The main tax incentives for shipping companies in Belgium
Belgian tax law offers several tax incentives for shipping companies. This memorandum gives a general overview of the main incentives.
1. The optional-tonnage tax regime
Belgian companies or the Belgian branches of foreign entities can opt for a special tonnage tax regime, according to which profit that is taxable in Belgium and that results from ocean shipping is assessed at a flat rate based on the tonnage of the seagoing vessels that have generated the profit. More precisely, the tonnage tax is determined on the basis of a virtual profit that is calculated by applying a notional profit rate to the tonnage and that is then subject to the normal corporate income-tax rate.
On 6 November 2017, the European Commission approved the continuation of this tonnage tax regime until the end of 2022. Belgium has nonetheless committed to a number of changes to its scheme to prevent any discrimination between shipping companies and registries of different European Economic Area States. We will keep you posted on any future amendments.
To be eligible for the Belgian tonnage tax regime, the following conditions must be met:
(i) the profit must result from the operation of a seagoing vessel that is doing one of the following:
- flying the flag of an EU Member State and that transports goods or persons as well as all activities directly connected with such operations over international maritime routes or over routes to and from installations at sea that are designed for the exploration or exploitation of natural resources
- flying the Belgian flag for the transport on the high seas of dredged materials resulting from the exploration or exploitation of natural resources at sea, if the operation of such seagoing vessel involves carrying such materials on the high seas for more than fifty percent of the vessel’s operating time during a given tax period
- flying the Belgian flag if more than fifty percent of the vessel’s actual operations during the tax period involve towing operations on the high seas and if such operations can be regarded as maritime transport
- the taxpayer must be the owner, co-owner or bareboat charterer of a seagoing vessel that is managed to a considerable extent in Belgium and which the taxpayer has not given out for bareboat chartering purposes; or
(ii) the taxpayer must mainly carry out the commercial management in Belgium of a seagoing vessel for another taxpayer, provided that the annual total of the net daily tonnages of the seagoing vessels for which it performs this commercial management does not exceed 3 times the annual total of the net daily tonnages it manages in the way referred to above (in this respect, seagoing vessels in co-ownership count for their full tonnage if a joint owner holds at least 5%); or
the taxpayer must be the time or voyage charterer of the seagoing vessel, provided that the annual total of the net daily tonnages of the seagoing vessels it charters on a time or voyage basis does not exceed three times the annual total of the net daily tonnages it manages in the way referred to above (in this respect, seagoing vessels in co-ownership count for their full tonnage if a joint owner holds at least 5%)
(iii) a request for a ruling must be filed in a timely manner with the Belgian tax authorities (this should, in principle, have been done the previous financial year).
Ship-management companies that manage seagoing vessels on behalf of third-party owners can also opt for the tonnage tax regime, provided that they meet certain conditions.
1.2 Tax features
The taxable profit is determined on a flat-rate basis per vessel, per day and per 100 net tons, based on the tonnage of the seagoing vessels that are generating the profit:
|Up to 1.000 tons:||EUR 1.00 per 100 net tons|
|From 1.001 to 10.000 tons:||EUR 0,60 per 100 net tons|
|From 10.001 to 20.000 tons:||EUR 0,40 per 100 net tons|
|From 20.001 to 40.000 tons:||EUR 0,20 per 100 net tons|
More than 40.000 tons:
EUR 0,05 per 100 net tons
The EUR 0.05 rate for the bracket over 40,000 net tons shall apply to vessels in just one of the follow scenarios:
- to sea-going vessels that have been acquired new
- to seagoing vessels less than five years old that have been registered under the flag of a non-EU Member State as from their delivery and during the entire period immediately preceding the taxable period during which taxable profits are assessed on a flat-rate basis for the first time in Belgium
- to seagoing vessels at least five years old that have been registered under the flag of a non-EU Member State for the five years immediately preceding the taxable period during which taxable profits have been assessed on a flat-rate basis for the first time in Belgium
In other cases, the rate of EUR 0.20 per 100 tons applies to vessels exceeding 40,000 net tons. For the implementation of this article, the age of a vessel is determined on the basis of the delivery date as established by the registrar of maritime mortgages or the competent registration authorities.
Capital gains or losses on seagoing vessels to which the tonnage tax system applies are tax exempt (they are deemed to be included in the profit established on the flat-rate basis).
Previously incurred losses cannot be deducted from the profit that is determined in accordance with the tonnage tax system. Such losses (not yet deducted) could, however, be deducted after the expiration of the period for which the profit was assessed on the basis of the tonnage tax system. Furthermore, shipping companies that opt for the tonnage tax regime cannot benefit from the notional interest-deduction regime.
The tonnage tax regime will apply from the taxable period that follows the one in which the ruling request was filed until the end of the taxable period that is closed during the tenth calendar year following that in which the ruling request was filed. At the end of that period, the system is extended for a period of the same length. The tonnage tax system can be cancelled by the taxpayer no later than three months before the expiry of the last taxable period of the 10 years.
If the Belgian tonnage tax system applies, the special optional system of depreciations and the investment allowance (see below) cannot be used.
The ordinary rules of Belgian corporate income tax will apply to all other activities of the company that are not subject to the tonnage tax system.
2. Alternative tax incentives
Other alternative tax incentives are available for sea-shipping companies that do not opt for the tonnage tax regime.
2.1 Special optional system of depreciation
The following depreciation percentages are allowed for new vessels, for jointly owned parts of such new seagoing vessels, and for shares in such new vessels:
- 20% for the financial year in which the new seagoing vessel is put into service
- 15% for each of the two financial years that follow
- 10% for each of the following financial years until the vessel is written off entirely
Seagoing vessels not acquired as new but used exclusively for the purpose of ocean shipping, jointly owned parts of such seagoing vessels, and shares in such vessels shall also be entitled to this special optional system of depreciation when such vessels are owned for the first time by a Belgian taxpayer.
2.2 Increased investment deduction
The investment deduction is equal to 30% of the purchase price of the seagoing vessels, for vessels obtained in new condition or for second-hand seagoing vessels that are owned for the first time by a Belgian taxpayer. If not enough profit is generated in a given taxable period to benefit from the investment allowance, the deduction can be carried forward to the following taxable period(s).
2.3 Exemption of capital gains realised on the sale of seagoing vessels
In principle, capital gains realised on seagoing vessels are subject to the normal Belgian corporate income tax rate if they are realised when the special tonnage tax regime is not applied. However, an exemption applies under all of the following conditions:
- the company realising the capital gain is exclusively engaged in the ocean shipping sector
- the capital gain is recorded on a separate reserve account, which is blocked
- the vessel has been recorded as a fixed asset for more than five years before it was aliened
- a sum equal to the selling price is reinvested in seagoing vessels, in shares in joint ownership of seagoing vessels, in interests or in shares of a company-ship operator whose registered office is located within the European Union
- the reinvestment is made no later than when the professional activity is terminated and within 5 years from the first day of the taxable period during which the capital gain was realised or from the first day of the penultimate taxable period that preceded the realisation of the capital gain
- the investment regarded as a reinvestment must be maintained as an asset for at least five years but may be replaced within three months of its alienation
- a special form must be enclosed with the tax return for the assessment year in which the capital gain was realised and for the following assessment years until the reinvestment is carried out
If the reinvestment is not done in the way and on the schedule given above, the capital gain realised will be considered a profit of the taxable period during which the reinvestment period has expired. As of 2018, a late payment interest of minimum 4% will become due in such case.
MarcDhaeneAttorney at law Local Partner
Marc Dhaene is a member of the Loyens & Loeff International Tax Services in Belgium and of the Tax Controversy and Litigation Team. His expertise covers a broad range of international and domestic corporate tax issues.T: +32 2 743 43 22 E: firstname.lastname@example.org