Belgian law provides for a tax friendly treatment of copyright royalties, provided certain conditions are met. Do you create works that are protected by copyright, and do you transfer your rights to e.g. your own company or to a client? If you receive a separate compensation for such transfer, then you might qualify for this tax friendly treatment. Note that it is recommended to remain reasonable and realistic in the assessment of the royalties to be paid. We also recommend that you properly document the transfer of copyrights and the royalty payments in a contractual document. We have solid experience with drafting such documents, and always base our assessment on the factual circumstances and on previous decisions taken in similar cases.
What is the relevant tax rate? The tax rate is only 15%, instead of the regular progressive tax rate of up to 50%. In reality, the tax rate drops even further (to 7.5% for the lowest scale), thanks to lump sum expense deductions. Note that this tax-friendly treatment of copyright payments is subject to certain ceilings.
Who can benefit from this tax regime? Only natural persons (human beings, no corporations) can benefit from this tax treatment. In reality, this fiscal treatment is relevant mainly for business owners, freelancers (self-employed), and employees.
What are the conditions?
- Only for copyrighted works: This fiscal regime is only valid for the transfer of copyright (not trademarks, not for the transfer of mere ideas or know-how). In practice, the following professions are potentially eligible for the tax-friendly copyright transfer: software developers, designers, musicians, authors, artists, marketers, directors, architects, lecturers, photographers, actors, dancers, journalists, etc. Note that not all creations will be copyrighted. Note also that you have to make sure that you owned the copyright in the first place. Also, the valuation of the royalties will depend on several factors such as the type of work (for example, some software will have greater value, some architectural designs are more original than others, etc.).
- Only for actual transfers of licences of copyright: It is highly recommended to describe the transfer or the licence of copyrights in sufficient detail in the transfer agreement, together with the copyright royalties that will be paid by the acquirer of the rights.
- Only if the revenues are actually generated from the transfer or licence of the copyrights: If the royalties are not described in sufficient detail in the transfer/licence agreement, then the Belgian tax authorities will treat the transfer/licence as been done free of charge (meaning that you will not benefit from the tax-friendly treatment). Note also that the compensation for the transfer/licence must correspond to realistic market conditions. We recommend that you use concrete parameters and factual circumstances in your contract. In some circumstances, you can rely on previous decisions of the Belgian Ruling Commission.
In case of doubt, you can always ask for a preliminary decision by the Ruling Commission.
Do not hesitate to contact us for more information or for a first opinion.