The Government of Aruba has taken a significant step to enhance the purchasing power of its citizens by announcing a reduction in income and wage taxes. This decision, implemented via government decree, will provide meaningful financial relief for individuals and families across the island.
What’s Changing?
Effective January 1, 2025, and retroactively applied, the following changes have been made to Aruba’s tax structure:
Reduction of Wage Tax Tariff:The wage tax tariff of 10% has been completely eliminated, dropping to 0%.
Tax-Free Income Threshold:
Income up to AFL 30,000 remains untaxed, under the "vrije voet" (tax-free allowance).
The previous 10% tax on income between AFL 30,000 and AFL 64,930 has been reduced to 0%.
What Does This Mean?
In practical terms, all income earned up to AFL 64,930 is now tax-free. This change will enable workers to retain more of their earnings, enhancing their financial well-being.
For example:
A person earning AFL 25,000 annually will continue to pay no taxes.
A person earning AFL 50,000 annually will now see the tax on income between AFL 30,000 and AFL 50,000 completely waived.
Why Is This Important?
The reduction in taxes is part of the government’s efforts to improve the cost of living and stimulate the local economy. With more disposable income, residents are expected to have greater financial flexibility to cover essential expenses, save, or invest.
Looking Ahead
As this policy takes effect retroactively from January 1, 2025, it’s advisable for taxpayers to stay informed about how this change may affect their financial planning. Employers and payroll processors will need to adjust systems accordingly to reflect the new tax structure.
This bold move underscores the government’s commitment to addressing the financial challenges faced by the Aruban community, fostering a more equitable economic environment.
Stay tuned for more updates on how these changes will continue to shape Aruba’s economic landscape.
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