Main | Web Analytics Vendor warns a fifth of pay-per-click activity may be Fraudulent. »
Belgian Gov't Reduces Taxes On Diamond Companies.
At the end of 2005, a new fiscal law was adopted that will make Belgium far more attractive to all companies doing business there —which means not only diamond companies, but firms from all business sectors and industries.
The principle of the new program relies on what’s been referred to as a “notional interest rate.” As of accounting year 2006, all Belgium-based companies will have the opportunity to calculate a totally fictitious interest rate on their equity. This interest rate — which is currently between 3.442 and 3.942 percent — will be deductible from the taxable profit, a measure that is likely to reduce the taxable profit of businesses to verylow levels. The effective tax burden, especially for larger capitalized companies, could drop from the usual 28 or 34 percent corporate income tax rate to the negligible figure of 6 percent in the best cases.
The new tax law does not have any stringent conditions — no employment condition, no investment condition, applicable to all companies, no limitation on activity — and will restore the balance between Antwerp and other competing diamond centers.
Kaushik Mehta of Eurostar Diamond Traders, however, has a different opinion: “It’s very good as you pay less tax. The notional interest will certainly help ease business in Belgium, but it’s still no match for Dubai, at least as far as their zero tax is concerned. Antwerp has other assets, such as a huge market, to compete with other diamond centers.”
The notional interest tax plan will also assist with respect to DeBeers Diamond Trading Company (DTC) and the Banks. The diamond industryr is typically a sector that requires large working capital and relatively small profit margins, and a substantial number of companies have capital booked as current account. Currently, this cannot be taken into consideration for the notional interest deduction and is booked as a loan. From this year onward, registration fees on capital increases of 0.5 percent are abolished and there is virtually no cost involved anymore in increasing the statutory capital. Therefore, it is useful to incorporate the loans/current accounts into statutory capital. This, of course, can substantially increase the equity of the company, which also results in an improved solvability toward third parties — this is equity against balance sheet total. Banks are, indeed, pushing diamond companies to move toward an equity of 15 percent-plus because traditionally the equity of Belgian diamond companies is very low. Also, for sightholders, DeBeers takes into consideration the financial strength of a company, which is reflected in the equity and solvability ratio.
Consequently, the larger the capital, the higher the amount of the notional interest deduction. This allows companies with larger capital to pay lower taxes on their profit and as a result have higher net profits, which, again, they can capitalize. The following year, the equity has grown with the increased net profits of the previous year on which the notional interest deduction is applicable. So, this creates a rollerball effect in which equities grow quicker and quicker and are constantly leveraged with the notional interest deduction the following year.
It’s been understood that the measure would also benefit smaller-size companies, depending on their degree of capitalization, as the law applies to all corporate entities. Percentwise, it can create the same result, but, of course, the nominal amounts are smaller.
The first cycle of the system will be completed within the year. Tax reduction is positive in that it spurs production and eventual tax revenue. The effects on consumer prices remains to be determined.
Comments
Hands down, Apple's app store wins by a mile. It's a huge selection of all sorts of apps vs a rather sad selection of a handful for Zune. Microsoft has plans, especially in the realm of games, but I'm not sure I'd want to bet on the future if this aspect is important to you. The iPod is a much better choice in that case.
Posted by: NFL Jerseys on April 7, 2011 12:49 PM
Howdie. This blog was totally interesting, mainly because I was searching for ideas on this subject last Friday.
Posted by: Daniel Migraine on April 20, 2011 1:51 PM
I had a great time reading through about your posts as I go through it extensively.
Posted by: Rosetta stone spanish on April 22, 2011 12:21 PM
Fantastic document, bookmarked for future referrence
Posted by: Christian Louboutin Sandals on April 23, 2011 1:06 PM
Th is information really helped me, I am sharing which has a number of friends.
Posted by: Rosetta stone languages on April 25, 2011 1:15 PM
Thanks for all the information. On a aspect observe, how do you take care of all the spam you get in your weblog? My new weblog is getting destroyed by random spammers and I've been spending loads of time and power deleting comments its merely not funny. . I get so drained preventing spam that I feed I must cease working a blog entirely.
Posted by: coupon bbs on May 22, 2011 5:10 AM
Truly educational article right here my friend. I simply wanted to comment & say keep up the good work. I?ve bookmarked your weblog right away as well as I?ll be to read more in the future my pal! Additionally nice colours on the theme it goes nicely using the weblog in my very humble opinion
Posted by: seo tools on June 4, 2011 1:42 AM
You positive do know what youre talking about. Man, this blog is just great! I cant wait to read more of what youve got to say. Im truly happy that I came across this when I did simply because I was really beginning to get bored with the entire blogging scene. Youve turned me around, man!
Posted by: Insulated Lunch Bags on June 12, 2011 2:49 PM
The beauty of these blogging engines and CMS platforms is the lack of limitations and ease of manipulation that permits developers to implement rich content and 'skin' the web site in such a way that with quite little effort 1 would in no way notice what it can be creating the website tick all without limiting content and effectiveness.
Posted by: terro ant killer on June 12, 2011 3:12 PM