Aruba originated as an offshore financial centre in the Second World War, when along with and as part of the Netherlands Antilles it provided a good destination for emigration for Dutch companies during the German occupation of the Netherlands. Since the war the Netherlands Antilles government, and since the split, the Aruban Government, have followed a consistent policy of encouragement towards offshore companies, particularly in the manufacturing and trading sector and in banking.

As from 1st July, 2003, Aruba introduced the New Fiscal Regime (NFR) which abolishes its offshore regime as such, and introduces a dividend withholding tax and an imputation payment system, although many companies will qualify for 'IPC' (Imputation Payment Company) status, which will result in an effective 11.8% taxation rate.

Companies formed prior to the introduction of the NFR are 'grandfathered' into the NFR, with existing privileges continued until the end of 2007, meaning an effective tax rate of 2.4% to 3% for foreign-owned companies.

The NFR contains a specific exemption for the Aruba Exempt Corporation (AEC), 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 35%.

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 rate of 35%.
• 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 percent 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.

The NFR is intended to modernize Aruba's fiscal legislation in line with generally accepted standards set by the Organization for Economic Cooperation and Development (OECD), and to allow it to conclude Double Tax Treaties with OECD countries. The government also wants to encourage increased investment and plans reductions in the effective personal and corporate income tax rates.

Banking

The Central Bank of Aruba is responsible for supervision of the financial sector. Until the enactment of the State Ordinance on the Supervision of the Credit System (AB 1998 no. 16) the Bank (itself created in 1986) considered that it did not have the tools with which to regulate banks sufficiently closely. As a result, it has been extremely choosy about admitting banking operations, and until recently there were only three offshore banks in Aruba. See Law of Offshore for information about the registration of a bank in Aruba.

Offshore banks take the form of 'offshore' NVs and are permitted to deal only with non-residents or with Aruban Exempt Corporations.

The Central Bank is now encouraging the development of a larger financial sector, and will consider applications for licenses from financially sound and reputable banks who are subject to consolidated supervision in their home jurisdiction. A small number of new banking arrivals have taken place in the last few years.

The minimum issued capital of an offshore bank is 5m Aruba Florins. No withholding taxes are levied on interest-bearing deposits. Aruban banks are supervised by the Central Bank of Aruba under the State Ordinance on Supervision of the Credit System, 1998, amended 1999.

During the registration process, information is required as follows:

The number, the names and the past history of the persons who determine the day-to-day policy of the enterprise or institution; The number, the names and the past history of the members of the supervisory board of the enterprise or institution or of the body of the enterprise or institution having a task comparable with that of a supervisory board; The names of those who have a qualifying holding in the enterprise or institution, as well as the size of any such qualifying holding; Annual accounts or an opening balance sheet which shall be provided with an auditor's report, signed by an auditor; A programme of operations which the enterprise or institution intends to carry on; The envisaged administrative organization and management controls, including the financial accounting system and internal control; The deed of incorporation of the enterprise and institution.

The Bank may request the applicant to furnish additional information regarding the application for authorization or the type of business to be pursued.

The Bank will decide on the application within thirteen weeks of the date of receipt of the application or any subsequent information that is requested.

The Bank may refuse authorisation, inter alia, if:

• The Bank is of the opinion that the expertise of one or more persons who determine or codetermine the policy of the enterprise or institution is insufficient in connection with the pursuit of the business of a credit institution;
• On the grounds of the intentions or the past history of one or more persons who determine or codetermine the policy of the enterprise or institution, the Bank is of the opinion that the interests of the creditors or future creditors of the enterprise or institution could be jeopardised;
• If the Bank is of the opinion that, as a result of a qualifying holding in the enterprise or institution, the sound banking policy of the enterprise or institution is or could be subject to an undesirable influence;
• The financial report is a report to the effect other than that the annual accounts or opening balance sheet give a true and fair view of the financial position of the enterprise or institution;
• If the has reason to assume that the enterprise or institution has applied for authorisation in order to evade regulations pertaining to the supervision of the credit system in another country.

  Trade Marketing and Distribution

  Aruba has encouraged commercial activity and manufacturing, especially in high technology, taking advantage of its membership of the EU and privileged access to the US market, by creating the Free Trade Zone and the Aruban Exempt Corporation form.

  Thus, a number of companies involved in the trading or distribution of FMCG and other physical goods use Aruba as a trading base for the American and European markets. Obviously the island is better located geographically for American markets, but even for Europe it is possible to locate marketing, administrative and holding activities on Aruba, and American-source goods can acquire EU origin if they undergo 'substantial transformation' in the Free Trade Zone. Licensing activities can also be carried out effectively from Aruba.

  Aruba is a major distribution and transshipment center for the region. In 1986 the European Commission agreed to allow products originating in any Generalised System of Preferences country to be trans-shipped through Aruba without losing their originating status provided that the goods do not undergo any transformation other than packaging and affixing of labels etc…. The consequence and intention behind this waiver is that Aruba could develop as a major trans-shipment and distribution center since its strategic location along international shipping routes already gives it a distinct advantage .

  Apart from low taxation, and exemption from customs duties, companies in the Free Trade Zone have access to certain types of EU grant or assistance. For a company importing or trading in physical goods in the EU, an Aruban Exempt Corporation can be combined with a base in the Free Trade Zone to give a very effective result.

  Along with other offshore jurisdictions, Aruba is a suitable place in which to base e-commerce services for retail or wholesale distribution of material or non-material goods: see Offshore-e-com.com for extended descriptions of how such businesses can take advantage of the combination of offshore and e-commerce. See Offshore Legal and Tax Regimes for further details of taxation and fees payable by trading companies.

  Aircraft Registry

  In recent years Aruba has developed a thriving aircraft registry, which now contains aircraft of more than 30 different types, including large commercial jets, helicopters, and especially executive jets. The aircraft in the registry belong to commercial and VIP international operators, leasing companies and private owners.

  Aruba is a CATEGORY 1 country rated by the US FAA and ICAO. As an overseas territory and country of the European Union and an autonomous country within the Kingdom of the Netherlands, ARUBA follows the Joint Aviation Authority (JAA) standards and its civil aviation regulations are based on the JAR’s. However, since Aruba is geographically located in the Americas Insular Territory the Department of Civil Aviation is well versed in the US FAR’s regulations.

  Aruba was invited to be a member of the International Maintenance Review Board, formed by the civil aviation authorities of the USA, Canada, European Union, Japan, and Australia.

  Official personnel from the Department of Civil Aviation of Aruba conduct the inspection and certification of the aircraft and its records.

  The process of registering and certifying an aircraft normally takes from 5 to 7 working days. Documentary requirements are:

  • Registration Application INS 4.014
  • Airworthiness Application INS 4.009 (Sign off by Mechanic)
  • Aircraft Operated Outside Aruba Application INS 4.003
  • Proof of ownership (Bill of Sale if any)
  • Copy of lease agreement (if any).
  • Certificate of Insurance. (third party liability required)
  • Copy of de-registration letter.
  • Export Certificate of Airworthiness
  • Copy of the page of the Flight Manual with the MTOW of the aircraft.
  • Work order for installation of Registration Marks & ID Plate
  • Request of additional Certificates (Noise, MNPS-RVSM, etc.)
  It is common to use an Aruba Exempt Corporation (AEC) to own aircraft, which brings tax advantages