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10.4. Specific Regimes

Tonnage Tax Regime

Upon request, companies (and private entrepreneurs) may elect to report taxable income for corporate income tax as a certain percentage of the volume transported if they operate sea vessels sailing under the flag of Belgium or another EU Member State (or EEA country effective 1 January 2018) for the transport of goods or persons (i) on international sea routes, or (ii) on routes from and to installations at sea used for the exploration for, or the exploitation of, natural resources and certain related activities.

The regime is granted for an initial period of 10 years, with an automatic renewal every 10 years. After the request has been approved, taxable income is determined by applying daily coefficients with reference to the tonnage of the relevant vessel. The notional profits so computed are subject to corporate income tax at the normal rates. A reduced rate is applied in respect of certain vessels.

To qualify for the regime, a company must generally own the sea vessel or charter it under a bareboat agreement. Moreover, a company may create a separate business division which elects for the regime. Belgian companies or branches engaged in the management of vessels on behalf of third-party owners also qualify for the regime if at least 75% of the vessels are registered in the Belgian maritime register. Moreover, the company or branch must be exclusively engaged in the management of vessels and must bear full responsibility for the operation. Effective 1 January 2018, at least 51% of the on-shore or on-board positions must be carried out by EEA nationals in order to qualify for the regime. Further, it has been clarified that the qualifying activities include:

  • Activities that are essential to the operation of a vessel for the transport of goods or persons; and
  • Ancillary activities related to the operation of a vessel for the transport of goods or persons, provided that the profits from these activities do not exceed 50% of the total revenue from the operation of the vessel to which they are linked and, if ancillary activities relate to on-shore services which form an integral part of the transport, such services must be purchased by the taxpayer under market conditions (at arm's length).

Effective 1 January 2018, capital gains on a vessel benefiting from the tonnage tax regime are taxable if:

  • The vessel is disposed of within 24 months after it is registered under the tonnage tax regime unless the vessel has been transferred to a related company and continues to operate under the regime for the full 24-month period;
  • There is a sustained reduction of at least 30% in the net tonnage of the fleet for longer than two tax periods; or
  • There is a total or partial cessation of activities of the undertaking within nine tax periods after a company enters the regime.

Capital losses are not deductible. Losses from other activities may not be set off against the notional profits of the shipping division. Losses made before an election to apply the tonnage tax regime may only be carried over to years in which the regime is not applied.

Diamond Regime

The Program Act introduces the so-called ‘diamond regime’ for registered companies (including Belgian permanent establishments of foreign companies) active in the diamond sector. The taxable result of these companies is determined on a lump-sum basis, being 0.55% of the turnover from the diamond activities. Companies subject to the diamond regime cannot benefit from the notional interest deduction and cannot deduct losses carried forward. For certain registered traders of rough diamonds, the diamond regime is optional. This is effective starting with the tax year 2016 (financial years ending on 31 December 2015 at the earliest), subject to confirmation by the European Commission that this measure cannot be considered as illegal state aid.