Persistence in (Tax) Litigation Pays Off

Congratulations are in order for Bucuti Beach Hotel, Grant Thornton, and the Aruba Hotel and Tourism Association (AHATA) following the recent tax court ruling in favor of Bucuti. The September 2024 decision vindicates the hotel’s persistent fight against retroactively applying the 12.5% tourist tax, affirming justice – though delayed.

Civil Summary Court: Early Setback for AHATA

The legal dispute began in early 2023, when AHATA, represented by Gomez Coffie Law, initiated civil summary proceedings on behalf of AHATA’s members. At issue was the government’s sudden increase in the tourist tax from 9.5% to 12.5%, effective January 1, 2023, implemented without a transitional provision. Hotels had already booked guests and collected total payments for stays scheduled after the start of the year based on the lower rate of 9.5%. AHATA argued that the actions of the tax department were unfair and requested that hotels apply the old rate for reservations made and paid for in 2022, citing the principle of legitimate expectations.

The crux of their case was an email from the tax authority dated December 29, 2022, which confirmed that bookings paid for in 2022 would still be subject to the 9.5% rate. However, in a ruling issued on March 10, 2023, the civil summary court rejected AHATA’s arguments as it was not convinced the arguments would ultimately prevail in tax court. 

The Tax Court Victory: Justice Served

Bucuti Beach Hotel continued to challenge the tax increase in formal tax proceedings. In a case led by Hans Ruiter, Bucuti argued that the hotel had a legitimate expectation that bookings made and paid for in 2022 should be taxed at the 9.5% rate, as was assured by the December 29, 2022, email from the tax authority. The same arguments presented in summary proceedings. The case hinged on the principle of legitimate expectations, a cornerstone of fair governance in tax matters. On September 23, 2024, the Tax Court of Aruba ruled in favor of Bucuti Beach Hotel. The court recognized that the tax authority’s communication had created legitimate expectations and that the tax department was bound to honor its assurances. The court found that Bucuti Beach Hotel was entitled to rely on the December 2022 email stating that the lower tax rate would apply to prepaid bookings. As a result, the hotel was awarded a refund of Afl. 119,872.38, reflecting the excess tax paid at the higher rate​.

Same Arguments, Different Outcomes

The same arguments presented by AHATA in the civil summary proceedings, which were rejected in early 2023, were ultimately upheld by the tax court in 2024. Both cases relied on the principle of legitimate expectations, yet they produced contrasting outcomes. The tax court gave greater weight to the December 29 email. It recognized that businesses like Bucuti Beach Hotel had justifiably relied on the government’s communication when preparing their 2023 tourist tax returns. 

Lessons for the Future

The contrasting outcomes between the civil summary and tax court proceedings highlight the importance of persistence in legal matters. Although AHATA’s arguments were initially dismissed, Bucuti Beach Hotel’s determination to pursue formal tax proceedings led to a successful outcome. This outcome demonstrates that even when initial (summary proceedings) rulings are unfavorable, there is value in fighting for what is fair and right, especially when supported by strong legal principles, like the principle of legitimate expectations.

Congratulations

Congratulations to Bucuti Beach Hotel, AHATA, and especially to Grant Thornton for their outstanding tax casework and continued support in the civil summary proceedings. Your efforts have ensured that justice, though delayed, has been served.