Documentation requirement

As of 1 January 2008, a documentation requirement was included in the National Ordinance on Profit Tax (LWB) with regard to transactions between affiliated companies (such as sister companies).

The introduction of this documentation obligation resulted from the codification of the arm's length principle, as per the same date. This principle concerns the generally accepted tax principle that associated enterprises must agree on terms regarding their mutual legal relationships that correspond to the terms that would have been agreed upon between independent enterprises. For example, an arm's length interest should be charged on a loan granted by a parent company to a subsidiary.

These conditions must be documented. This implies that the administration must include information showing how these conditions have been arrived at and showing that there are conditions that would also have been agreed upon by independent companies (transfer pricing documentation).

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Standardized documentation requirement multinational group 

From 1 January 2020, a multinational group with consolidated group revenues of Afl. 1,500,000,000 or more will be subject to a standardized documentation requirement: Country-by-Country (CbC) reporting. CbC reporting is the implementation of action point 13 of the OECD Base Erosion and Profit Shifting (BEPS) project.

Filing obligation country report and currency fluctuations

For the purpose of clarity, the CbC filing requirement in Aruba (as contained in the NOPT) will be applied in a manner consistent with the OECD guidance on currency fluctuations, such that in respect of an multinational group whose Ultimate Parent Entity is located in a jurisdiction other than Aruba and the jurisdiction of the Ultimate Parent Entity has implemented a reporting threshold that is a near equivalent of EUR 750 million in domestic currency as it was at January 2015, an MNE Group that complies with this local threshold should not be exposed to local filing in Aruba.

For further guidance on this matter refer to Guidance on the Implementation of CbC Reporting, Question 1, Section IV relating to “Impact of currency fluctuations on the agreed EUR 750 million threshold (June 2016)”.

The reporting entity 

According to CbC reporting, the reporting entity of the multinational group must submit an annual country report to the tax authorities in the country of which this entity is resident for tax purposes. The reporting entity is the ultimate parent entity, the surrogate parent entity, or another group entity as referred to in Article 28(2) or (3) LWB.

What contains the country report?

The country report contains information about:

  • the profits before Income Tax earned in the various tax jurisdictions;
  • the turnover of affiliated and non-affiliated transactions;
  • Profit Tax paid;
  • Income Tax recognized in the financial statements;
  • paid-up capital;
  • accumulated profits;
  • number of employees;
  • value of tangible assets other than cash or cash equivalents;
  • a description of each group entity of the multinational group indicating the State of tax residence of that group entity, and if different;
  • the State under whose law that group entity is established;
  • the nature of the principal business activity or activities of that group entity.

For the country report, the OECD has developed a template that Aruba also uses. The country report is then automatically exchanged between the tax administrations of the various countries.

Notification

Aruba-based entities of the multinational group must notify the Aruba Tax Authority which entity within the multinational group will be submitting the country report and in which country the reporting entity is established. This notification must be received by the Aruba Tax Authority no later than the last day of each reporting year.

Compilation and submission of country report

For the compilation of the country report, please consult the ministerial regulation on additional documentation requirements for transfer pricing (Dutch version), in which detailed rules are laid down on form and content. 

You must submit the country report to the Aruba Tax Authority within one year after the end of the reporting year in XML format via the MDES portal.

Group file and local file

In addition to CbC reporting, there are 2 more standardized documentation requirements that stem from Action Point 13 of the OECD BEPS project and have been implemented in the LWB. These are:

  • the group file
  • the local file

The obligation to prepare a group file and a local file applies in Aruba, in brief, only to group entities of a multinational group that has achieved at least Afl. 100,000,000 in consolidated group income.

Both files must be included in the local records of the group entity liable for tax in Aruba. This must be done within the term set for filing the income tax return (therefore for the first time no later than 31 May or, if a postponement has been granted for filing the return, no later than 30 November). The Aruba Tax Authority have the option to request the group file and/or local file; therefore, these do not have to be provided automatically every year.

The purpose of the group file and the local file in this context is to substantiate the transfer prices used in related relationships. The group file includes an overview of the transfer pricing policy of the entire group. The local file should contain the related transactions in which the company liable for tax in Aruba, is involved. The local file must also include the profit allocation of any permanent establishment. 

The group file and the local file can be drawn up in Dutch or in English.

Non-compliance

Non-compliance with the aforementioned obligations is subject to legal sanctions, administrative fines and criminal prosecution. 

Do you have any questions?

Do you have a substantive question about the CbC regulations? For example about the notification or about definitions used in the country report, group file and local file? Please contact the Aruba Tax Authority. You can also e-mail your question to the CbC team within the Aruba Tax Authority via: Competent Authority Aruba, caa@impuesto.aw

Laws and Regulations

These documents are presented in Dutch.