The copyright (and related rights) tax regime reform is embedded in the Program Law of December 26, 2022, published in the Belgian Official Journal on December 30, 2022. This tax reform came into force on January 1, 2023. Are there any actions that copyright holders should take to avoid undesirable effects?
By Samuel BELOTTI, Tax Lawyer at DALDEWOLF
The tax reform does not affect the tax rate on copyright income, which will still be 15% after deduction of expenses. However, the scope of this specific tax regime is considerably restricted, and new thresholds are to be introduced.
Artist’s certificate or a transfer of the copyrighted work
Copyrighted works must now be effectively exploited or used by the copyright holder, the licensee or a third party. Going forward, it will be compulsory for the taxpayer to produce an artist’s certificate or – alternatively – transfer the copyrighted work to a third party for the purpose of public distribution or reproduction. Undeniably, this new requirement will exclude from the new copyright tax regime certain professionals who create works without sharing them publicly (one thinks in particular of programmers creating softwares for internal use in their company, architects, etc).
In addition to the threshold introduced in 2008 by the tax legislator to benefit from the preferential 15% withholding tax rate (37,500€, indexed to 64,070€ for assessment year 2023), this reform introduces two additional thresholds:
- A 30% ratio: the annual copyright income cannot exceed 30% of the total annual remuneration of the taxpayer; this measure targets taxpayers who – besides the creation of a literary or artistic work – combine this creation with a linked service. If the creation of the work is not coupled with a supply of service, the 30% threshold does not apply ;
- Average of the last 4 taxable periods: the application of the tax benefit is now subject to the condition that the average annual gross income of the authors’ rights that have been received during the 4 previous taxable periods does not exceed the maximum indexed threshold of 37,500€. The idea of the tax legislator is to narrow down the new tax regime of copyrights to non recurrent income, in particular income received in the framework of artistic activities.
- 1. The 30% threshold will not come into force immediately. It will initially be 50% for assessment year 2024 and 40% for assessment year 2025. As of assessment year 2026, the 30% rate will apply.
- In addition, the Program Law provides for a transitional regime for taxpayers who were able to benefit from the previous copyrights regime but who will no longer be able to benefit from the new regime. These taxpayers will still be able to benefit from the regime for income received in FY 2023, but the threshold of 37,500€ (indexed) as well as the fixed expenses (indexed) will be halved.
Towards the end of 2022, the Belgian Ruling Office suspended all copyrightst tax rulings until the new regime came into force. The new copyright tax regime is now published and fully applicable; it would therefore make sense to be able once again to apply for a copyright ruling (as from FY 2023).
Taking the necessary steps without delay
Although not explicitly mentioned in the preparatory works, the government’s intention is clearly to exclude from the new copyright tax regime certain industries that are considered to be too distant from the artistic professions (ICT, amongst others). Our tax team at DALDEWOLF is here to assist and walk you through the maze of this copyright tax regime reform. We can analyze whether you are still eligible to benefit from the new regime; furthermore, we can also assist you in the context of a ruling request to provide you with the appropriate legal and tax certainty.