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Year End Tips 2014

Dear client and or relation, We are pleased to share with you our last recommendations before the start of the new year 2015. One of our main priorities is to keep our clients and our relations well informed on current and future tax matters. In this newsflash we will provide you with tips and tax planning opportunities still possible to manage your tax matters for the year 2014 and prepare for 2015. In this newsflash the focus is on private wealth, corporate income tax, turnover tax, health levy, dividend withholding tax, wage tax and social security premiums. Should you have any questions or should you need more detailed advice on any tax related subject, please do not hesitate to contact us. Our PwC Tax team in Aruba can offer you high quality tax advice and support. Our Tax team can provide you with both domestic and cross-border related tax services. We trust that this newsflash will be helpful in managing your tax burden as per the year end of 2014 and the start of the new year 2015. Yours sincerely, Hans Ruiter Tax Partner

Tips In this newsflash we will provide you tips on the following subjects:

Private Wealth

Corporate income tax

Turnover tax (BBO)

Health levy/BAZV

Dividend withholding tax

Income tax, wage tax and social security premiums

Liability

Well prepared for 2015

2 Year End Tips 2014

Private Wealth Ownership transfer Our specialized private wealth tax team offers tax planning services for wealthy individuals and families. We understand the unique dynamics between family enterprise, private wealth, philanthropy and global tax issues. We recommend considering:

If your family enterprise is ready for the ownership and leadership transfer to the next generation.

Whether your business and private assets are structured in an optimal way considering ownership and leadership transition to the next generation.

If your assets are structured in such way that they can resist possible risks and conflicts within the family/heirs.

Tax planning can play an important role when structuring your wealth and legacy for the next generation(s). Contact our specialized private wealth tax team for customized service.

Corporate income tax Documentation requirements Companies are required to document all transactions made for a period of ten (10) years. Under Aruba tax law the arm’s length principle is applicable on intercompany transactions. In this regard it is crucial that all intercompany transactions are properly documented. Document in your files the method used for calculating intercompany prices and the reason as to why these prices are according to the arms’ length principle. Include among others the following in your documentation:

An overview of the company structure;

An outline of the business;

The nature and terms of transactions;

A functional analysis (e.a. description of the assets used and risks assumed);

A specification of the conditions and circumstances of the concerning

affiliated transactions supported by facts, agreements and invoices;

A description of the relevant economic aspects (e.a. economic conditions and property involved in the relevant transaction).

Corporate income tax return Please verify whether your corporate income tax returns are properly prepared and timely submitted to the Aruba tax authorities. The 2013 corporate income tax return must have been filed prior to November 17, 2014. In case you have been granted a first extension and you will not be able to meet the filing deadline based on the first filing extension, you can request a second filing extension at the tax authorities.

General tips to take into account before year end 2014:

Losses can be carried forward for five (5) years after which they can no longer be offset. This means that losses of the year 2009 can be offset at the latest against profits of the year 2014. Losing the possibility of loss compensation can usually be avoided by taking timely measures. For example if you have available remaining losses of the year 2009 but at the same time no profits are available to offset these with, you might consider transferring assets with hidden reserves within the group of entities in order to offset the profit realized with the transfer of the assets with the remaining losses of the year 2009. Note that there are more possibilities in this regard.


In case you have a holding company with subsidiaries in Aruba a fiscal unity between the companies can be requested provided that all the companies have the same tax regime. Having a corporate income tax fiscal unity has many benefits such as:

the tax group will be treated as one taxable entity,

filing one consolidated corporate income tax return for the group,

transactions within the group are not to taxation, and

losses and profits can be offset within

the group.

In case your company recently purchased a business asset it is possible to (partly) depreciate on the business asset provided that the business asset is in use prior to the year-end December 31, 2014.

It is possible to claim the investment allowance for locally purchased business assets in 2014 if certain conditions are met. The investment allowance is set at 6% of the purchase price for the year 2014.

In the event that your company claimed the investment allowance for an asset

purchased in 2012, this investment allowance must in principle be reversed in case the assets are not in use prior to the year end December 31, 2014.

If your company has claimed the investment allowance for an asset which was purchased less than six (6) years ago and you are planning to sell it, the investment allowance that was claimed must in principle be reversed.

In case you formed a replacement reserve in 2010 as a result of the sale of a business asset the amount of the replacement reserve is to be added to the taxable profit of 2014 in case you do not replace before year end 2014 (within 4 years following the year in which the replacement reserve was formed). The maximum period to maintain a replacement reserve can be extended under certain circumstances.

Timeshare resorts are allowed to create a reserve for investments to be made in regards to certain maintenance of the resort. The reserve can be created for example for mayor maintenance of buildings and redesigning of rooms.

In the event that you are planning to purchase a local participation please note that the interest due in connection with the financing of the acquisition of a local participation is deductible from the profit. However the interest costs of the first two years will be deducted in the 3rd, 4th and 5th year after the year in which the local participation was purchased.

For tax purposes provisions are allowed provided certain conditions are met. Examine if the provision meets the following cumulative conditions for this book year:

the future costs and expenditures originate from facts and circumstances prior to the end of the book year;

these costs and expenditures can be assigned to that period, and

there is a reasonable degree of certainty that these costs and expenditures will occur.

Examples of possible provisions are:


Maintenance provision for maintenance costs of buildings (e.g. roof maintenance costs);

Anniversary bonus provision. It is possible to create a provision in this regard in case the company rewards its employees with an anniversary bonus for their years of service;

Reorganization provision. It is possible to create a provision for a company restructure such as the relocation of certain business activities.

In case you are a business owner with a self-administered pension, please verify that the pension provision is calculated correctly. It is possible to consider a salary raise in the year 2014 in order to create an additional pension allocation (back service) to the pension provision in the year 2014. Also consider the change in tax rates in this respect.

In case you are a business owner with a self-administered pension, please verify if the pension agreement is in accordance with the Ordinance General Pension.

Examine whether the company has reached the maximum deductible amount of Afl. 50,000 for donations. Donations are only deductible if donated to religious, charitable, cultural, sportive, scientific and public interest institutions in Aruba. Please keep a copy of the related documents and transfers in your files.

Turnover tax (BBO) The turnover tax (BBO) is levied over realized business revenue regarding the supply of goods and the rendering of services in Aruba. Some exemptions apply. General tips to take into account before year end 2014 are:

Review if you have applied all relevant exemptions in your monthly turnover tax (BBO) returns for the year 2014. It could be that the sales should be split

between tax exempt sales and taxable sales.

Verify if the monthly filed returns are filed correctly and if they reconcile with the transactions for the year 2014.

Assess if the BBO filed in the BBO return is correctly calculated. See the following example: Good supplied: Afl. 100.00 BBO charged: Afl. 1.50+ Total invoice: Afl. 101.50 BBO to be remitted to the Aruba tax authorities: 1.5%*Afl.101.50 = Afl. 1.52

If your company declares BBO on invoice basis or on cash basis you should

verify if the invoices issued or cash received respectively reconcile with the BBO declared. It is possible to make a correction on the BBO in the remaining BBO return to be filed for December 2014.

In case you have a holding company with subsidiaries in Aruba, a BBO fiscal unity between the companies can be requested. Having a BBO fiscal unity has many benefits such as:

the tax group will be treated as one taxable entity,

filing one consolidated BBO return for the group,

The filing and payment due date is ultimately the 15th day of the month following the month over which the BBO is due. Make sure that the BBO return regarding the month December 2014 is filed and paid latest on January 15, 2015.


Health levy (BAZV) The health levy (BAZV) at a rate of 1% entered into force as of December 1, 2014. The health levy is levied on the supply of goods and or services rendered in Aruba. The taxable subject for the health levy is similar to the BBO. All entrepreneurs on Aruba are subject to the health levy. General tips to take into account before year end 2014 are:

Starting December 1, 2014 the health levy must be mentioned on all invoices of the entrepreneur. Check if your invoice system complies with this requirement as of December 1, 2014.

Similar to the BBO, the filing and remittance of the health levy is in principle cash based. In case you have an approval (in Dutch: beschikking) from the Aruba tax authorities to declare BBO on the invoice based system, this approval also applies for the health levy.

Under the same conditions as for the BBO, a fiscal unity can be formed for health levy purposes. In case you have an approval (in Dutch: beschikking) from the Aruba tax authorities for a BBO

fiscal unity, this approval also applies for the health levy

The health levy has the same filing and payment due dates as the BBO which is ultimately the 15th day of the month following the month over which the health levy is due. The health levy should be filed in the BBO return. Make sure to take this into account when filing the December 2014 BBO return (latest on January 15, 2015).

Dividend withholding tax Please verify if your company distributed dividends in the year 2014. If no dividend tax return has been filed and the dividend tax due has not been paid, you can still voluntarily file the dividend withholding tax return and pay the amount due. In that case the Aruba tax authorities can still impose a low administrative penalty. In case you do not voluntarily file a dividend tax return and pay the amount due, the Aruba tax authorities are allowed to impose a penalty up to a maximum of 100% of the amount due.

Income tax, wage tax and social security premiums Please verify if the wage tax and social security premiums are calculated correctly. A recalculation of the wage tax and social security premiums is necessary in the event that an employee received additional compensation during the course of the year. Tips to take into account before year end 2014 are:

The possibility to request and apply the special tax rate of 15% on severance payments (in Dutch: afkoopsom) will expire on December 31, 2014. As of


January 1, 2015 the regular tax rate of 25% will apply.

The maximum deductible mortgage interest and related costs is Afl. 50,000 starting January 1, 2015.

Verify if the monthly filed wage tax returns are filed correctly and if they reconcile with the wage tax summaries (in Dutch: verzamelloonstaat) for the year 2014. Verify if the wage tax and social security premiums that were filed and paid reconcile with the financial statements for the year 2014. It is possible to make a correction on the wage tax and social security premiums in the remaining wage tax and social security premiums return to be filed for December 2014.

The filing and payment due date is ultimately the 15th day of the month following the month over which the wage tax and social security premiums are due. Make sure that the wage tax and social security premiums return regarding the month December 2014 is filed and paid latest on January 15, 2015.

Verify if you have complied with the administrative obligations for the wage tax and social security premiums. Assess if you have complied with the identification obligations for the

employees. Your files should include the name, address, personal number and a copy of a valid ID of each employee.

File the summary payments to third parties (in Dutch: verzamelloonstaat derden) for all persons and business that performed activities or services without an employment relationship towards your company.

Review if the benefits and allowances provided to the employees are according to the Fringe Benefits Regulations.

Liability In 2014 the so called chain liability law (in Dutch: ketenaansprakelijkheid) was introduced. If you are currently a contractor or if you use an employment agency (e.g. of temporary workers), please make sure that you have the required declaration of good fiscal conduct from your subcontractors respectively outsourcers. If you are currently a director of a company which has liquidity problems (e.g. not being able to pay the relevant taxes), you should notify the tax collector within the stipulated deadline of 2 weeks following the payment due date of the taxes/levies or social premiums.

Our PwC Aruba Tax team

7 Annual Note 2014

How can PwC help If you want to learn more about the content of this Newsflash, please contact one of the advisors of PwC Dutch Caribbean or send an email to [email protected] PwC Aruba L.G. Smith Boulevard 62 Oranjestad, Aruba T: +297 522 1647 F:+297 582 4864 Website: www.pwc.com/dutch-caribbean Hans Ruiter (Tax partner) [email protected] Anushka Lew Jen Tai [email protected] Brian Dake [email protected] Hassan Echchakir [email protected] Jordi van den Heiligenberg [email protected] Jourainne Wever [email protected] Lance Henriquez [email protected] Mynalba Irons-Carolina [email protected] Nicole Duyvelshoff [email protected] Rachel Maduro [email protected] Tell us how you like Tax News and what topics you would like to hear more about. Just send an email to [email protected] or call +297 522 1647. ©2014 PricewaterhouseCoopers Dutch Caribbean. All rights reserved. PwC refers to the Dutch Caribbean member firm, and may sometimes refer to the PwC network.

Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information

contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness

of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Aruba does not accept or assume any liability, responsibility

or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based

on it. December 8, 2014

mailto:[email protected]

mailto:[email protected]

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