Lieze Czech – July 29th, 2021 – Belgian law provides for a tax friendly treatment of copyright income, provided certain conditions are met. Do you create literary and artistic works, and do you transfer or license your copyrights in exchange for a renumeration? Then you might benefit from this favorable tax regime.
This article explains what copyrights are, how this favorable tax regime works, which situations it covers and why getting an advance tax ruling with the Belgian tax authorities is advisable.
What is protected by copyright?
A copyright protects literary and artistic works in a very broad sense and can subsist in any work in which the basic legal conditions (i.e. tangible form and originality) are united.
This includes all kind of creations, such as literary, musical and dramatic works but also choreographic works, architectural works, software, web-design and layout, material design, photographs, audiovisual works, etc.
Hereby, the work is actually protected in an automatic way and without any formality. As an author, you don’t need to take any additional measures to benefit from the copyright protection of your work. Copyright is granted automatically as soon as the conditions of protection are fulfilled.
Which sector can be covered by this regime?
This tax friendly copyright regime is set out in Article 17, §1, 5° of the Belgian Income Tax Code 1992 and is relevant for employees, freelancers, and business owners.
In practice, following sectors can easily benefit from this special tax regime: authors, artists, dancers, journalists, architects, musicians, designers, photographers, software developers, actors, marketeers etc.
What are the requirements for this regime?
This copyright tax regime only applies if (1) there is a transfer or license of copyrights and (2) the author receives monetary compensation in return. According to Article 17, §1, 5° of the BITC 1992, this income is taxable as “moveable income”.
In this respect, we recommend our clients to describe the transfer or license of copyrights in a written contract, together with the copyright royalties that will be paid.
What is the relevant tax rate for copyright royalties?
This means that in Belgium the tax rate for copyright payouts is only 15%, instead of the regular progressive tax rate of up to 50%. This tax rate can drop even further to 7,5% for the lowest scale because of lump sum expense deductions.
For income year 2021, the maximum amount for distributions in royalties is €62.550. This amount is subdivided into different levels with separate deductible fixed costs.
Below you will find a schematic overview of the fiscal thresholds for copyright renumerations for the income year 2021:
|Copyright royalties||Expense deductions||Taxable||Tax rate|
|€0 -€ 16.680||50%||€ 8.340||7,5%|
|€16.680 – €33.360||25 %||€ 12.510||11.25 %|
|€33.360 – €62.550||0%||€ 29.190||15%|
|> €62.550||Taxed as such under the usual progressive rates (between 25% and 50%)|
Once above the amount of € 62.550, the income will be regarded as “professional income” and will be taxed as such under the usual progressive rates.
The tax due must be withheld at source and paid directly to the Belgian tax authorities within 15 days of the payment.
A realistic valuation of copyright royalties…
The Belgian tax authorities generally do not accept that your entire income consists of a copyright income. That said, the renumeration for the transfer or license of copyrights must be realistic. This valuation often depends on several factors such as the type of work and is demonstrated by previous rulings of the Belgian Ruling Commission.
How can companies make use of this favorable regime?
- Draw up a copyright agreement
In order to make use of this favorable tax regime, there must be an effective transfer or license from one party to another. Hereby it is important to provide a clear distinction between the “normal” salary of the person concerned and the remuneration for this transfer or licensing.
- Request a prior ruling from the Belgian tax authorities
Even though a company can decide for itself whether or not to make use of this tax regime. We recommend nevertheless to request a prior ruling from the tax authorities. This is in particular because the tax authorities adopt a strict approach and impose additional requirements in practice. This is certainly the case when it comes to the valuation of copyright royalties.
By getting a ruling from the tax authorities, your company obtains legal certainty and is sure during a period of 5 years that the Belgian tax authorities won’t come back to levy additional taxes .
What can we do for you?
Our team can assist your company with the application of the favourable tax regime income resulting from the transfer or licensing of copyrights under the employment or cooperation agreement.
This includes giving general advice, drawing up a copyright agreement or adapting the existing agreements where necessary and filing a request for an advance tax ruling with the Belgian Office for Advance Tax Rulings.