The Caribbean islands are a well-known travel destination.Aruba with its white sandy beaches and its crystal clear blue sea is no exception. The happy island, as it is called, attracts a lot of tourists every year. Nowadays, tourism is the most important source of income for Aruba. Tourism offers all kinds of opportunities for entrepreneurs and individuals to supply goods and services. There are various tax aspects that need to be taken into account when someone is supplying these goods and services in the tourism industry. This article highlights some of those tax issues. The Supply of Goods and Services in the Tourism Industry
Most common in the tourism industry in Aruba are the rental of goods and services and the provision of all kinds of activities on the island, such as:
• The rental of rooms and apartments;
• The rental of cars, bicycles, scooters, and boats;
• The rental of diving equipment;
• Offering island tours and excursions;
• Restaurant and catering services;
• Taxi and bus transport;
• Selling products on markets and in shops.
Aruba has both direct taxes and indirect taxes. This article will only shed some light on the indirect taxes. More specifically and regarding the supply of goods and services in the tourism industry, it will discuss the business turnover tax, hereinafter referred to as BBO (belasting op bedrijfsomzetten in Aruban tax law) and the health levy, hereinafter referred to as BAZV (Bestemmingsheffing algemene ziektekostenverzekering in Aruban tax law). In addition, the tourist levy, the tax on the rental of motor vehicles, and the special tax on stays, hereinafter referred to as BBV (bijzondere belasting verblijf in timeshareresorts, logementen en hotels in Aruban tax law) will be addressed as well.
BBO
Everyone, regardless of the type or legal form of business, is an entrepreneur for the BBO if the person carries out a business or profession independently. BBO is levied on the revenue of the supply of goods and services of entrepreneurs in Aruba. Goods that are imported into Aruba are therefore not subjected to BBO. Goods that are sold to customers outside Aruba are exempted from BBO under certain conditions.
The BBO is neither a value-added tax nor a sales tax. It is but a business turnover tax. Hence, all services and goods supplied in Aruba by an entrepreneur are taxable, unless an exemption is applicable. The abovementioned activities in the tourism industry on Aruba can lead to different outcomes for the BBO. The rental of hotel rooms and apartments for which tourist levy or tax is due, for example, is exempted from BBO. Tax consequences for renting out other immovable property can lead to different outcomes. These are not taken into account in this article. BBO is due on the rental of diving equipment, offering islands tours and excursions, restaurant and catering services, taxi and bus transport, and selling products on markets and in shops in Aruba. The BBO rate for all these examples of supplying goods and services is 1.5 percent of the revenue. This turnover is the remuneration received in cash or in kind.
BAVZ
In many ways the BAVZ is similar to the BBO. Its tax base and other characteristics are very much alike. Just as the BBO, everyone, regardless of the legal form, is an entrepreneur for the BAVZ if the person carries out a business or profession independently. BAVZ is levied on the revenue of the supply of goods and services sold by entrepreneurs in Aruba. The same exceptions apply to both BAVZ and BBO. The BAVZ rate is two percent of the revenue. This turnover is the remuneration received in cash or in kind. As a result, both BBO and BAVZ will be charged and are due by the entrepreneur who is supplying goods and services in the tourism industry in Aruba.
Tourist Levy
According to the Tourist Levy Ordinance (hereinafter: ‘Tourist Tax’), a levy is due during the stay of a tourist in a guest house or hotel accommodation. A guest house includes any space provided for accommodation for at least four persons with a maximum of nine persons including services. A hotel accommodation includes a space provided for accommodation for at least ten persons including services. Hence, no tourist levy is due when someone accommodates one to three persons. The tourist levy is payable by the person who rents the accommodation and this person is therefore entitled to charge the guest for the payable tourist levy. There are other rules at play regarding condominiums, since renting them out requires an agreement with a third party. The landlord of the guest house or hotel accommodation has to pay tourist levy over the remuneration including the charges imposed on the tourist. The tourist levy is 9.5 percent of the remuneration paid by the tourist for the stay and use of services at the guest house or hotel accommodation. There are different rules for timeshare and all-inclusive packages. If someone is registered at the civil registry and makes use of a hotel accommodation or guest house in Aruba, no tourist levy is due. The same is applicable to an owner of a condominium who makes use of his own immovable property.
BBV
The special BBV tax is levied on stays in timeshare resorts, lodging, and hotels. This tax is very similar to the tourist levy. A timeshare resort is defined as an accommodation if the right to use a timeshare is exercised. Lodging means every occasion where at least four persons with a maximum of nine persons are given accommodation including services. An apartment in a house that is rented out to tourists is considered to be an accommodation as well. Whether the rental is commercial or private, is not taken into account. As a result BBV can be due if one provides accommodation in an apartment to a maximum of three persons. Hotels are described as places where ten or more persons receive accommodation including services. The BBV is payable by the holder or the operator of a timeshare resort, lodging or hotel. The special tax is levied on the stay in a timeshare resort, regardless of the duration. In the case of a guest house or hotel, BBV is levied on the overnight stay and per occupied room. The rate of the BBV for stays in timeshare resorts depends on the kind of room. The rate can either be AWG 26.85 for a studio or AWG 44.75 for one bedroom. The use of all other rooms is charged the same rate: AWG 44.75. Different rules apply for transient guests of timeshare resorts. The rate of the BBV for guest housing and hotels is AWG 5.37 per overnight stay per occupied room, regardless of the number of tourists that are actually staying in the accommodation. Similar to the tourist levy no BBV is due when someone is registered at the Civil Registry of Aruba.
Rental of Motor Vehicles
A special tax on rental cars and rental motorcycles, hereinafter referred to as car rental tax (bijzondere belasting op verhuur auto’s en verhuur motorfietsen in Aruban tax law), is levied on the rental of cars and motorcycles. Rental cars are motor vehicles used for the transportation of people without hiring a driver, which is shown on the license certificate. Rental motorcycles are motor vehicles on two to four wheels that are not provided with a closed body, and which are rented out without a driver as well. In addition, the rental motorcycles can only or partly be driven by a mechanical force present on or in the vehicle. The license holder is liable for the car rental tax. The car rental tax is calculated on the total number of rental cars and rental motorcycles in the fleet on the first day of the period in which the tax due must be paid. The rate of the car rental tax is AWG 96.75 per rental car or rental motorcycle per quarter. The remuneration or days that the rental car or motorcycle actually has been rented out, are not taken into account. In addition to the fact that in the BBO the rental of a motorized or non-motorized vehicle is taxed, it appears that regarding the rental of cars and motorbikes car rental tax may be due as well.
Conclusion
The tax consequences of supplying goods and services on Aruba have been mapped out. This article has shown that certain exemptions in the BBO result in services being charged by another tax or levy, such as the Tourist Tax. Moreover, it has been concluded that double levy or even multiple levies can occur for the same supplied service, as is the case with the rental of cars and motorcycles or the rental of hotel and guest rooms. Regarding the double or multiple levy one wonders if it would not be better to integrate all the previous mentioned levies into the BBO.By doing so the Aruban legislature would surely initiate simplification, transparency, and the reduction of the administrative burden for both entrepreneurs and tax authorities.