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Thread: Income Taxes in Aruba

  1. #1
    Junior Member Hannah E's Avatar
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    Income Taxes in Aruba

    We're US citizens considering relocating to Aruba, and I'm trying to get a complete and straight answer about the income tax situation. The US foreign earned income exclusion will not cover our entire income, so I'm not sure if we'll be double taxed on the remaining portion. (There is no tax treaty between the US and Aruba that I could find). Has anyone faced this situation, and can you point me in the direction of a reputable (and responsive) tax prep expert in Aruba? I've tried contacting two different Aruba-based CPAs with no response. On a related note, do you as ex-pats feel the pinch of excessive taxes from the US (which are high enough) and Aruba (which are the highest tax rates in the world)? Everything else about the island seems acceptable to perfect, but the taxes really concern me. Any advice or recommendations would be most appreciated.

  2. #2
    Senior Member Aruba4ever's Avatar
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    Congrats on your possible move. So you are planning on being there full-time? Without earning residency you can only stay 180 days max which I am sure you have already learned. Tax laws are very complicated regardless of where you are...good luck finding a good CPA. Have you tried to visit any CPAs while on the island? How you lived on the island for any extended period of time yet? Good luck in your search.

  3. #3
    Aruba since 1979
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    Andrea J.'s Avatar
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    hi
    welcome to the aruba.com community forum.

    we have a few expats that are members here.
    i have messaged a few and sent them links to check out your question.

    i am sorry, that i cannot answer any of your questions.

    when my husband and i retired 9 years ago, we had considered retiring to aruba.
    our accountant and financial planner sat together and ran numbers and it was a no go.
    both of these folks told us that the taxes would kill us and if we wanted to go badly enough, to buy a small condo and live there 6 months of the year.
    we chose florida instead.

    Quote Originally Posted by Hannah E View Post
    We're US citizens considering relocating to Aruba, and I'm trying to get a complete and straight answer about the income tax situation. The US foreign earned income exclusion will not cover our entire income, so I'm not sure if we'll be double taxed on the remaining portion. (There is no tax treaty between the US and Aruba that I could find). Has anyone faced this situation, and can you point me in the direction of a reputable (and responsive) tax prep expert in Aruba? I've tried contacting two different Aruba-based CPAs with no response. On a related note, do you as ex-pats feel the pinch of excessive taxes from the US (which are high enough) and Aruba (which are the highest tax rates in the world)? Everything else about the island seems acceptable to perfect, but the taxes really concern me. Any advice or recommendations would be most appreciated.

  4. #4
    Senior Member schexc's Avatar
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    Like Andrea, we considered the same thing. I do not have direct answers for you but out CPA also told us not to achieve residency. I did not inquire to as why at the time because it is not our first intent. We have a meeting with him when we return to the states and I'll get some more specifics for you, but I imagine you'll have your answers by then. I will tell you that in our stay's on the island that we have run into two people from the states that have dual residency and neither spoke in a negative fashion about it, but again nothing on the topic was brought up specifically.

    As in most situations taxes apply differently to each owns situation, but we'd be very interested in what you find out.

    Great Thread!
    Trip #13 Coming Up Next In October.

    THE ARUBA PEARL. OUR COUPLE'S RETREAT.
    https://youtu.be/hfk7YBj3Z1k

  5. #5
    Super Moderator Jacki's Avatar
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    Welcome to the Aruba.com Community Forum!

    I'm exciting to see the responses you get!
    Jacki ~ loving Aruba from NJ

  6. #6
    Member Travelinman's Avatar
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    Hi Hannah,

    I am a bit confused also. I researched the same thing as I am applying for a work permit and he US the foreign earned income exclusion will not cover my income either. It was almost a show stopper for me. This is what I have found so far.

    If you make more than $170,000 USD, your taxes owed in Aruba will be 59%. Your tax liability in the US would be any income over $102,000 (foreign income exclusion amount). And if you lived abroad for the entire year, you can deduct housing expenses at up to $36,000 annually for Aruba. (or $98.36 daily for less than a full year)

    However I think that is all moot because there is a paragraph in IRS pub 54 (page 25) that states the following:

    You can take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. Taken as a deduction, foreign income taxes reduce your taxable income. Taken as a credit, foreign income taxes reduce your tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U.S. tax liability.

    If I understand correctly, with a 59% tax rate in Aruba (which is higher than the US max of 39.6%) the taxes owed to the US would be nil due to taking taxes paid as a tax credit.

    I would like to hear a definitive answer from any expats that make more than $170,000 USD also. I have a Dutch friend that is a CPA and has lived in Aruba for 20 years and she "believes" that there will be no taxes owed to the US at that tax rate. However she is not a US tax professional.


    https://www.expatinfodesk.com/expat-...tax-liability/
    http://www.wtsaruba.com/aruba-tax-sy...al-income-tax/
    https://www.irs.gov/pub/irs-drop/n-16-21.pdf
    https://www.irs.gov/pub/irs-pdf/p54.pdf

    This is what my research has amounted to at this point. If anyone has more data to share or make corrections to my above statements, please do so. I have also pinged my hiring manager who is an Expat and am awaiting his response that I will share here. (He is well over the max income rates also)

    thanks!

    -Rich

  7. #7
    Member Travelinman's Avatar
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    I heard back from my hiring manager (expat) and he said "Yes, you get a “foreign tax credit” each year that you balance against the U.S. Taxes owed. I am not a CPA. My taxes are done for me by KPMG."

  8. #8
    Senior Member Aruba4ever's Avatar
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    59% is off the charts! When we make our move in 12 odd years we won't be looking for anymore than a condo for 180 days. I can't imagine giving up almost $6 for every $10 I make in income...wow!

    Have you looked into the difference tax rates for capital gains verse income or is it all taxed at 59% for that income amount? I know I pay a certain rate for my income and a much lower rate for my capital gains. If they had a rate like the us (15%) for long term cap gains it would not be bad at all but I am guessing that is not the case in Aruba.

  9. #9
    Member Travelinman's Avatar
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    Hi Aruba4ever...

    Yes, capital gains is much lower (as in the US) but at the end of the day, I wouldn't care if it were a 70% income tax. My tax rate in the US is pretty high now if you count my state income tax, federal income tax, SS, sales tax, property tax etc.

    Depending on where you live, the property tax could be cheaper also. On a $320,000 home, your property tax is only $1,200 per year. Here in the Chicago suburbs, that same priced home would be taxed at $11,000

    http://www.wtsaruba.com/aruba-tax-sy...al-income-tax/

  10. #10
    Senior Member Aruba4ever's Avatar
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    Point taken. I live in taxachusetts so I know all about crazy real estate taxes...ours are not at the same rate as Chicago as the 11k tax payment would be a house valued at approx 580k or so in the town I live in.

    avelinman;314066]Hi Aruba4ever...

    Yes, capital gains is much lower (as in the US) but at the end of the day, I wouldn't care if it were a 70% income tax. My tax rate in the US is pretty high now if you count my state income tax, federal income tax, SS, sales tax, property tax etc.

    Depending on where you live, the property tax could be cheaper also. On a $320,000 home, your property tax is only $1,200 per year. Here in the Chicago suburbs, that same priced home would be taxed at $11,000

    http://www.wtsaruba.com/aruba-tax-sy...al-income-tax/[/QUOTE]

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