Copyright tax optimisation in Belgium
Copyright Tax Optimisation – Belgian law provides for a tax friendly treatment of copyright royalties, provided certain conditions are met. This copyright tax optimisation scheme is frequently used by software developers / software architects, marketeers, photographers, actors, architects, and other creative profiles.
What is the relevant tax rate for copyright royalties?
The tax rate for copyright payouts in Belgium 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), because you can benefit from lump sum expense deductions. Note that this tax-friendly treatment of copyright payments is subject to certain maximum caps (see below).
Below is a schematic overview of the fiscal thresholds for copyright payments for the income year 2021 (these thresholds are indexed every year):
|Copyright royalties||Expense deductions||Taxable||Tax rate|
|0 € – 16.680 €||50% (8.340 €)||8.340 €||1.251 € (7,5%)|
|16.680 € – 33.360 €||25% (4.170 €)||12.510 €||1.876,5 € (11,25%)|
|33.360 € – 62.550 €||0% (0 €)||29.190 €||4.378,5 € (15% )|
|> 62.550 €||Progressive income tax between 25% and 50%|
In other words, if you receive € 62,550 in copyright payments (royalties) in 2021, you will pay approximately 12% tax or € 7,506.
Who can benefit from this copyright tax regime?
This copyright fiscal regime is relevant for business owners, freelancers (self-employed), and employees.
In practice, the following professions are potentially eligible for the tax-friendly copyright transfer regime: software developers, software architects, designers, musicians, authors, artists, marketeers, film/TV directors, architects, lecturers, photographers, actors, dancers, journalists, etc.
This copyright tax regime is only valid for the transfer of copyright (not for trademarks; not for the transfer of know-how). Note that not all creations will be protected by copyright. Note also that you have to make sure that you owned the copyright in the first place.
It is highly recommended to describe the transfer (or licence) of copyrights in sufficient detail in a written contract, together with the copyright royalties that will be paid.
What is a realistic valuation of copyright royalties?
The compensation for the transfer (or licence) of copyrights must be realistic. We recommend that you use concrete parameters and factual circumstances in your valuation.The valuation of the copyright compensation (royalties) will depend on several factors such as the type of work (for example, some architectural designs are more valuable or more original than others, etc.). In some circumstances, you can rely on previous decisions of the Belgian Ruling Commission.
In general, a fee of 12.5% of the (relevant) turnover is accepted as a compensation for the transfer of copyrights. Of course, the copyright compensation must always be assessed on a case-by-case basis. A compensation calculated as a percentage of the remuneration of the author is also possible (for managers as well as for employees and freelancers).
If the royalties are not described in sufficient detail in a transfer/licence agreement, then the Belgian tax authorities might decide that the transfer/licence has been done free of charge (meaning that you will not benefit from the tax-friendly treatment).
If you receive a copyright royalty from the company of which you are also the manager, you must make sure that you receive a least 45.000 euros remuneration from your company (including benefits). We also advise to always limit the copyright royalties to maximum half of the result of the financial year.
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 about copyright tax optimisation in Belgium.
Bart Van Besien