Published on and written by Cyril Jarnias
Moving to Aruba or investing in real estate there is attracting more and more expats, particularly Europeans and North Americans. Behind the postcard image, however, the tax system is structured, technical, and sometimes counterintuitive for newcomers. Income tax, property tax, taxation of tourist rentals, resident or non-resident status: all of this strongly conditions the net return on a salary or a real estate investment.
Aruban taxation for expats primarily consists of personal income tax and property tax (land tax). Transfer taxes and specific rules applicable to short-term property rentals must also be considered.
Becoming a tax resident or remaining non-resident: A pivotal choice
Before discussing rates, deductions, or property tax, the first question for an expat is whether they will be considered a tax resident in Aruba or not. This point determines the scope of taxation.
Aruba doesn’t just count days of presence. The authorities look for where the individual’s “center of vital personal, social, and economic interests” lies. In other words, where their real life is concentrated.
Several elements are examined as a whole: having a home in Aruba, presence of close family, duration and regularity of stay on the island, registration with the civil registry, local bank accounts, professional activity, or economic interests on the island. If the majority of these ties are in Aruba, the individual will be considered a tax resident and taxed on their worldwide income.
Conversely, when these interests remain primarily abroad, the individual is treated as a non-resident. In this case, only Aruban-source income (salaries for work performed in Aruba, real estate income from the country, certain business or management income, etc.) is taxable locally.
This distinction is essential for an expat who, for example, maintains significant employment or investments outside of Aruba. The shift to tax residence can trigger the obligation to declare and potentially tax in Aruba income earned anywhere in the world.
Income tax: A progressive scale common to residents and non-residents
Aruba applies a progressive income tax system, with little difference in rates between residents and non-residents: the principle of equal rates is established. What mainly varies is the scope of the taxable base (worldwide income for residents, local-source income for non-residents) and access to certain deductions.
For recent years, the authorities have published a modernized income tax and wage withholding tax (wage tax) table. It is characterized by the introduction of a tax-exempt amount and fairly steep progressive brackets.
Exemption threshold and recent tax scale
A fixed amount is deducted from taxable income to arrive at the “table income” on which the brackets are applied. This exempt amount is around 30,000 Afl. Individuals whose taxable income does not exceed this threshold pay no income tax or wage tax.
The progressive income tax scale for individuals in France is structured into 4 brackets.
| Annual income bracket (AWG) | Tax rate |
|---|---|
| Up to 34,930 | 0% |
| 34,930 – 63,904 | 21% |
| 63,904 – 135,527 | 42% |
| Over 135,527 | 52% |
The top marginal rate is set at 52%. Historically, the ceiling has been higher: earlier sources mention a maximum close to 58.95%, showing that the system, long considered heavy, is subject to adjustments.
For non-residents, older tables sometimes mentioned an exemption threshold of 30,000 Afl and rates starting at 10%. In practice, recent data converges towards a harmonization of the scale. The key takeaway is that residents and non-residents are now subject to the same tax brackets once they are taxable in Aruba.
Simple calculation example
To illustrate the impact of the exemption threshold, take an annual taxable income (before deduction) of 78,864 Afl.
– 1. Deduct the exempt amount of 30,000 Afl, leaving 48,864 Afl of “table income.” 2. Apply the corresponding brackets:
– 0% on the first 34,930 Afl;
– 21% on the portion above 34,930 Afl and within the next bracket.
Ultimately, the annual tax calculated in an official example amounts to about 2,926 Afl, showing that despite high progressive rates, the combination of the exemption threshold + bracket structure can significantly reduce the effective tax for intermediate incomes.
What income is taxable for an expat?
For an expat working or investing in Aruba, practically all types of income are likely to be included in the income tax base, as long as they are from Aruban source (for a non-resident) or the individual is a tax resident (worldwide income).
The main categories are as follows.
Salaries, wages, and benefits
Employment income is of course central to the system: salaries, bonuses, gratuities, past remunerations, allowances, but also director’s fees and management remuneration. Benefits in kind (provided housing, coverage of personal expenses, etc.) are in principle taxable.
Even a non-resident who comes to work for a few days or weeks on the island for an Aruba-based employer is taxable on the remuneration related to that activity. Notable particularity: when a non-resident is employed by an Aruban public entity, the income may be taxable in Aruba even if the work is not physically performed on the island.
Independent professional and entrepreneurial income
The profits from a sole proprietorship, a practice, or an independent activity conducted in Aruba must be calculated according to sound management principles and are fully taxable. A non-resident operating a business in Aruba, directly or through a permanent representative, is taxable on that basis.
Self-employed individuals can deduct the entirety of their actual business expenses. Furthermore, they benefit from an additional flat-rate entrepreneur deduction of 2,400 Afl per year.
Management and board fees
Non-residents who sit on the board of directors or supervisory board of a company resident in Aruba and receive management or supervisory fees are taxable on this income in Aruba, even if they are tax resident elsewhere.
Capital income, dividends, interest, royalties
Portfolio income (dividends, interest, royalties, rental income) is, except for exceptions, taxed as ordinary income. One particularity, however: interest on savings accounts held with local or “recognized” foreign banks is exempt from tax in Aruba. Conversely, dividends distributed by resident companies to individuals are subject to an upfront withholding tax of 10%.
Capital gains: General case and specific cases
Aruba does not, in principle, have a separate capital gains tax for individuals. Capital gains are generally exempt, except in specific situations where they are recharacterized as income:
Gains on the sale of real estate other than the primary residence are taxed according to the progressive income tax scale. Gains on the sale of shares are taxed at a specific rate of 25% if the seller held, alone or with certain close relatives, at least 25% of the rights (substantial interest) at any time during the five years preceding the sale. Finally, gains from a repeated independent or commercial activity are also taxable.
Conversely, when the real estate is registered in the name of an individual in a private capacity and is not considered a business asset, some texts indicate that the resale capital gain is not taxed, making it a particularly sensitive point for expat investment strategies.
Deductions and allowances: Opportunities mainly for residents
Aruba offers a series of deductions and allowances that reduce the taxable base. Tax residents are clearly better served than non-residents, reflecting an intent to favor individuals whose life is primarily on the island.
The main mechanisms include:
Employees benefit from a flat-rate deduction of 3% of their income (capped at 1,500 Afl/year). Residents can deduct mortgage interest for their primary residence, personal loan interest (up to 5,000 Afl/year), life insurance premiums (up to 5,000 Afl/year), as well as certain extraordinary expenses and donations. Self-employed individuals are entitled to full deductions for their business expenses, including a specific 2,400 Afl deduction. Losses can be carried forward for five years, extended to seven years for losses incurred in 2020, 2021, and 2022 due to the health crisis.
These mechanisms significantly change the effective rate for a resident expat who buys their primary residence in Aruba or who incurs significant family expenses.
Social security contributions: An often underestimated cost
In addition to income tax, expats employed in Aruba must factor in the cost of social security contributions, paid by both the employer and the employee, which can overall amount to more than a quarter of gross income up to certain ceilings.
The main components are:
Presentation of the main mandatory social security contributions in Curaçao, split between employer and employee, with their rates and ceilings.
The employer contributes 9.5% of gross salary, the employee 4%, up to an annual salary ceiling of 65,052 Afl.
Covers hospital, consultations, and treatments. 8.9% paid by the employer and 2.6% by the employee, up to an annual salary of 85,000 Afl.
Exclusively paid by the employer, with a variable rate between 0.25% and 2.5% of salaries.
2.65% of salary, paid by the employer, only for employees earning up to 4,550 Afl per month. Beyond that, this scheme no longer applies.
For a resident, the sum of AOV, AWW, and AZV contributions can represent about 26% of gross income (minus certain deductible expenses), up to a ceiling of 85,000 Afl. Non-residents employed locally are also subject to these contributions, which can lead to, in the absence of a social security agreement, double contribution with their home country. Totalization agreements can, however, mitigate this double charge in some cases.
Expatriate regime: A powerful tool for high-skilled, high-income earners
To enhance the island’s attractiveness, Aruba has established a specific regime for highly skilled expatriates. This scheme, formalized in tax law since 2017, targets employees possessing rare skills or skills unavailable locally.
To benefit from it, several conditions must be met simultaneously:
– Not have resided in Aruba during the five consecutive years prior to taking up the position;
– Earn an annual salary of at least 150,000 Afl;
– Justify expertise considered insufficiently available in the Aruban labor market.
In return, the regime offers substantial tax benefits:
– An annual cash allowance exempt up to 15,000 Afl;
– Schooling costs covered exempt up to 25,000 Afl per child per year, whether the child is schooled in Aruba or abroad;
– A housing allowance (rent) non-taxable up to 2,500 Afl per month.
It is possible to agree to a “net wage arrangement,” where the employer directly covers the employee’s income tax. The employee thus receives the agreed net salary, without a gross-up to cover the tax, and the company settles the tax liability with the authorities.
The regime, granted initially for five years, can be extended once for an additional five years, if the employer demonstrates that the employee’s expertise remains unavailable locally. The application must be filed within four months of the contract start date, with CV, diplomas, employment contract, work permit, and residence permit.
In return, expats benefiting from this regime forfeit certain standard tax benefits: no age deduction, no child deduction, no professional expenses deduction, and ineligibility for certain regimes concerning company housing.
Taxation of non-resident expats: Targeted Aruban income
Non-residents are still taxed only on certain types of Aruban-source income. For an expat owning a property rented short-term without claiming residence, or for a consultant working sporadically on the island, understanding this targeted taxation is crucial.
The following are notably subject to Aruban taxation for non-residents:
– Salaries and fees for work performed in Aruba;
– Income from a business operated on the island, whether received directly or through a permanent representative;
– Rental income and other income related to real estate located in Aruba;
– Certain shareholder or management income when there is a significant interest in a local company;
– Interest on loans secured by a mortgage on Aruban property.
Non-residents have fewer personal deductions than residents, but retain the ability to deduct certain expenses directly related to the income (e.g., maintenance and operating expenses for a rental property).
Property tax (ground tax): How the tax on real estate works
For any expat owner or future buyer, property tax is a central element of the cost of ownership. In Aruba, it takes the form of an annual tax on the value of real estate, sometimes called “real estate tax,” “land tax,” or “ground tax.”
The principle is simple: the tax hits each year the value of properties held as of January 1st. The authorities assess the reference value, taking the higher of the actual economic value and the approximate value based on potential income. This assessment is updated approximately every five years.
Property tax scale according to owner status
The system clearly distinguishes resident individuals from non-residents and legal entities.
For resident individuals, the property tax is progressive and applies to the aggregate value of properties held:
| Total property value (AWG) | Property tax rate |
|---|---|
| Up to 120,000 | 0% |
| 120,000 – 250,000 | 0.20% |
| 250,000 – 500,000 | 0.30% |
| 500,000 – 750,000 | 0.40% |
| Over 750,000 | 0.60% |
For non-residents and legal entities, the rule is more straightforward: a flat rate of 0.6% applies to the total value of the real estate, without any exempt bracket. In other words, a non-resident expat who owns a 500,000 Afl villa will pay about 3,000 Afl per year in property tax, or 0.6% of the value.
Some simplified presentations mention a “standard” rate of 0.4% and an exemption on the first $33,707 of value (about 60,000 Afl), with the 0.4% rate applying to the excess portion. In practice, reference texts for expats converge towards the bracket system above for residents and the 0.6% flat tax for non-residents.
Tax on second homes is payable in four annual installments, easing cash flow management. It remains due even if the property is not rented: merely owning an unoccupied second home does not exempt from its payment.
Owner reporting obligations
Owners must ensure their properties are correctly registered with the tax department. Upon purchase, cadastral documents (plan, plot number, etc.) allow for registering or updating the value. In case of significant renovation increasing the value (extension, adding a pool, etc.), the owner is expected to inform the authorities.
Non-compliance can be costly: failure to report a renovation likely to increase the taxable value can result in a fine equal to 100% of the property tax due. Similarly, failure to register a property can lead to heavy penalties once detected.
Real estate transfer tax: An entry cost to anticipate
When purchasing a property, the expat encounters another key tax: the real estate transfer tax, levied at the time of signing the deed before a notary.
This tax, paid by the buyer, is calculated on the higher of the sale price and the official value used by the authorities. The scale is as follows:
| Property value (AWG) | Transfer tax rate |
|---|---|
| Up to 250,000 | 3% |
| Over 250,000 (on the excess) | 6% |
The notary is legally required to collect this tax during the execution of the deed of sale and remit it to the state. Since a regulatory update, even the transfer of shares in companies whose main asset is real estate, or the transfer of “economic ownership” without a notarial deed, can be subject to this tax. In case of a non-notarized economic transfer, the transferor must inform the tax inspector within two weeks; otherwise, a fine of up to 100,000 Afl or 10% of the property value may be applied.
In case of inheritance, the transfer tax may be reduced if the property was the deceased’s primary residence and is allocated to the surviving spouse or direct heirs. Note that Aruba no longer imposes inheritance or gift taxes since mid-2018, but real estate transfer following a death remains potentially subject to this transfer tax.
Total cost of a real estate transaction for an expat
Beyond the transfer tax, buying and reselling a property in Aruba generates various costs: notary fees, legal advice fees, agency commissions, etc. Market studies show that:
Percentage of the purchase price representing costs borne by the buyer in a real estate transaction.
Overall, the “roundtrip cost” (entry cost + exit cost) of a real estate investment in Aruba typically ranges between 7 and 15% of the property’s value. For an expat investor, incorporating this percentage into their projections is essential to calculate the real net profitability.
Rental income taxation: Second home, long-term lease, and tourist rental
Aruba is a major tourist destination, and many expats invest in apartments or villas intended for short-term rental. However, this rental income is strongly on the authorities’ radar.
Taxation of rental income in income tax
Income from renting real estate located in Aruba is taxed at the progressive income tax scale, whether the owner is a resident or non-resident. The taxable base is not the gross rental amount, but the net income after deduction of certain expenses.
The following are notably deductible:
– Maintenance and routine upkeep expenses;
– Property tax paid;
– Property insurance premiums;
– Mortgage interest;
– Various operating costs (water, electricity, management fees, property management company fees, etc.), when borne by the owner.
Major renovation works, like adding a pool or enlarging a wing, are not deductible as current expenses. They are considered capital investments.
For non-resident expats, a crucial point is the obligation to file an annual tax return in Aruba as soon as they derive rental income from an Aruban property. Failure to file can result in fines or even prosecution, and the authorities have explicitly stated that the taxation of vacation homes has become a priority.
Theoretical examples show that the effective tax rate on rental income increases sharply with income: for monthly rental income equivalent to $1,500, one study cites an effective tax rate of about 10%, which rises to over 30% for $6,000 per month, and can exceed 40% for $12,000 monthly, given the progressive scale.
Indirect taxes specific to tourist rentals
Alongside income tax, short-term rentals (like Airbnb, vacation villas, tourist condos) bear several indirect levies:
In Mauritius, tourist accommodations may be subject to several separate taxes. A tourist tax proportional to the nightly rate is applied, with a rate that can reach 12.5% in some cases. In parallel, a fixed tourist levy, called a “special tourist levy,” is charged at $3 US per night per occupied room for short-term rentals. Finally, the BBO (Business Turnover Tax), a turnover tax, may apply to certain rentals; for example, a long-term lease of a vacation home may be taxed at a rate of 7%, unless the property is used as a primary residence.
Ancillary services offered to tenants (breakfasts, cleaning billed separately, spa or massage services) may also be subject to BBO on the generated turnover.
The authorities are also preparing stricter regulation of the tourist rental sector through the creation of the Aruba Quality & Hospitality Authority (AQHA), responsible for registering owners, issuing licenses, controlling hygiene standards, and collecting fees. The AQHA is expected to cooperate closely with the tax authorities to identify and track owners, including non-residents.
Lack of extensive tax treaties: A double taxation risk to manage
Aruba does not currently have a developed network of double taxation avoidance treaties with other states. A French, Canadian, or Latin American expat living on the island therefore generally cannot rely on a classic treaty to prevent the same income from being taxed twice.
There is, however:
The Dutch territories benefit from an intra-kingdom tax regulation (Tax Regulation for the Kingdom of the Netherlands) which harmonizes taxation between Aruba, Curaçao, the Netherlands (including Bonaire, Sint Eustatius, and Saba), and Sint Maarten, notably with reduced withholding tax rates on dividends that can be lowered to 7.5% or 5% under certain conditions. They are also parties to many Tax Information Exchange Agreements (TIEA) with countries like the United States, the United Kingdom, Canada, and several European states, ensuring transparency of financial flows without creating rights to tax reduction. Finally, social security agreements with certain countries allow for coordinating pension and health insurance contributions.
Aruba may also grant a unilateral credit for tax paid abroad, up to the amount of Aruban tax due on the same income. For an expat, tax planning must therefore anticipate this interaction, especially when the home country also taxes worldwide income (the case of the United States, for example).
Special case of US citizens living or investing in Aruba
US citizens and green card holders living in Aruba remain liable for their tax obligations to the IRS, regardless of local taxation. They must file a US tax return each year, even if they also file an Aruban return.
Income earned in Aruba may be exempt from US tax via the Foreign Earned Income Exclusion (FEIE) if you meet the foreign residence criteria and file your return on time. Furthermore, taxes paid locally may qualify for a Foreign Tax Credit to reduce your US tax on the same income.
US reporting obligations are heavy as soon as an expat holds Aruban bank accounts exceeding certain thresholds or interests in local companies: FBAR, 8938, 5471, 8865 forms, etc., with penalties that can reach or exceed $10,000 per form in case of non-filing.
Finally, US self-employed individuals working in Aruba remain subject to US social security contributions (self-employment tax), whereas employees working for a non-US employer can generally avoid contributing to US social security on Aruban wages.
A tax environment that is both competitive and demanding for expats
Aruba is neither a tax haven in the traditional sense, nor a tax hell. The country has evolved its system towards more transparency and largely complies with international OECD standards. The top income tax rates remain high compared regionally, but are mitigated by a significant exempt amount and a set of targeted deductions.
For expats, the key takeaways are as follows:
Determining tax residency is based on a collection of indicators, not just the number of days; a change in life center can trigger taxation of worldwide income. Residents and non-residents share the same progressive scale, but residents benefit from more personal deductions. Social security contributions add to income tax and can represent up to a quarter of gross income, subject to a ceiling. The special expat regime offers, for high-skilled, high-income earners, substantial tax benefits on housing allowances, schooling, and certain allowances. Property tax is moderate for residents (thanks to an exemption up to 120,000 Afl) but heavier for non-residents and companies, with a flat rate of 0.6% without a threshold. Purchasing a property incurs a significant transfer tax (3 to 6%), and the full cost of a buy-sell cycle can reach 7 to 15% of the price. Rental income, especially from tourism, is monitored by the authorities, who cross-reference information via the AQHA and are strengthening compliance for non-resident owners.
For an expat considering working, buying property, or both in Aruba, taxation is therefore neither a detail nor a mere formality. It must be integrated from the project phase, evaluating for each scenario the combination of income tax + social security contributions + property tax + transfer and occupancy taxes.
Professional local guidance is recommended to navigate crucial choices: tax residency, use of a personal or corporate structure, eligibility for the expat regime, and optimization of real estate ownership and rental. In a stable legal framework but with a limited tax treaty network, the quality of this preparation is decisive to ensure a sound investment and avoid successive tax surprises.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
