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Belgium’s Carat Tax Passed into Law

Dec 18, 2016 8:04 AM   By Rapaport News
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Belgium’s Parliament approved the new Carat Tax that is expected to increase stability for the trade by making tax bills more predictable.

The levy, enshrined into law December 15, will come into effect for all registered diamond traders for the tax year 2017. This means it will apply to income generated in the current year.

The corporate tax regime enables traders to forecast tax payments based on sales, according to the Antwerp World Diamond Centre (AWDC), which supported the introduction of the new law. It is levied on a lump sum amount, which is fixed as 97.9 percent of revenue, or an assumed gross margin of 2.1 percent.

Companies can then subtract expenses and tax deductions from that margin, although the net taxable income after deductions cannot be less than 0.55 percent of revenue. This ‘floor rate’ will be 0.65 percent for the first year of the levy.

The new system will also improve diamond trading companies’ access to financing by strengthening their capital base, the AWDC said.

The tax has generally been well received by the trade as it removes the complexity of the current profit-based system, which requires a valuation of inventory. The new setup lets companies “focus on running their businesses rather than running their books,” Erik Jens, head of Diamond & Jewellery Clients at ABN Amro, said in a recent interview with Rapaport News.

Even so, at least 75 percent of diamond traders will end up paying more tax than they do under the existing system, the European Commission (EC) concluded in a review of the proposals earlier this year. Total tax collected from the sector will increase by at least $52.3 million (EUR 50 million), more than triple the amount currently paid, the EC predicted.
Tags: ABN Amro, Antwerp, AWDC, Belgium, EC, Erik Jens, EU, European Commission, Rapaport News
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