Caribbean islands are very attractive for individuals seeking real estate to invest in. Whatever the purpose of this investment might be, somewhere down the road it almost always becomes a business investment, albeit the resale of it.
Ownership of a second home abroad has fiscal implications for you personally. Taxation of a second home in many countries is stiff; make sure you talk to an accountant/attorney before buying a real estate object in the Caribbean. Aruba’s tax office cooperates with many tax collectors’ offices around the world.
What options are there on wanting to do business with (already own) real estate in Aruba?
As a real estate owner in principal it is not allowed to do business with it. The thought process behind this is that as a foreign national you need a permit to engage in any commercial activity on the island. This permit is to somehow protect the local entrepreneur in a very open economy which the Aruban one is known for.
All individuals and companies who engage in monetary gain in the form of rent from a property owned in Aruba are considered being commercially active and therefore must obtain a permit to engage in such activity.
An individual/company which sells real estate objects in Aruba as a primary business activity, will have to be in possession of the necessary economic permits to do so. A very important exception to this rule is when an individual is selling his own property. In this case you are free to sell the property without restrictions.
How about the money flow?
The sale of a real estate object in Aruba requires the money to flow through Aruba. For example, a real estate owner who wants to sell his or her vacation home in Aruba to the next door neighbor in the home country is not allowed to deposit the money directly on the personal bank account of the seller in the home country, but rather deposit on a local Aruban bank account. After payment of all taxes and fees in Aruba the money is transferable without restriction. This same principle is valid upon rental of a property.
How can this be controlled?
Needless to say that controlling the money flow is very difficult, if not impossible. In theory, if there were legislation, the notary investigates the money flow at the time of a sale of property.
How about renting my Aruba vacation home?
Continuing to use above hypothetical example, renting to the neighbor falls under a similar principal as a purchase. As mentioned before, officially a permit is required in order to rent the property for monetary gain. Additionally the money has to flow through Aruba as well. To bypass this rule is actually simple. Hire a local property manager and let them handle the rent and money flow locally and you bypass, legally, all of the above.