Aruba Changes Tax Laws

by Amanda Banks, Tax-News.com, London

05 February 2008

Companies in Aruba have been alerted to some key changes to the jurisdiction's transfer pricing rules, which came into effect on 1st January, 2008.

In an advisory note to its clients, business advisory firm, Ernst & Young explained that the changes are centred on article 4 of the Aruba Profit Tax Ordinance, which lays down the 'arm's length' principle for intra-company accounts.

Prior to 2008, the arm's length principle was based on OECD guidance and common law. But changes introduced on 1st January 2008 have changed the intra-company relationship and added new documentation requirements.

Under the first change, it is now viewed as possible that there is also an intra-company relationship in a case in which one of the companies is not the shareholder of the other, according to the E&Y advisory note.

The second change stipulates that all transfer pricing methods should be laid down in documentation, and that these documents should tell the Aruba Tax Authority about the transfer-pricing method used, the reason for choosing that method, and the calculation of intra-company prices. These documentation requirements apply to transactions agreed on before 1st January 2008 but still applicable in 2008, the note explained.

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