Changes in tax law create new business opportunities
While the Caribbean has long been a center for financial services, offshore business and investing, Aruba’s financial services sector has been rather dormant and has not been marketed heavily to foreigners. Recent changes in legislation are making the jurisdiction more attractive for investment.
Rina Gonzalez is the CEO of the Century Group, a full service law firm started by her late father, Hector Emilio Gonzalez, in 1964.
Aruba’s financial services sector was started in 1988, shortly after separation from the Netherlands Antilles, but it has never been exploited. Currently there are only about 4,000 offshore companies incorporated in Aruba.
"Recent changes mean that Aruba is not a tax haven anymore," stated Gonzalez, referring to the legislation reforming Aruban Exempt Companies in January 2006.
"Proper business can be conducted with and through Aruba without fears of tax haven or money laundering issues," said Lincoln Gomez, attorney at the firm Gomez and Bikker.
He explained that, "Recent legislation made sure that Aruba was in line with all of the international developments with the OECD, EU, and US requirements in terms of reporting, identity of share holders, disclosure, and so on, while still allowing flexible vehicles for international business."
Financial services and vehicles for investment in Aruba
Aruba offers several products to investors: the Limited Liability Company (LLC), Trust Company incorporation, insurance vehicles and trademark registration. There are vehicles that are fully to almost fully tax exempt.
Companies incorporated in Aruba are tax exempt as long as they operate business outside of Aruba and their shareholders are offshore.
Gonzalez explained that Aruba is an independent country in the Kingdom of the Netherlands. As part of the Kingdom, Aruba cannot have its own treaties directly with other countries, but Aruba can decide whether or not it wants to participate in Netherlands treaties. Aruba does have its own tax laws, separate from those of the Netherlands.
Gonzalez’ firm works directly with law offices, accountants and tax advisers abroad. She and her partners always direct clients to get tax advice in their jurisdiction before they do business overseas.
"Tax wise, companies have to look at best situation for them, what products each country offers, and what tax treaties exist between countries. Each case is special."
LLCs/NV/AVV
An LLC is called an NV in Dutch, but both are structured about the same. In Aruba, an NV is used more for local market and an AVV is geared towards the offshore market and international clients. The laws, structure, and cost incorporation is about same for the NV or the AVV. Both require a minimum $6,000 investment and proof of identification.
Trust Companies
The process for establishing a Trust Company is relatively simple. Natalie Doorenbos, an attorney in Gonzalez firm, noted, "It requires some information, mostly for our own files and audits. We need to know who we are dealing with."
Trust companies in Aruba can be used for financing, investment, holding and licensing of intellectual property. She explained that clients must provide certified identification such as a valid passport, and another ID, bank reference letters and accounting reference letters. Additionally, clients must disclose the amount of capital their company has, what the company does, and define what kind of shares the company desires.
While Trust Companies do not currently fall under due diligence rules, they soon will. "The local banks are required by law to have due diligence. We already comply with the coming rule and use the same due diligence as the local banks do," said Gonzalez. She stressed that all information is still confidential, unless there is a legal reason to provide it.
In 2007, a new product will be launched, a Limited Liability Corporation based on the American Delaware Corporation. While it is still under discussion at the government level, legislation should soon be finalized.
"The vehicle will offer great flexibility for incorporator. The set up structure will be similar to the U.S. but based on Aruban law. The tax burden for the LLC will depend on the company and its shareholders. It will also depend on the company’s activities, whether the company is doing business on or offshore," explained Doorenbos.
Insurance
Insurance companies incorporated in Aruba are under strict supervision from the Central Bank. "The companies have to comply with list of requirements from central bank in order to obtain license. They must show collateral and do extensive financial reporting in addition to their annual reports," explained Gonzalez. In Aruba, the insurance business is comprised mostly of reinsurance and captive insurance companies.
Intellectual property and trademarks
Intellectual property, trademarks, domain names, and patents, even if patented in another country, have to be registered in Aruba.
"Only registering a trademark in the US does not protect you in Aruba," said Doorenbos. "It is always better to have it registered in all the jurisdictions where you want it protected."
The average cost for one application of one trademark in up to three classes is about $600 all fees included.
In most countries you must be a local entity to register a trademark. If you are not local, then you have to use a registered agent.
Future growth
Gonzalez is optimistic about the future of the financial services sector in Aruba. By offering more products and services, more high quality employment will be offered.
She emphasized that, "Aruba is politically stable and we have stable banks with good monetary policy. The Central Bank has very high standards requiring the membership of all banks on the island."
"It is common in Aruba to have high quality standards. Almost everyone here speaks English and the dollar is widely accepted on the island. We make it easy for investors and we are very welcoming here," said Doorenbos.
