General
As per January 1st of 2019, the first phase of the amendments to the Aruban fiscal regime was implemented, which includes the amended Aruba property tax.
Property tax is levied over real estate property and real rights (hereinafter: property).
The old property tax
Prior to January 1st of 2019, property tax was calculated over the value of the properties at a flat rate of 0.4%.
The new property tax
The amendments to the property tax can be found in de ordinance regarding the amendments to the property tax a.o. As of January 1st of 2019, property tax is determined on the basis of the total value of the properties applied to an incremental bracket system as follows (article I.A):
- Total value of properties: Awg 120,000 or lower: no ground tax due (0%)
- Total value of properties: as of Awg 120,000 but lower than Awg 250,000: 0.2%
- Total value of properties: as of Awg 250,000 but lower than Awg 500,000: 0.3%
- Total value of properties: as of Awg 500,000 but lower than Awg 750,000: 0.4%
- Total value of properties: Awg 750,000 and above: 0.6%
- A flat rate of 0.6% applies to non-resident and/or legal entities that own properties in Aruba
Projected results according to the tax office
According to the tax office, about 60% of owners will be subject to a reduced property tax. About 1/3 will see no change, whilst 10% of owners will experience an increase in property tax (article).
Local owners of several properties
Local owners of several properties suffer the most under the new system, because the tax base under the new law consists of the total value of the properties, for example:
Local owner X has 3 properties in Aruba, valued at (i) Awg 50,000, (ii) Awg 200,000 and (iii) Awg 500,000 respectively.
- Calculation according to the law: the tax base consists of the total value of the properties at Awg 750,000, which places X in the highest bracket at a rate of 0.6%, resulting in property tax due to the amount of Awg 4,500(50,000 + 200,000 + 500,000 x 0.6%).
- Alternative calculation: the properties are valued separately according to their respective bracket, which results in property tax due to the significantly lower amount of Awg 2,400 (50,000 x 0% + 200,000 x 0.2% + 500,000 x 0.4%).
The alternative calculation mentioned above leads to a more reasonable outcome, thereby taking into account the following:
- Owners of multiple properties are not necessarily wealthy individuals with sufficient disposable income to pay for the increased property tax. This is especially true for owners of residential properties.
- Initially, it was proposed to no longer tax income derived from the properties because it is difficult to effectively collect income tax from non-residents whom often omit to file income tax returns. This would have compensated for the increase in property tax due on the properties, provided the owner would earn income from the properties. However, the Advisory Council advised against this proposal citing unwelcome stimulation of tax evasion. The advise of the Advisory Council can be found here.