THE BOTTOM LINE
- Significant Financial Risk: Relocating employees face substantial, unexpected import duties (in this case, over Afl. 51,000, approx. USD $28,000) on vehicles that do not meet strict exemption criteria.
- “Use” is More Than Ownership: The six-month ownership rule for tax-free vehicle importation is not enough. The executive must physically be in the country of origin and using the vehicle for that full period. Spending significant time in Aruba during the six months prior to the move will disqualify the exemption.
- Timing is Everything: Purchasing a high-value vehicle shortly before applying for a residence permit is a major red flag for tax authorities. Courts will view this as an attempt to circumvent import duties, regardless of the owner’s personal transportation needs.
THE DETAILS
A recent ruling from Aruba’s Court of First Instance provides a critical lesson for companies managing international assignments and for executives planning a move. The case involved an individual relocating from the U.S. who was denied a tax exemption on his Chevrolet Silverado pickup truck, resulting in an import duty bill of over Afl. 51,000. The dispute centered on a specific Aruban tax exemption for personal household goods, known as the ‘verhuisboedelvrijstelling,’ which has very specific conditions for motor vehicles intended to prevent tax avoidance.
The core of the court’s decision hinged on the six-month ‘use requirement.’ Aruban law stipulates that to be imported duty-free as part of household effects, a vehicle must have been both owned and used by the individual in their previous country of residence for at least six months before relocating. In this instance, the executive had purchased the car about seven months before officially moving. However, the court found that he had spent approximately five of those months physically present in Aruba. This simple fact made it impossible for him to have “used” the car in the U.S. for the mandatory six-month period, thereby nullifying the exemption.
The court’s reasoning underscores a critical principle: objective facts will always override subjective explanations. The executive argued that his low mileage and time away were consistent with his work-from-home lifestyle, but this was deemed irrelevant. The court focused on the timeline: the car was purchased in April, a residence permit was applied for in July, and the majority of the subsequent months were spent in Aruba. This sequence created a strong presumption that the vehicle was acquired primarily in anticipation of the move—exactly the scenario the law is designed to penalize. The ruling serves as a stark reminder that tax exemptions for relocating personnel require careful, long-term planning and strict adherence to both the letter and the spirit of the law.
SOURCE
Source: Court of First Instance of Aruba
