVP/BAZV. The tax authorities will have to approve the request however before the invoice system can be applied.Requirements invoices and cash register receipts
All invoices must (i) be numbered consecutively, (ii) be dated, (iii) mention the date on which the goods are delivered or the service is performed, (iv) mention the entrepreneurs’ name, address and personal identification number for tax purposes (“tax PIN”), (v) mention the name and address of the buyer of the goods or recipient of the services, (vi) mention a description of the goods sold and delivered and/or the services rendered, including quantities involved and (vii) mention the consideration owed. The same requirements are also applicable to cash register receipts, with the exception of the listing of the name and address of the buyer.As of January 1, 2019, the BBO, BAVP and BAZV may no longer be mentioned on the invoice but must either be included in the price or be absorbed by the entrepreneur.
Exemptions
Exemptions from turnover tax on goods exist in amongst others the following cases:- Transfer of real estate, in as far as transfer tax is due.
- Fuels to for example airlines or ships belonging to (foreign) militaries, and the Coast Guard of the various Islands of the Dutch Kingdom.
- Prescription medicines.
- By Decree mentioned (artificial) medical supplements.
- Fuels to water & electricity generating or distribution companies.
- Refined oil products.
- Water, electricity and gas.
- Free zone companies in as far as turnover is generated with sales abroad.
- Renting out hotel rooms and apartments, in as far as tourist levy is due.
- Gaming services, in as far as gaming tax is due.
- International transport of goods and services by way of an airplane or ship.
- Public schools and specific schools, as well as the University of Aruba.
- Renting out of houses used as dwelling of the tenant.
- Life and pension insurances.
- Services provided from the airport or seaport relating to outgoing and incoming goods or persons.
- Interest, dividends and capital gains of shares and securities.
- Refining oil based on tolling agreements for foreign purchasers.
- Storage and transshipment of oil for foreign purchasers and aimed at export thereof.
Fiscal representative
For non-resident entrepreneurs without a permanent establishment on Aruba, the entrepreneur can appoint a fiscal representative on Aruba (via written declaration). The fiscal representative needs to notify the Tax Authorities of his/her appointment, and provide the written declaration). As of that moment, the fiscal representative can file the turnover tax returns, and pay the turnover taxes due, on behalf of the non-resident entrepreneur. This also implies the fiscal representative is liable for the turnover taxes (and penalties) of the non-resident entrepreneur!Small entrepreneurs exemption
If an entrepreneur (entity, sole proprietorship or partnership) generates an annual turnover not exceeding AWG 50,000, a request can be filed at the tax authorities to apply the small entrepreneurs exemption. The approval of the small entrepreneurs exemption implies that no monthly BBO/BAVP/BAZV returns need to be filed, only one at the end of the year declaring all turnover at once. Should the turnover during the year exceed the threshold, only the amount exceeding the threshold is subject to BBO/BAVP/BAZV.Note that if more than one enterprise is conducted, the small entrepreneurs exemption applies to all enterprises combined.
The small entrepreneurs exemption does not apply to individuals exploiting non-residential real estate.
Tax filing obligation
The BBO/BAVP/BAZV payment and return are due within fifteen days after the end of the month. We refer to the Filing & Paying Dates.The above is not intended to constitute, nor should it be relied upon, to replace any professional advice. No action should be taken without first consulting your tax advisor. The above reflects the law effective August 1, 2023.
