In December 1999, along with the Netherlands Antilles, Aruba adopted new legislation under the heading of The New Fiscal Regime (NFR). The NFR involves the abolition of the distinction between offshore and onshore companies, at least for new formations, the introduction of a 10% withholding tax on dividends, and a rationalisation of profits tax rates.

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.

Aruba The Netherlands Tax Treaty

Provisions under the NFR and a revised 'BRK' (tax treaty with the Netherlands) came into effect from July 1, 2003. They include:

    * dividends from a Dutch corporation to Aruba corporate shareholders, who own at least 25% of the shares in the Dutch corporation, will be exempted from Dutch dividend withholding tax, provided that the dividend is subject to Aruban tax at a rate of at least 8.3%.
    * the Dutch corporation will have to withhold 8.3% dividend withholding tax from the gross dividend. The 8.3% which has been withheld upon the dividend distribution in the Netherlands can be credited against tax in Aruba.
    * dividends and capital gains derived from shareholdings in a Netherlands corporation will be exempted from additional profit tax in Aruba provided that the shareholding amounts to at least 25% and that 8.3% Aruba tax is paid on the gross amount of dividends received
    * dividends paid by Dutch corporations to Aruban corporations unable to take advantage of the participation exemption will be subject to 15% Dutch dividend withholding tax. Existing Aruban offshore corporations may elect for the new dividend treatment.
    * for Aruban coporations incorporated before December 2002, subject to profit tax and having a book year which ends before 1st July 2003, the grandfathering rules with respect to the offshore regime will remain applicable until 2007 as long as the company continues to have substantial business.

Aruba Other International Agreements

Mutual Assistance Treaties: Aruba has mutual co-operation treaties with a number of foreign states. In the particular case of the USA, co-operation includes information relating to tax matters, but this is not true generally.

Independently of treaty procedures the local law broadly permits requests for information relating to tax evasion, specifically under a newly-legislated Code of Criminal Procedure.

Aruba has no specific bank secrecy laws. Local professionals try to maintain confidentiality on behalf of their clients, but can be required to disclose beneficial ownership and other details, even for Aruban Exempt Corporations, which are not obliged to enter such information into the Commercial Register.

Tax Information Exchange Treaty The United States Treasury announced in November 2003 that it had signed a new agreement with the Kingdom of the Netherlands which will provide for the exchange of tax information between Aruba and the US. Treasury Secretary, John Snow praised the close and cooperative relationship between the two countries in matters of law enforcement and tax evasion, and explained that:

"We have an obligation to enforce our tax laws, because failing to do so undermines the confidence of honest taxpayers in the fairness of the US tax system. Access to needed information is vital to our efforts to ensure full and fair enforcement of our civil and criminal laws."

He went on to add: "This new tax information exchange agreement we are signing today is the ninth such agreement the United States has signed with a significant financial center in the last two years. It is the first such agreement that I will have the privilege to sign, and I do not intend it to be the last. I hope that Aruba's cooperation with the United States will serve as an example to other financial centers in the region and around the world."

In September, 2004, the US Treasury Department announced that the United States and Aruba had exchanged diplomatic notes bringing the tax information exchange agreement into force.

The US-Aruba Tax Information Exchange Agreement is consistent with the standards for an exchange of information agreement described in the Internal Revenue Code. The Code generally allows US taxpayers to claim a tax deduction for expenses associated with a convention held in certain beneficiary countries with tax information exchange agreements with the United States to the same extent as a convention held in the United States.

As of September 13, 2004, Aruba is considered part of the ‘North American area’ for purposes of determining whether US taxpayers may deduct expenses incurred in attending conventions, business meetings and seminars in Aruba.

Convention expenses that are incurred by US taxpayers for meetings in geographical areas considered part of the North American area and that otherwise are deductible as ordinary and necessary business expenses are allowed as deductions without regard to the additional limitations applicable to deductions for expenses associated with foreign conventions.

The Kingdom of the Netherlands, including Aruba, is party to the 1988 U.N. Drug Convention, a member of the Financial Action Task Force (FATF), 6 and has an MLAT agreement with the United States. The United States–Netherlands extradition treaty of 1980 extends to the Government of Aruba, and provides for the extradition of nationals. Aruba also has criminal procedure code that allows for the extradition of Aruban nationals, subject to their serving any sentences imposed in Aruba. In addition, Aruba is a member of the CFATF.

Aruba has a Financial Intelligence Unit (FIU), known as the Meldpunt Ongebruikelijke Transacties (MOT), and is a member of the Egmont Group, an international group of FIUs.