As
from 1st July, 2003, Aruba introduced the
New Fiscal Regime (NFR) which abolished
its offshore regime as such. See Offshore
Legal and Tax Regimes and Domestic
Corporate Taxes for a full description
of the NFR.
Companies
formed prior to the introduction of the
NFR were 'grandfathered' into the NFR. Existing
privileges continued until the end of 2007,
making an effective tax rate of 2.4% to
3% for foreign-owned companies.
The
NFR contains a specific exemption for the
AEC (see below), although the exemption
is disapplied in the event that the AEC
generates profits from illegal activities,
as defined under Aruba criminal law. In
such case all of the AEC's profits earned
from the day of incorporation will be liable
to profit tax at the rate of 28% (reduced
from 35% on 1 January, 2007).
However,
as from January 1, 2006, Aruba has introduced
a revised tax regime for these companies,
which offers three possibilities to AEC
companies:
- The
AEC can continue its activities as a
fully taxed corporation, subject to
tax at the normal rate.
- An
AEC can remain exempt if it acts as
a holding or financing company (but
not as a bank) with foreign subsidiaries
subject to a profit tax of at least
17.5% on at least 95% of dividends.
Investment activities can also remain
exempt, excluding real estate. Licensing
of intellectual property is also permitted.
- An
AEC can elect to be a pass-through entity.
The income of a “pass-through
AEC” would accrue directly to
the AEC’s shareholder(s) and would
be subject to tax at the shareholder
level. When electing for transparency
status an AEC has to disclose the identity
of its shareholder(s) to the local tax
authorities, and has to file its financial
statements with the tax authorities
in Aruba within six months of the financial
year-end.
Aruba Limited
Liability Company
The NV is a limited liability company which
is available to residents and non-residents
alike. An NV operated by non-residents and
trading outside Aruba is an offshore NV,
whereas an NV controlled by residents and
trading inside Aruba is an onshore NV. Until
the introduction of the NFR, a more favorable
fiscal regime applied to an offshore NV
than to an onshore NV (see Offshore
Legal and Tax Regimes).
The
NV is subject to a much more complicated
regulatory regime than the AEC (see below)
which is the normal form of choice for offshore
operations. The following are the main rules
applying to an NV:
- The minimum
authorized share capital is
Af50,000 of which
20% must be issued, and a minimum of
two subscribers are required;
- An
NV must both file accounts and have
those accounts audited;
- The
NV's incorporation document must be
published in the official gazette, and
corporate details including the director's
name need to be entered in the Commercial
Register;
- In
order to trade, an NV must apply for
a business license to the Minister of
Economic Affairrs;
-
If the director of an NV is a foreigner
then an application for a director's
license must be made to the Minister
of Economic Affairs;
- Stamp
duty is payable on incorporation;
-
In order to open a bank account a certificate
from the chamber of commerce must be
lodged and the identity of the beneficial
owners disclosed;
- An
NV is subject to
foreign exchange controls;
- Shareholders'
meetings must be held in Aruba and must
be minuted.
Companies
involved in the provision of financial service
activities must by law use an NV as a corporate
vehicle.
Fees
payable on incorporation and annually depend
on capital; for the minimum level of
Af50,000 the intial fee will be Af165 and
the annual contribution fee Af156.
Other fees for clearance of the name
from the Ministry of Justice, for entry
into the Commercial Register, and for registration
of directors, will amount to a few hundred
florins. Professional fees will be extra.
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Aruba Exempt Corporation
See above for changes
to Aruba company laws.
Legislation establishing the Aruba Exempt
Corporation (AEC) or Aruba Vrijgestelde
Vennootschap was passed in 1988. It was
considered a more attractive corporate vehicle
than the NV since it was subject to fewer
formalities and regulatory restrictions.
It was a limited liability company whose
shareholders' liability for the company's
debts was limited to the amount of unpaid
share capital.
The
AEC was known as the "zero tax corporation"
since no tax was payable so long as all
business income arises outside of Aruba
and so long as the company was not controlled
directly or indirectly by Aruban residents
(see Offshore Legal
and Tax Regimes). The following were
the key characteristics
of the AEC:
- The minimum
authorized share capital is Af10,000
of which a minimum of one share of Af1
must be issued;
- Capital
can be expressed in any currency;
- A
single subscriber is permitted for incorporation
and there is no need to publish incorporation
details in the Official Gazette;
-
No stamp duty is payable on incorporation;
- Shares
can be voting or non-voting, limited
voting, preference or cumulative preference.
Bearer and no par value shares are permited.
-
If the director of an AEC is a natural
person then that person must be a non-
resident, but if the director is a company
then resident corporate directors are
allowed;
- Directors'
and business licences are not needed;
-
An AEC must have a registered office
and a locally licensed legal representative;
- There
is no requirement to prepare or file
financial accounts unless the company
has an authorized capital of more than
Af50,000 in bearer shares
-
An AEC cannot conduct business activities
in Aruba other than activities in connection
with the maintenance of its office there;
- AECs
are not subject to foreign exchange
restrictions;
-
Shareholders' meetings can be held anywhere
in the world and need not be minuted.
The annual registration fee payable to Government
was USD285, and a further USD40 was payable
to the Commercial Register. Fees also needed
to be paid to the resident agent.
The incorporation time schedule was reasonable.
Registration of a company took only a few
days which by the standards of civil law
jurisdictions is very quick.
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Aruba General Partnership
Partnerships are recognised under the Aruban
Commercial Code. In the General Partnership
(vennootschap onder firma) each partner
is liable for all the debts of the partnership,
as in common law partnerships. There are
no filing requirements, and no auditing
requirements. Partnerships are fiscally
transparent.
Details
of partnerships and of the partners must
be entered in the Commercial Register at
the Chamber of Commerce.
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Aruba
Limited Partnership
The limited partnership (commanditaire vennootschap)
is similar to the general partnership except
that it has one or more general partners
with unlimited liability, who manage the
partnership, and one or more limited partners
each of whose liability is limited to the
amount of his contribution. The identity
of the limited partners does not have to
be disclosed or entered in the Commercial
Register.
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