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European Commission - Press release

State aid: Commission authorises alternative income tax regime for wholesale diamond sector in Belgium

Brussels, 29 July 2016

The European Commission has found that Belgian corporate tax provisions applicable to the wholesale diamond sector were in line with EU State aid rules. The provisions do not selectively favour certain companies and therefore involve no State aid within the meaning of EU rules.

In May 2015, Belgium notified to the Commission plans to introduce a specific income tax regime for diamond traders to address specific difficulties in the application of the general income tax regime to the sector. The Commission's assessment showed that the measure, as amended by the Belgian authorities in the meantime, is designed in such a way that it minimises the possibility of selective advantages to certain companies in the wholesale diamond sector.

Under the general Belgian corporate tax system, a taxpayer's taxable income depends in the first place on the profit registered in the accounts. For wholesale traders in rough and polished diamonds, their profit depends largely on the value of the inventory of diamonds registered in their accounts. However, since the valuation of the stones requires significant expertise, it is difficult for the Belgian tax administration to assess and correct the value of diamond inventories through tax audits. Moreover, diamonds at wholesale level are bought and sold as commodities, which adds to the complexity of tracing individual stones in traders' accounts. As a result, there is often litigation between diamond traders and the tax administration, creating legal uncertainty.

The new specific income tax regime for diamond traders in Belgium (the "Diamond Regime") seeks to address this difficulty by introducing a method to calculate the income tax base of diamond traders that does not require the tax administration to review the valuation of diamonds in the traders' accounts. Under the Diamond Regime, the calculation of a trader's gross profit is based on a fixed percentage of turnover, which also results in a fixed calculation of the value of stones purchased and the variation in the inventory during the accounting period (cost of goods sold).

The Commission has assessed the measure under EU State aid rules to ensure that it does not unduly favour diamond traders over other businesses, which are subject to the normal income tax regime in Belgium. It also assessed whether the scheme favours certain diamonds traders within the wholesale diamond sector in Belgium.The Commission found that the Diamond Regime ensures that diamond traders pay their fair share of tax, while avoiding the tax inspection difficulties related to assessment of the inventories. It is in fact expected to increase the tax paid by the wholesale diamond sector. According to Belgium's estimates, the wholesale diamond sector is likely to pay at least €50 million more income tax every year, i.e. to pay more than three times the taxes it used to pay under the normal income tax regime.

Moreover, the regular checks and safeguards under the Diamond Regime further limit the possibility of undue advantages to diamond traders due to the special tax treatment. In particular, the new regime introduces a minimum tax base set at 0.55% of the trader's turnover. Belgium has committed to re-examine the level of the applicable gross profit margin percentage under the Diamond Regime at least every 5 years.

On this basis, the Commission has concluded that the Diamond Regime involves no State aid within the meaning of EU rules.


In May 2015, the Belgian authorities notified plans for introducing a specific income tax regime for the activities of wholesale trade in rough and polished diamonds in Belgium. In October 2015, the Belgian authorities requested the suspension of the notification procedure and, following discussions with the Commission, in March 2016 amended the notification to propose an alternative tax regime for the activities of diamond traders (the 'Diamond Regime').

This is because the verification of the taxable profit of diamond traders is complicated given the difficulties in the valuation and follow-up of individual stones in the accounts. At wholesale level, diamonds are traded as commodities and then sorted and sold again, usually in different assortments; or they are cut and polished and then sold. After transformation, the stones have a different aspect and value and it is impossible to know from which rough stone they originate. As a consequence, it is practically impossible for tax auditors to follow-up individual stones and their inventories and to assess the value of cut and polished diamonds based on the wholesalers' accounts.

Currently, diamond wholesale traders in Belgium are subject to the general income tax rules. A specific inspection technique was designed in the 1990s in accordance with the Belgian tax code and used until now by the Belgian administration. However, it did not solve the valuation and follow-up difficulties.

Under the new Diamond Regime, a trader's gross profit margin is fixed at 2.1% of its turnover. This also fixes the cost of goods sold in the trader's accounts, which includes the variation in the inventory during the accounting period. All other elements for determining the income tax base follow the normal taxation rules. The percentage was fixed at a level such that at least 75% of the wholesale diamond traders would have paid a higher amount of taxes under the new Diamond Regime than they did over the period 2012-2014 under the ordinary rules of taxation of income. In fact, the gross profit margin of 2.1% represents the weighted average of the Upper quartile gross profit margin of small, medium-sized and large diamond traders for the period of 2012-2014 (the median being 1.65%).

To ensure that diamond traders pay their fair share of taxes, the new regime introduces a minimum tax base set at 0.55% of the diamond trader's turnover and Belgium has committed to re-examine the fixed gross profit margin percentage at least every 5 years.

The non-confidential version of the decisions will be made available under the case number SA.42007 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.


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General public inquiries: Europe Direct by phone 00 800 67 89 10 11 or by email

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