Aviation: Registration & Exploitation in Aruba

The Aruban tax and legal system contains attractive facilities for aircraft registration and the establishment of an airline company. Aruba has developed itself into a suitable jurisdiction for aviation companies. The Aruban aircraft registry is in conformity with the ICAO regulations and is in compliance with JAA & FAA requirements. Airplanes registered in Aruba fall in highest category for aviation safety, making it possible for Aruba registered airplanes to land anywhere in the world. For tax purposes two interesting alternatives exist.

Fiscal transparency

In Aruba it is possible to opt for a fiscal transparent treatment of companies. In order to obtain this treatment, a notification for fiscal transparency should be submitted with the tax inspector at the time of incorporation. As a consequence the corporation becomes fiscally non-existent in Aruba. A foreign shareholder can only be taxed in Aruba if the activities performed by the entity form a permanent establishment.

The Aruban government has issued a policy guideline where it is explicitly confirmed that the sole activity of holding proprietary rights of airplanes that are not present in Aruba, do not form a permanent establishment. As a consequence, even if the airplanes are registered in Aruba, income generated by the airplane from for example leasing activities will not be taxed in Aruba.

Imputation Payment Company (IPC)

The IPC regime is attractive for the establishment of an airline company with substance in Aruba. An IPC is a regular limited liability company that is subject to Aruba profit tax at the regular profit tax rate of 28%. However, the shareholder(s) of a qualifying IPC are entitled to an imputation payment by the Aruba government of 26/72 of the distributed dividends, if the company conducts one or more qualifying activities and fulfills certain other requirements. Because of this refund, the overall profit tax burden on the aviation activities could be as low as 2%.

Conducting an aviation company is considered a qualifying IPC activity. The following activities could qualify under aviation activities as mentioned in the IPC legislation:

  • the transportation of person or goods;
  • ground handling activities, e.g. refueling, airplane maintenance, baggage handling activities;
  • leasing of  airplanes in case of financial lease.

Aruba attractive for aviation companies

The above is a short overview of the fiscal possibilities for aviation activities in Aruba. With fiscal transparency and the IPC, the Aruban tax law is equipped with attractive solutions!

In case you are contemplating on performing aviation activities, please contact us in case you require in depth information on the requirements, timing and cost involved in your specific situation.