No date yet for VAT; Aruba steps up tax enforcement

ORANJESTAD — The Government of Aruba has not announced an implementation date for VAT in its latest budget. Instead of moving ahead with the new tax, the government is placing greater emphasis on tax enforcement and compliance, particularly in the short-term rental sector and the informal economy.

VAT, or value-added tax, is a system in which tax is charged at different stages of the commercial chain, while businesses can generally deduct the VAT they have already paid on their own purchases. The final burden is therefore carried by the consumer. This differs from BBO, which is a turnover tax charged on gross sales and can accumulate through different stages of the supply chain without a general input-tax deduction mechanism. BAZV is a separate levy linked to the financing of Aruba’s general health insurance system. The previously discussed reform was intended to replace both BBO and BAZV with VAT.

VAT had previously been discussed as a replacement for the existing BBO turnover tax and BAZV health levy, but implementation stalled after the December 2024 elections. The new budget does not provide a new start date.

The government plans to step up enforcement to ensure short-term rental businesses are current with both direct and indirect tax obligations.

It will also introduce a national plan to address the informal economy. Under the initiative, some people working without a residence permit may be given an opportunity to regularize their status and settle outstanding taxes.