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The new expat regulation
This fact sheet applies to
Aruba. You will find
information with regard
to:

The expat regulation

The expatriate

Tax free allowances

Gross up

The application

Termination and
continuation
Introduction
The promotion of investments, including the creation of a knowledge-based
economy, is one of the action points arising from the economic action plan of the
Government for the years 2011 through 2013. This also became evident during the
Social Dialogue - consisting of the Government and representatives of employers’
and employees’ organizations - which was held during the period of August 21,
2012 through November 9, 2012, and during which Social Dialogue it was
determined that investments aimed at a sustainable, diversified, and innovative
economy should be stimulated. The social partners recognize that the creation of a
sustainable, diversified, and innovative economy requires manpower that is not
available on the Aruban labor market or only to a limited extent. It mostly
concerns high-skilled manpower. Consequently, there is a need for providing for
further rules to attract this manpower.
The expat regulation
If an employee is temporarily
employed in Aruba from abroad, he
normally incurs costs that are not
incurred by an employee who works
in his country of origin or who
permanently immigrates to another
country. According to the expat
regulation temporarily means that,
after termination of his employment,
the employee will usually return to
his country of origin.
The
Fringe
Benefits
Taxation
Regulations will be supplemented
with rules applicable to the
expatriate.
Definitions and conditions
The expat is an employee hired from
abroad, who lived abroad during a
consecutive period of at least five
years immediately prior to his
employment in Aruba. A five-year
period has been opted for to avoid
that persons already living in Aruba
emigrate abroad for a little while and
then immigrate to Aruba again, only
to qualify for this regulation.
One of the conditions to be
considered an expatriate is that the
expatriate should train a local
employee. To avoid confusion as to
the meaning of local employee, a
definition will be used that is in line
with the admission legislation.
To qualify as an expatriate for the application of
the new provisions, the person concerned should
dispose of specific expertise. To avoid discussions
in actual practice about the question when
someone disposes of specific expertise, an income
standard of at least AWG 150,000 will be used.
expatriate is entitled to this untaxed allowance for
schools in Aruba or for schools abroad, which
could be the case, if the children do not move
house together with the expatriate.
If the employer does not make a house available to
the expatriate and the expatriate rents his own
house, the employer may pay an
untaxed allowance not exceeding
AWG 2,500 per calendar month. The
rent for a modal house in Aruba
ranges between AWG 1,500 and AWG
2,500.
An expat who enjoys the high untaxed
allowances, does not qualify for a
deduction of professional expenses,
elderly person’s allowance, or a tax
deduction for children.
Gross up
In addition, the expatriate should submit a work
and residence permit in accordance with the State
Ordinance on the Admission and Expulsion of
Aliens, showing that he has permission to carry out
his work in Aruba.
Based on the above, it can then be demonstrated
that the expertise of the expatriate is not available
on the local market, or only to a limited extent.
Tax free allowances
Three allowances paid to the expatriate may
remain untaxed, in addition to the untaxed
allowances mentioned in Fringe Benefits Taxation
Regulations. According to the explanation to the
Expat Regulation expatriates incur costs, which
they will not incur in their country of origin, or
which they will not incur when immigrating to
Aruba. Examples of such costs are additional
educational expenses for the children and the like.
Consequently, an employer may
pay the expatriates untaxed
allowances not exceeding AWG
15,000 per calendar year. It
concerns here remunerations paid
in cash, such as a daily
reimbursement.
Contrary to the main rule, the wages
of the expatriate will be grossed up
only once, provided that the employer
has agreed on net wages with the
expatriate in writing. In this case, the
main rule is that the net wages should
be converted into gross wages for the calculation of
the wage tax. The wage tax due will be paid by the
employer.
For example, if an employee has agreed a net
salary of 100, the tax due with a (assumed) tax rate
of 50% is 50 under the expat regulation. Normally
the tax due would be 100 (a gross salary of 200
with a tax rate of 50% leaves a net salary of 100).
The application
The employer will be the one that has to file a
written application for the benefit of the employee
with the Inspector of Taxes to consider the
employee an expatriate. The employee also has to
sign the application and will be considered an
expatriate for the duration of four years, provided
that he trains a local employee who has to take
over his work. The period of four years is deemed
sufficient to train a local employee.
To qualify as an expatriate for the application of
the new provisions, the person concerned should
dispose of specific expertise.
Likewise, the employer may pay
the expatriate untaxed allowances
for the educational expenses of his children up to
AWG 25,000 per child per calendar year. The
The expatriate status may be extended by two
years, provided that the employer makes it
plausible that no local employee with an expertise
©2013 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. July 15, 2013
equal to that of the expatriate has been found. This
can inter alia be proven by publishing a vacancy
before the end of the four-year period. If no skilled
local employees apply, it will be considered proven
that the expat decision can be extended.
A period of four months will be used, within which
the employer has to file the application, so that the
employee can obtain the expatriate status. The
reason for this period is that it usually takes four
months before a temporary residence and/or work
permit is issued. If the employer files the
application within this period, the employee will be
considered an expatriate as of the first day of his
employment. If the application is not filed within
this period, the expatriate status will not take effect
until the first day of the month following the
month in which the application has been filed.
Termination and continuation
If the employment contract is terminated, the
employee will lose the expatriate status. The
employer has to notify the Inspector hereof within
one month after termination.
If the employee changes employer within the same
group, he will keep the expatriate status, as long as
the employee also meets the conditions at the new
employer. The expatriate status may continue to
apply to an employee who changes employer
during the period of validity of the expatriate
status, subject to conditions.
The successive employer should file an application
with the Inspector to maintain the expatriate
status. He should also prove that the employee
enjoyed the expatriate status at his former
employer, and the employee should fulfill the
conditions.
Our PwC Aruba
Tax team
How PwC can help
If you would like to learn more or have questions or remarks in respect of the contents of this newsletter,
you can contact:
Hans Ruiter (Tax partner)
Anushka Lew Jen Tai
Brian Dake
Geert Weber
Jordi van den Heiligenberg
Jourainne Wever
Nicole Duyvelshoff
Rachel Maduro
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Office: T: +(297) 522 1647 or send an email to: [email protected]
©2013 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. July 15, 2013