The so-called "Carat Tax", the institutionalized tax regime which the Belgian federal government implemented for the Belgian diamond trade in tax year 2016, yielded significantly higher revenues in 2017 than expected, according to Belgian newspapers De Standaard and Gazet van Antwerpen. The special tax on diamonds delivered $84 million (€68.4 million, converted at average 90-day exchange rate) to the Treasury against forecasted earnings of $61.25 million (€50 million), and dwarfed last year's earnings of $62.7 million (€51.2 million), a nearly 34% increase in revenues.
The tax regimes in the four major diamond midstream trading centers - Antwerp, India, Dubai and Israel - have been the topic of great discussion and significant change in recent years. The beginning of this year saw the tax policies in both Belgium (Antwerp) and Israel (Tel Aviv) change. These countries levied a minimum tax on diamond companies, which was levied as a percentage of the turnover. While this was termed as a “turnover-based tax”, it was never truly a turnover-based tax.
According to The Economic Times, Indian diamond traders that participate in rough diamond auctions at Mumbai's Indian Diamond Trading Centre (IDTC) are complaining that taxation issues are reducing their activity to mere window shopping. "Diamantaires can see the rough diamonds they bid for at the IDTC, but the delivery doesn't happen locally .. despite their successful bids at Bharat Diamond Bourse", the newspaper writes.
The Belgian Parliament has officially adopted the 'Diamond Regime', commonly known as the 'Carat Tax', as the new fiscal system for the Antwerp diamond industry. The new system stipulates that companies will no longer be taxed on the basis of their profit but on a fixed percentage of their turnover - thereby eliminating complicated discussions with tax authorities about the value of inventory, which is difficult to assess.
Industry representative body Antwerp World Diamond Centre (AWDC) is confident that the adoption of a new fiscal Diamond Regime - commonly known as the 'Carat Tax' - will give a new impetus to the Antwerp diamond industry and will attract new companies to the diamond capital, or encourage those that had left to return, writes Belgian daily De Tijd. Antwerp's diamantaires recognize their tax burden will increase, "But we accept this fact," said one prominent trader. "Our main concern is legal certainty," which the Carat Tax will provide.
By Chaim Even-Zohar. Reprinted from Diamond Intelligence Briefs by special arrangement. Click here to read the first article.
By Chaim Even-Zohar. Reprinted from Diamond Intelligence Briefs by special arrangement. Read the second part of this article here.
After years of discussion between the Antwerp diamond industry and the Belgian Government, in 2015 it was decided to introduce the “Diamond Regime” tax system, pending European Commission approval. Today the EC announced that the fiscal regime does not constitute State aid, and gave the green light to what has come to be known as the "Carat Tax". Implementation of this new tax regime will put an end to complex discussions between the Antwerp diamond industry and tax authorities on the control and valuation of diamond traders' stock.
Over 350 Antwerp diamond traders attended the second Carat Tax Information Session, organized by the AWDC to explain the details of the so-called "Carat Tax". One month ago, following the formal decision of the European Commission, the Belgian Federal Government received official authorization for the introduction of the ‘Carat Tax’. This new regime has been enshrined in law by the Belgian federal government, and is applicable to all registered diamond traders as from tax year 2017. The corporate tax is levied on a lump sum amount, defined as a percentage of the turnover of the company.
Belgian newspaper Gazet van Antwerpen reports that Belgium's Federal Council of Ministers has finalized and approved the legislative framework accompanying the budget proposal, including the new tax proposal for the diamond industry. According to Belgium's Minister of Finance, Van Overtveldt, the new tax system, calculated as 0.55% of turnover, will result in an additional €50 million in tax revenue, which is double the amount of taxes currently paid by the diamond industry.
By Chaim Even-Zohar. Reprinted from Diamond Intelligence Briefs by special arrangement.
The phone went silent. I had just outlined the underlying principles of the new turnover tax contemplated for Antwerp’s diamond sector to an Indian friend in Dubai – it made him speechless. When he finally did speak, he said: “Wow, if what you say is true, then we can come back to Antwerp. There would be no reason whatsoever to be here in Dubai. We’ll be close to my children again.”
The Belgian Federal Government recently agreed to introduce a simplified tax system for the Belgian diamond industry. Commonly known as the “Carat Tax”, diamantaires will henceforth be taxed on a lump-sum basis of turnover rather than actual profits, which are highly difficult to determine. De Standard newspaper reports that government sources have claimed that the rate is to be fixed at 0.55%. Discussions are ongoing.