12. Tax
VAT
All persons carrying out an economic activity on a regular and independent basis, and providing goods or services which are not fully exempt from VAT by law, must charge value added tax (VAT) and must therefore register for a unique VAT number. VAT is calculated on the tax base at a rate, which depends on the nature of the transition, which can be:
· 6 % mainly for basic products and social services;
· 12% for certain goods and services which are economically or socially important;
· 21% for all transactions of goods or services which do not fall under the other two categories.
Special regulations apply for the Belgian diamond industry. According to article 40 §1 and 42 § 4 of VAT-legislation (Wetboek van de Belasting op Toegevoegde Waarde) the following transactions with regard to diamonds are exempt VAT:
- Supply of unmounted diamonds to Belgian registered diamond traders (including diamond manufacturers) exclusively trading in unmounted diamonds;
- Import of unmounted diamonds by Belgian registered diamond traders (including diamond manufacturers) exclusively trading in unmounted diamonds;
- Services with regard to unmounted diamonds provided to Belgian registered diamond traders (including diamond manufacturers) exclusively trading in unmounted diamonds.
The export of goods – including diamonds – performed by (or for the account of) the trader (in this case the Belgian diamond trader) is exempt VAT (art. 39 VAT-Legislation). To benefit from this exemption, the trader needs to have proof that the goods are indeed exported (e.g. export customs declaration).
When importing diamonds or buying diamonds on the local market, Belgian diamond traders benefit from the VAT exemption as mentioned in article 40§1 and 42§4. When also dealing in diamond Jewelry, the Belgian diamond traders can no longer profit from this exemption. Diamonds mounted in jewelry are submitted to 21% VAT (and 2,5 % import duties when importing from outside the E.U.).
No other import or export duties are due for Belgian diamond traders.
For more information, it is advisable to contact an accountant. Please find several suggestions in the list of contacts.
Corporate tax
All companies based in Belgium are liable for corporate income tax (vennootschapsbelasting) if they have their official headquarters, their principal establishment, their management headquarters or administrative headquarters in Belgium and if they are engaged in a profit-making activity. Belgium has a corporate income tax rate of 33,99% (including crisis contribution of 0,99%).Companies are obliged to make quarterly advance tax payments:
· for the first quarter, no later than 10th April
· for the second quarter, no later than 10th July
· for the third quarter, no later than 10th October
· for the fourth quarter, no later than 20th December
Carat tax or the Diamond Regime
The Carat Tax or the so-called “Diamond Regime” introduces a lump sum taxation for registered diamond traders in Belgium selling from their own diamond stock. In essence, the new Regime is characterized by two key (cumulative) rules.
The principal rule is that the diamond dealers’ gross margin will be fixed for income tax purposes (hence, not in the financial statements) on a lump sum basis. More in particular, their “cost of goods sold” is set at 97.9% of the turnover realized during the taxable period, thus, resulting in a lump sum gross margin of 2.1% on turnover. The substitution of the diamond dealers’ gross margin for Belgian income tax purposes occurs irrespective of the actual gross margin as reflected in their financial statements.
That being said, because the Diamond Regime does not alter the other Belgian income tax rules, its impact is not invasive meaning that operating expenses remain deductible, tax losses carried forward can still be deducted and/or the Belgian notional income deduction remains applicable.
However, as a secondary rule, the diamond dealers’ minimal taxable basis (thus, still subject to the applicable income tax rate either as a corporation or a physical person) can, in principle, never be less than 0.55% on turnover. This secondary rule functions as a so-called ‘de minimis’ clause to determine the minimal taxable basis for registered diamond traders.
The new Regime is applicable as of tax year 2017, i.e. for accounting years ending per 31 December 2016 (or later).
In short, the Diamond Regime provides clarity, predictability and certainty to the diamond trade industry. Indeed, the well-known diamond stock inspection difficulties (i.e. the track & trace as well as the valuation issues) are fully taken out of the equation for Belgian income tax purposes.
More importantly, the new Regime has formally been approved by the European Commission as a ‘no state aid’ regime on 29 July 2016.
The Diamond Regime is applicable to all registered diamond dealers selling out of their inventory.
Applicability of the Diamond Regime to brokers, depends on how the goods are sold:
- If a broker sells goods in the name of the principal (and the brokers’ name isn’t mentioned on the invoice), the broker isn’t subject to the Diamond Regime.
- If a broker makes the invoice in its proper name but only buys goods in view of the sale he contracted, then he isn’t subject to the Diamond Regime on condition that the invoice mentions “sale on behalf of principal” and/or if the goods aren’t displayed on the brokers’ balance sheet.
For further information on the Diamond Regime, your Belgian specialized accountant or tax consultant.
