The new (para-)tax regime for copyright, which has been in force since 1 January 2023, still raises a number of questions. These questions relate to the impact on the IT sector, the current guidelines of the Tax Authorities and the Office for Advance Tax Rulings, the possibilities of introducing a remuneration policy that includes copyright income (and the potential associated risks), and the existence of alternative remuneration strategies.
More broadly, the new regime calls for a number of considerations in terms of human resources management, particularly with regard to retention and recruitment. In some companies, a comprehensive review of current remuneration policies may be in order.
Since 2008, copyright income has benefited from particularly favourable tax terms.
Specifically, copyright income is classed as income from movable assets and taxed at a rate of 15% up to a certain threshold (EUR 73,070 for the 2024 tax year). Above this threshold, it is generally regarded as professional income.
But that's not all. The taxable amount, subject to the 15% rate, is calculated after deduction of a flat-rate expense allowance. This results in an effective tax rate of between 7.5% and 12%.
More than a year ago, however, the legislator reformed this tax system, seeking to restrict its scope.
Why this reform? As the copyright tax regime has grown in popularity in recent years and spread across a wide range of business sectors, the Belgian authorities considered that it was being used too much as an attractive form of remuneration for many employees.
Tax treatment until the end of 2022
Until the end of 2022, all income from the assignment or licensing of works protected by copyright, related rights or licences referred to in Book XI of the Code of Economic Law benefited from favourable tax treatment.
New tax regime applicable from 2023
Since 1 January 2023, the new copyright tax regime has referred specifically to copyright, related rights and licences under Title 5 of Book XI of the Code of Economic Law.
In addition, the rights in question must now relate to original literary or artistic works or performers' performances (covered by Title 5 of the Code of Economic Law). It should be noted that these rights must be assigned with a view to their actual exploitation or use.
There is an additional condition. The person concerned must now either hold an arts worker's certificate, or transfer his or her rights to a third party for the purposes of communication to the public, public performance or reproduction.
Secondly, in addition to the current copyright cap, a second cap equal to 30% of the beneficiary's total remuneration has been introduced where the author is also remunerated for professional services. This percentage will be temporarily increased to 50% for 2023 and 40% for 2024.
Lastly, a final limit is introduced when the person concerned has received royalties over the last four years, with the average amount exceeding the cap in force for the income year concerned. In this case, the royalties for the current year are taxed at progressive rates (up to +-53.5%) in the same way as professional income.
Social security
Until 2022, remuneration paid in the form of royalties to employees was in principle subject to social security contributions.
Since 2023, copyright compensation received by employees may be exempt from social security contributions provided certain conditions are met.
Sylvie Dumortier, Tax Partner at Claeys & Engels
Justin Lennertz, Attorney – Associate at Claeys & Engels | Tax law
Would you like to find out more? Sylvie Dumortier and Justin Lennertz will be discussing these topics in detail at the seminar on 11 June 2024. They will help participants to understand the new tax landscape surrounding copyright and to adapt to these tax changes.