The Aruba Imputation Payment Company

General
The Imputation payment company (hereinafter: IPC) is designed to replace the current offshore companies and tax holiday companies. The IPC is in principle an ordinary company, i.e. the IPC pays 28% profit tax. However, when certain stringent conditions are met, the shareholder of the IPC will obtain an imputation payment of 26/72 of the (formal) dividend distributed. This means a 26% refund.

Together with the dividend withholding tax (which is for foreign entities a final levy from an Aruban tax point of view) the combined tax rate for the IPC is 2%.

Requirements for the IPC
The requirements the IPC has to meet are as follows:

• The IPC must perform qualifying activities in Aruba;
• An Aruban resident individual must be a member of the board of managing directors of the IPC;
• The IPC must perform qualifying activities in Aruba;
• The IPC must meet the following statutory requirements:
1. The shares of the IPC are registered;
2. The shares are registered in a shareholders register;
3. The financial statements are drawn up according to internationally accepted principles (like IAS or GAAP) and an audit by a qualified (group of) independent certified public accountant(s) is necessary;
4. The board of managing directors must notify the Tax Department that when a dividend is distributed by the IPC, the shareholder will claim the imputation payment;
5. The independent certified public accountant must provide an opinion regarding compliance with respect to the qualifying activities of the IPC, that an Aruban resident individual is a boardmember, that the shares are by name and that the shares are registered in a shareholders register;
• An exemption from the audit requirement exists when:
  • The purchase value of the assets is less than USD 555,555;
  • The net turnover is less than USD 1,111,111.

Requirements for shareholder
Also the shareholder must meet certain requirements, like:

• The shareholder must hold the shares for an uninterrupted period of at least twelve months;
• The shareholder must hold the legal and economic ownership of the shares;
• The shareholder must file a request (with several enclosures) with the Tax Department to receive the imputation payment.

Qualified activities
Furthermore, the activities of the IPC are restricted to certain areas:

• Quality hotels: a quality hotel exists when the Revenue per available room (RevPar) exceeds USD 125 and the hotel enterprise is operated on its own risk and account. This last requirement implies that sole management services for a hotel do not qualify for the IPC status;
• Industrial and trading enterprises aimed at export: These enterprises must export at least 75% of their products;
• Shipping- and aviation enterprises aimed at international transportation.
• Rental and lease of own material fixed assets to entities abroad The material fixed assets should exceed a purchase value (per asset) of USD 13,888,888. Only operational lease is allowed;
• Developing, acquiring, holding, maintaining and licensing of patents, image-, name- or music rights and copyrights;
• Developing, acquiring and exploiting information- and communication technology;
• Insuring special entrepreneurial risks;
• Holding: In order to qualify for this activity, a participation according to the National Ordinance profit tax should exist;
• Financing (not being a bank): Please note financing of individuals is not allowed. Included in the activities are loaning, cash management, treasury and hedging;
• Investment activities.

Contact PMP
If you are interested in establishing an Aruba Exempt Company, or if you have any questions with respect to the change of the tax regime in Aruba for AEC’s, please contact our offices via email (info@premier-mp.com) or call us at (+599) 9 737 0754.

Disclaimer:
The information contained in this memorandum is of a general nature only and should not be construed as legal or tax advice. Readers should obtain appropriate professional advice before setting up any structure. If required, PMP can refer readers to a panel of reputable tax- and legal advisory firms.