Reform tax regime copyright

The new copyright tax regime entered into force on 1 January 2023. Copyright income is subject to a favourable tax regime, provided certain conditions are met. The Programme law of 26 December 2022 limits the scope of this regime and sets new limits.

Context

Copyright income is subject to a special tax regime that has been applied in more and more cases in recent years and has evolved into a full-fledged method of remuneration in some sectors of activity.

The government wanted to define the concept of copyright more restrictively and set new limits on the application of this regime in order to return to the original objectives of the special regime applicable to income from the assignment or licensing of copyright. This has been done in the meantime. 

What is copyright?

As of 1 January 2023, the nature of the income involved, but also the status of the recipients of the income, must be taken into account.

What? : Clarification of the term "copyright and neighbouring rights"

The nature of the income involved is defined by reference to the Code of Economic Law. It is income:

• that results from the assignment or licensing by the original owner of copyright and neighbouring rights, as referred to in Book XI, Title 5 of the Code of Economic Law or by analogous provisions of foreign law; 
• that relates to original literary or artistic works referred to in Article XI.165 of the same Code or to works by performing artists referred to in Article XI.205 of the same Code.

By referring to the Economic Law Code, this new definition gives a more precise and restrictive definition than before to the notions of "works" and "copyright". Furthermore, the interpretation of this new definition may be broad or more restrictive and is subject to discussion in certain sectors (e.g. the IT sector). 

Who? : Clarification of personal scope

Under the previous tax regime, no specific conditions were required for the beneficiary of the copyright. 

Under the new regime, copyright owners, whose income falls under the special tax regime, must:

• either hold a "certificate of work in the arts" referred to in the Act establishing the Commission for Work in the Arts and improving the social security protection of workers in the arts (as long as this new certificate does not exist, the current "artist's card" is tolerated);
• or, failing that, assign or license the rights to their copyrighted work protected by neighbouring rights to a third party for communication to the public, for public performance or for reproduction

Previous tax regime (until 31 December 2022)

In summary, the first bracket of copyright income, i.e. an amount of 64,070€ (2022 income), was taxed at a rate of 15% (withholding tax of 15%).

In addition, the effective tax rate was further reduced by the application of flat-rate expenses which amounted to 50% on the first bracket of 17,090€ and 25% on the bracket from 17,090.01€ to 34,170€, with a maximum of 12,815€ (amounts applicable to 2022 income).

Current tax regime (as of 1 January 2023)

In addition to the restrictions in scope (see above), the law has introduced new limits (ceilings). However, a transitional regime is provided for certain copyright beneficiaries in 2022 (see below).   

An absolute limit

Copyright is considered movable income to the extent that it does not exceed the basic annual amount of 37,500€ (indexed amount of 70,220€ for the 2023 income), above which it is taxed as professional income. When the duration of the taxable period does not correspond to a calendar year for a reason other than death, this amount is prorated according to the duration of the taxable period.

A relative limit

In addition to the ceiling of 37,500€ (indexed in 2023 to 70,220€), a relative ceiling is introduced. This determines that the ratio between copyright remuneration and total remuneration, which includes remuneration for work performed, may not exceed 50% in 2023, 40% in 2024 and 30% from 2025.

A new rule: the average of the previous four taxable periods

The application of the favourable tax regime is also subject to the condition that the average annual income from copyright, which has been received during the four taxable periods preceding the taxable period concerned, does not exceed the basic amount (37,500€ indexed to 70,220€ in 2023). 

Withholding tax

Provided that the conditions established by law and the above-mentioned limits are met, copyright is considered as movable income and is subject to a deduction of 15% (withholding tax), after applying a flat rate for professional expenses. Each debtor of income must withhold and pay the withholding tax on the amounts he allocates or pays to the recipient of this income.

The 15% withholding tax is therefore deducted from the author's net income, i.e., income after application of the following (expenses) lump sums (amounts applicable to 2023 income):

Maximum for 2023: 14,042.50€

Transitional tax regime for the year 2023

A transitional provision is provided to allow for gradual adaptation to the rights and obligations arising from the new provisions.

The favourable tax regime will continue to apply for 2023 income to taxpayers who benefited from it in 2022 and who can no longer avail themselves of it in 2023 under the new regime (the assessment of this condition is made by the beneficiary of the copyright).

For the application of the transitional regime, the basic ceiling above which copyright income is treated as professional income is reduced by half. It therefore amounts to 35,110€. The same rule applies to the ceilings for flat-rate expenses (50% up to 9,360€ and 25% between 9,360.01€ and 18,720€, with a maximum of 7,020€).

Entry into force

The new tax regime came into force on 1 January 2023 and is therefore applicable to income paid or allocated from 1 January 2023.

And on a social security level?

Compensation that can be considered as copyright income for tax purposes (see above "What is copyright?") could benefit from an favourable social security treatment if the following three conditions are met:

• during the four-quarter period of the calendar year, the amount allocated as compensation for the assignment or licensing of copyright or neighbouring rights amounts to no more than 30% of the sum of:
  • the total amount of remuneration subject to social security to which the worker is entitled at the expense of his employer;
  • and the total amount of compensation allocated by his employer for the assignment or licensing of copyright and neighbouring rights;
• the remuneration and compensation for the assignment or licensing of copyright or neighbouring rights shall be determined in a manner consistent with the market. The employer shall keep the supporting documents for the various assessment elements at the disposal of the National Social Security Office;
• the amount of the compensation is reported in the quarterly declaration of the quarter in which the compensation is allocated.

If these three conditions are met, the compensation for the transfer or licensing of copyright and neighbouring rights would not be subject to social security contributions. 

We would like to draw your attention to the fact that the legal text has not yet been published in the Belgian Official Journal. Changes could therefore still occur.

This new social security regime would come into force on 1 January 2023.

For Partena customers

If you are a Partena customer and are affected by this regime in 2022, you will be contacted in order to provide us with the relevant information for the copyright treatment.

Would you like additional information?

If you would like more information on the copyright regime and/or the new scope of this regime, please contact our consultants at globalmobility@partena.be: globalmobility@partena.be

Sources: Programme Law of 26 December 2022, Belgian Official Journal of 30 December 2022 (1st edition); Draft Royal Decree amending article 19 of the Royal Decree of 28 November 1969 implementing the Act of 27 June 1969 amending the Decree-Law of 28 December 1944 on social security for employed persons.