Companies can opt for the Belgian tonnage tax regime if they derive profits from ocean shipping activities. In this respect, profit created by ocean shipping activities concerns profit gained from the exploitation of a sea vessel:
= the profit from the operation of a sea-going vessel, flying a EU flag, for the transport of goods/persons (i) on international maritime routes or (ii) on routes to and from installations at sea for exploration/exploitation of natural resources, and profits of activities directly linked with these operations.
The condition that such operations should take place under the flag of a EU Member State does not apply if the conditions mentioned under 3.1, paragraph 8 and 9 of communication C(2004) 43 of the European Commission – Community guidelines on State aid to maritime transport – are met. In this case, a shipping company can still benefit from the tonnage tax regime if at least 60% of its tonnage operates under a Community flag.
= the profit from the operation of a Belgian flagged sea-going vessel for transport on the high seas of dredged materials resulting from the exploration or exploitation of natural resources, if these operations represent more than 50% of the vessel’s operating time in the taxable period.
= the profits from the operation of a Belgian flagged sea-going tug vessel, if more than 50% of the vessel’s activity in the taxable period consists of towage on the high seas.
The operation of a sea-going vessel
- taxpayer is owner/co-owner/bareboat charterer of a sea-going vessel that is managed to a considerable extent from Belgium and that he has not chartered out under a bareboat contract.
- taxpayer carries out the commercial management of sea-going vessels in Belgium for other taxpayers, provided annual total of net daily tonnage of the managed vessels ≤ 3 times annual total of net daily tonnage of the vessels he manages as owner/co-owner/bareboat charterer .
- taxpayer holds sea-going vessels in time- or voyage charter, provided the annual total of the tonnage so chartered ≤ 3 times annual total of net daily tonnage of the vessels he manages as owner/co-owner/bareboat charterer .
It is also possible for existing companies to create a separate shipping division whenever they opt for tonnage tax for their shipping activities besides other (non-shipping) activities. In this respect, a division is defined as a separate operational unit that meets the conditions of art. 46, §1, 2° BITC92 and art. 680 Companies Code. In addition, such a division should:
- keep separate accounts;
- present itself under division name;
- have a separate staff list;
- divisional cost allocation, i.e. every cost is charged to a certain division (excl. overhead expenses);
- no cost recharges between divisions (excl. overhead expenses).
Ship management for the account of third party
Ship management activities on behalf of third parties may qualify for the Belgian tonnage tax regime, provided that the taxpayer is entrusted with the technical and crew management of a sea-going vessel and assumes the full responsibility for the operation of the vessel for the account of a third party. In addition, they must take over from the owner all the duties and responsibilities with respect to the international maritime safety and pollution prevention.
Furthermore, the following conditions will have to be fulfilled in order to be allowed to apply the tonnage tax system:
- At least 75% of the number of seagoing vessels managed by third parties must be registered in the Belgian Register of Shipping;
- The companies must have the management of seagoing vessels as their exclusive activity.
Managed to a considerable extent from Belgium
To claim the benefit of the Belgian tonnage tax regime, the vessels must be managed to a considerable extent from Belgium.
The preparatory documents to the tonnage tax law clarify that the word “management” refers to the main responsibility for the shipping activities, among others, (not exhaustively listed):
- making agreements relating to the ship;
- taking care of (re)supplying the ship;
- taking care of the ship’s maintenance;
- entering into insurance contracts;
- keeping the books;
- meeting administrative formalities;
- appointing Masters.
The taxpayer is required to carry out or to have most of these activities carried out in Belgium.
In practice, in order to assess whether a vessel is managed to a considerable extent from Belgium, the Belgian Shipowners Association has developed a self-assessment matrix consisting of a number of questions covering the carrying out of (i) the strategic and commercial management of the vessel, (ii) its technical management and (iii) the crew management. Each question has its own weighing factor in the total of the matrix in order to support the position that a vessel is managed from Belgium – i.e. that the taxpayer carries out most of these management activities in Belgium or that he has them carried out in Belgium – a minimum score must be reached .
Taxable basis under the tonnage tax regime
Under the tonnage tax regime, profits from the operation of seagoing vessels are determined on a lump sum basis. The tonnage tax basis is calculated per vessel, per day and per 100 net tons, in accordance with the scale below. The number of days to be taken into account is the number of calendar days of ownership or, for bareboat charters, the number foreseen in the charter party.
- bracket up to 1,000 net tons = EUR 1 per 100 net ton per day
- bracket from 1,000 to 10,000 net tons: EUR 0.60 per 100 net ton per day
- bracket from 10,000 to 20,000 net tons: EUR 0.40 per 100 net ton per day
- bracket from 20,000 to 40,000 net tons: EUR 0.20 per 100 net ton per day
- bracket over 40,000 net tons: EUR 0.05 per 100 net ton per day
Note that the EUR 0.05 rate only applies:
- for new vessels
- for vessels < 5 years that used to sail under a non-EU flag
- for vessels ≥ 5 years that used to sail under a non-EU flag over the last 5 years.
|Netto tonnage of vessel (t)||Daily profit||Max/day|
|up 1.000 t||t/100x 1 EUR||10 EUR|
|from 1.000 to 10.000 t||[0,6 EUR x (t > 1.000) / 100] + 10 EUR||64 EUR|
|from 10.000 to 20.000 t||[0,4 EUR x (t > 10.000) / 100] + 64 EUR||104 EUR|
|from 20.000 to 40.000 t||[0,2 EUR x (t > 20.000) / 100] + 104 EUR||144 EUR|
|boven 40.000 t||[0,05 EUR x (t > 40.000) / 100] + 144 EUR||(…) EUR|
The tonnage tax basis thus determined is taxed at the normal corporate tax rate of 33.99%.
Capital gains / capital losses on vessels under tonnage tax regime
The tonnage tax basis is an all-in tax basis, hence the lump sum tonnage tax profit is assumed to include the capital gain/loss on a vessel.
Dividends received deduction/Notional interest deduction/Tax losses and Investment deduction
There is no set-off of dividends-received deduction, notional interest deduction, tax losses and/or investment deduction against the lump sum tonnage profit, but set off remains possible against profit of other divisions of the company, if any.
Tax losses and other deductions carry-forward that already existed upon the switch to tonnage tax are suspended. They are reactivated after expiry of the tonnage tax period.
If the tonnage tax company received dividends, the dividends received would either be included in the lump-sum taxable base of the tonnage tax regime or benefit from the dividend-received deduction. This is valid if the holding activities are considered/treated as a separate division, independent from the tonnage tax activities (the profits from the holding activities would then be subject to the normal corporate income tax regime. The necessary conditions should be met in order to benefit from the dividend-received deduction).
Dividends from and capital gains on shares in tonnage tax companies
Dividends received from a tonnage tax subsidiary (i.e. dividends paid by a tonnage tax company to a regular Belgian company) can benefit from the dividend-received deduction (participation exemption at the level of the regular Belgian company) provided that the necessary conditions for the deduction are met. D ividends distributed by Belgian tonnage tax companies meet the subject-to-tax condition.
Capital gains on shares of a tonnage tax company are subject to a 0.412% capital gains tax provided that the shares were held for at least one year.
Formally, election for the tonnage tax regime is made by filing a ruling request with the tax authorities’ Ruling Commission.
In principle, the Commission decides within three months whether the conditions for application of the tonnage tax regime are met, but this period can be extended by mutual agreement between taxpayer and tax authorities. If the ruling is granted, the tonnage tax regime will be applicable for ten years as of the first accounting year following the year in which the request was filed. At the end of this ten-year period the regime is tacitly extended for another ten years. Opting out is possible at least three months before the end of the last taxable period of the ten years.
Alternative tax incentives
Shipping companies that have not elected to be taxed under the tonnage tax, and hence subject to the general corporate tax regime, can nevertheless benefit from certain specific tax incentives:
(i) an optional system of accelerated depreciation for new vessels and for second-hand vessels that come into possession of a Belgian taxpayer for the first time;
(ii) a tax exemption of capital gains on the sale of vessels, subject to a reinvestment condition;
(iii) an investment deduction of 30% of the purchase price of new vessels or of second-hand vessels that come into possession of a Belgian taxpayer for the first time.
New vessels exclusively used for the purposes of ocean shipping are allowed to use the following depreciation percentages:
– For the financial year of putting into service: 20%
– For each of the two following financial years: 15%
– Then, per financial year up to the complete write-off: 10%
Seagoing vessels not acquired as new, and exclusively used for the purposes of ocean shipping are entitled to the abovementioned depreciation method provided that a Belgian tax payer owns these vessels for the first time. Vessels acquired from other Belgian tax payers will therefore not qualify for this accelerated depreciation method.
Shipping companies that have opted for tonnage tax cannot benefit from this accelerated depreciation regime.
Taxation of capital gains
Capital gains realized on the sale of sea vessels are exempt from corporate income tax, if:
– The sea vessel is recorded during the five previous years as a tangible asset; and
– The capital gains should be and remain subject to an intangibility condition; and
– A timely and valid reinvestment should take place at an amount equal to the selling value.
The reinvestment must be done at the latest at the time of termination of the professional activity and within a period of five years from the first day of the taxable period during which the capital gain was realized or from the first day of the penultimate period that preceded the realization of the capital gain. If the reinvestment does not satisfy these conditions, the realized capital gains are considered to be profits of the taxable period in which the reinvestment period ends.
The investment considered as reinvestment must be maintained as an asset during at least five years but can possibly be replaced within three months after it alienation.
This capital exemption regime does not apply during the period in which the company was subject to tonnage tax.
Domestic companies and Belgian branches of foreign companies can benefit from an investment deduction of 30% of the purchase price of seagoing vessels if the following conditions are met:
- The companies exclusively carry out ocean shipping activities;
- The seagoing vessels are obtained in new condition or second-hand but are owned for the first time by a Belgian taxpayer.
The investment deduction can be carried forward in case of insufficient profits in a taxable period. Investment deduction that was not deducted when tonnage tax was applied for the first time can again be used after the termination of the tonnage tax regime, as the company becomes subject again to the normal corporate income tax regime.
This 30% investment deduction does not apply during the period in which the company was subject to tonnage tax.