Imputation Payment Company

An imputation payment company (hereinafter: IPC) is a corporation (NV) or limited liability company (VBA) which focuses on specific, designated, activities. A transitional regulation is applicable for all IPC's existing per June 28, 2013, which was the date of the regime change. The IPC is subject to a flat rate of 10% and an exemption from dividend withholding tax.

New IPC regime (incorporated into the law per January 1, 2016; a transitional regulation exists for companies that applied the IPC regime on June 28, 2013) entails the following:

• Flat corporate income tax rate of 10%;
• The IPC will be exempt from the levy of dividend withholding tax;
• The following qualifying activities will be allowed:
  • Shipping enterprises;
  • Aviation enterprises;
  • Holding, if the entities in which the shares are held are subject to a tax rate of at least 12.5%;
  • Financing (not being a credit institution) of enterprises and entities;
  • Investments, provided no funds are put at the disposal of related entities or invested in real estate;
  • Generating sustainable energy;
  • Enterprise focused on company focused on agriculture, horticulture, fisheries, beekeeping, livestock or fish farming;
  • Enterprise focused on scientific or cultural activities to stimulate the knowledge-based economy;
  • Enterprise focused on medical tourism, with an annual maximum of resident patients of 5%;
  • Enterprise focused on rehabilitation for alcohol, drug and other addictions, with up to 5% of the number of patients being Aruba residents;
  • Enterprise focused on selling sustainable means of transport with no or low CO2 emissions;
  • Start-up company focused on developing of new technologies and software for digitization of business processes, 3D printing, Internet or Things, Big Data, robot and nanotechnology and drones and similar innovative start-up companies.
  • For hotels, specific criteria apply:
    • The RevPar determines the applicable rate as per the following table:

      	Category I	Category II	Category III	Category IV
      RevPar	> US$ 185	> US$ 175	> US$ 160	4 diamond
      Tax rate	10%	12%	15%	12%

    • Having an earth-check or similar certificate based on the first (lowest) standard;
    • An annual investment to make it more sustainable, which minimum amount depends on the category and reads as follows:

      	Category I	Category II	Category III	Category IV
      > 100 rooms	240,000	165,000	90,000	165,000
      <= 100 rooms	120,000	75,000	45,000	75,000

      An investment in sustainability is defined as:

      • 1/3^rd of the amount mentioned needs to be invested into green projects to reduce energy expenses within and outside the hotel operations;
      • 1/3^rd of the amount mentioned needs to be used for the training of employees traineeships available;
      • 1/3^rd of the amount mentioned needs to be used for the purchase of locally produced products.

The above is not intended to constitute, nor should it be relied upon, to replace any professional advice. No action should be taken without first consulting your tax advisor. The above reflects the law effective January 1, 2019.

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