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Aruba: Country and Foreign Investment

Executive Summary

Aruba is a small (75 sq m) island off Venezuela with a population of approx. 109,153 (2013 est). It separated from the Netherlands Antilles in 1987. The legal, political and administrative systems are largely modelled on Dutch originals, but there has been some common law influence on the offshore regime. Government, Judiciary and Central Bank are established in Oranjestad, the capital. Dutch is the official language, but English is often spoken; the local language is Papamiento, a Creole dialect. The local currency is the florin, fixed at 1$US = 1.79 Af. There is a well-connected airport near Oranjestad.

Aruba is an associated territory of the EU. The Aruban economy is very open and is highly dependent on tourism and offshore financial services. Most goods are imported since there are few natural resources. An important refinery was shut for a while but is now open again, mostly for trans-shipment. GDP per head is estimated at Afl46,645 for 2011, making it one of the highest levels in the region; economic fundamentals are good and unemployment is low enough to create labour shortages.

Local taxes are quite high for residents, but there is a well-developed offshore sector which originated in World War Two as a haven for Dutch companies fleeing the German occupation of the Netherlands. Many financial links are to the Netherlands in one direction and to South America in the other. The financial and professional infrastructure is well-developed, with a Dutch (civil law) cast. Banking, licensing, insurance and holding companies are the main offshore sectors. The tax burden on most offshore activities is light but not minimal. There is a Free Zone which has successfully attracted manufacturing companies with markets in the EU and the Americas.

Aruba has a tax treaty only the Netherlands, which gives access to the many Dutch tax treaties and good withholding tax regime. There is no banking secrecy legislation as such, but beneficial ownership of offshore companies does not have to be disclosed. The jurisdiction is party to 23 Tax Information Exchange Agreements (at time of writing).

A New Fiscal Framework, introduced alongside a new Dutch Tax Treaty (BRK) in response to international pressure as from 1st July 2003, abolished the distinction between offshore and onshore companies, but installed a generous participation exemption scheme which in effect maintains previous tax privileges for non-Aruban business activities.

 

 

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