You create, content, code for software, websites, applications, graphics, texts, advertisements, … ? Do you know you can reduce your taxes with confidence ? Copyright Income scheme is your answer
Many IT professionals, CEOs and creative people are not aware that they can take advantage of one of the latest tax niches in Belgium: the copyright concession contract.
Some facts: copyright income can be taxed at 15% (or even less) instead of 50 to 65% on your professional income. Thanks to this service, you can save potentially large amounts of money per year. On average, 12k EUR/year are saved and the investment is profitable from the first year. Why would you exempt yourself from it?
However, be careful: the tax administration ensures that abuses are avoided through systematically targeted controls and eliminates misuse of the system, which is legitimate in itself. The use of “ready-made” model agreements that are not necessarily adapted to your situation may either lead to the application of an inappropriate regime, thus opening the door to obvious tax risk, or to you losing part of this tax advantage, which is a pity.
Only tailor-made advice can achieve the right balance between tax security and tax savings.
The best option for you? Optimization, security and expertise.
Our team will:
- Invite you for a first meeting where your situation will be weighted under different angles, especially from fiscal and IP standpoints;
- Evaluate to which extent this system can be beneficial to you;
- Draft your contract if you chooses to move forward with this;
- Invite you for a second meeting where you will receive:
- An optimized contract showing you the benefit of using this system;
- A demonstration of the benefit of this optimisation compared to a ruling procedure (still possible if you wish);
- A practical note for your accountant including all the additional formalities to be respected: invoice, VAT, withholding tax, etc.
This follow-up meeting ensures that you are ready to operate with your copyright regime in complete serenity.
One last thing : no cure no pay !
If this system is not profitable to you, we stop the service and do not charge you a cent for the work performed.
Frequently Asked Questions (FAQs)
It is often the case that the taxpayer thinks he is doing the right thing by answering himself directly or through his trustee to the tax official who asks him for information regarding the tax optimization of his copyright income. This reflex often proves to be counterproductive. It is highly recommended to contact a specialized advisor such as GOlegal to provide the tax auditor with a clear, complete, coherent, and well-founded answer. Failing to seek expert advice, the taxpayer risks, with the best intentions in the world, providing the tax auditor with an inadequate response, which could potentially jeopardize the practical defense of his interests.
No, certainly not. It is extremely important to take into account the variety of fiscal, social and administrative situations. Depending on whether the worker is involved in a company that is growing or not, that is listed or not, of which he or she owns shares or not, and depending on a multitude of other criteria, the implementation of the system can vary greatly. As a result, the customization and tailor-made nature that we bring to the services provided for the benefit of our clients takes into account the different aspects of our client’s profile in terms of the identification and valuation of these rights but also the overall context within which the implementation of the copyright income scheme is to take place. It is at this price that we can both offer a high level of legal security and at the same time propose a particularly interesting copyright income tax optimisation system.
No, but in practice it is recommended. On the one hand the copyright income regime often makes economic sense when the self-employed person is in a position to set up his own collecting society. On the other hand, at the level of implementation, we observe that it is much easier to call the copyright income scheme set up if the contract is concluded between the individual taxpayer and his management company rather than with the multitude of clients he might have. One of the reasons for this recommendation is that the client of a worker who applies the copyright income scheme must pay the withholding tax to the tax authorities. It is, of course, complicated to ask each client to make separate payments for each order: one to the worker for what is due to him and the other to the tax authorities for the withholding tax. To avoid this problem, the use of a management company is recommended because it allows the management company to bear the administrative effort of centralized payment of the withholding tax on copyright income. This system is the default implementation method for the tax optimization of other authors’ income.
Yes, this is necessary for self-employed persons. If the copyright income is limited to an annual amount of € 25.000 excluding VAT, the registration of the self-employed person or VAT exemption scheme will be necessary. If this amount of copyright income is higher, then it will be necessary to have a VAT number under the standard regime.
No, this is neither in accordance with the spirit of the law nor in accordance with the economic interests of the taxpayer who would proceed in this way. Several factors explain why the calculation of copyright income must be personal and tailor-made. On the one hand, the identification of activities, their type, creative intensity or originality differs from one worker to another. On the other hand, the value that copyright-protected activities represent within the taxpayer’s turnover may vary between workers. Finally, and also very importantly, it should be taken into account that this calculation may in some cases be carried out differently depending on other contextual elements relating to the worker’s tax situation.
Not to our knowledge.
Call GOlegal. GOlegal proposes a unique methodology that has the dual objective of making the copyright income regime as secure as possible without going through the ruling and, at the same time, proposing an optimization of the copyright that comes as close as possible to what the law allows.
Yes, in part. Copyright income can be part of the employees’ remuneration. However, it is, of course, excluded to pay employees exclusively in copyright. Moreover, contrary to self-employed persons, it is essential to keep in mind that copyright remuneration is still considered as a form of salary by the National Social Security Office.
In general, we estimate the benefit of copyright income for employees to increase from €2500 to €4500 per year.
Yes, there are copyrights on e-mails. However, it is important to distinguish between e-mails of a purely functional nature and e-mails where it is possible to detect the author’s personality mark. In other words, an e-mail that could have been generated by a robot and which has absolutely no originality can hardly be protected by copyright. On the other hand, e-mails that are more complex, more detailed, and involving a specific choice of words, for example, will be better protected by copyright for the precise reason that the originality of the e-mail will be much better respected.
What is protected by copyright is very broad, provided that it meets two conditions. The first condition is a condition of originality. Originality can be defined as the mark that creation bears and which reveals a personality part of its author. The originality thus relates to the link that exists between the personality of the author he works, by unique hypothesis, that he has created. The second condition is the condition of materialization. Materialization means that the original creation must necessarily be able to be apprehended by one of the 5 senses of the human body. This definition, which is both broad and restrictive, allows works as diverse as a speech, a film, music, a plan, a painting, a drawing, or a computer program to be considered as protected by copyright.
No. The tax authorities want to control this generosity, and, over the last ten years or so, they have established certain “recommendations” that are best controlled to avoid the risks of a recovery. These “recommendations” are often not mandatory, but they give an important indication to avoid the risk of abuse.
This is the law of 16 July 2008 organizing flat-rate taxation of copyright and related rights. For many years this law did not meet the interest it deserved. One of the reasons for this is the uncertainty that certain directives of the tax administration have caused the legal security attached to this regime. In the course of 2010, several clarifications, sometimes made by the Belgian courts and tribunals, have made it possible to implement the tax optimization of copyright income more predictable. As a result, we observe an increase in the implementation of this regime for different taxpayers.
We observe several errors on the part of taxpayers. The first mistake consists in copying someone else’s contract. A well-implemented copyright mechanism is based on a perfectly personal and custom-made assessment, implementation and enforcement of the scheme. The simple fact of copying a third party’s contract not only removes the taxpayer concerned about the personal and custom-made dimension of his copyright regime but also does not allow him to justify, in the case of a tax audit, the identification and valuation. He must be concerned about the copyrights that are subject to separate remuneration and taxed at the preferential rate of withholding tax.
Moreover, and this is the second frequently observed error, some taxpayers consider it appropriate to take the percentage of copyright remuneration out of their hat and, in their opinion, to moderate it to be on the safe side. There are double errors. On the one hand, this percentage is likely to be below the copyright amount to which they are entitled by law. In this case, the money saved by not using the appropriate expert service and then lost many times over, on each tax returns, by paying more taxes to the state than could have been saved by making an expert assessment of their copyright. On the other hand, as explained elsewhere, the tax authorities also control the method by which the percentage of copyright income has been calculated. By using an ultimately flat-rate percentage, the taxpayer, as well as any other lawyer he may decide to engage in a tax adjustment, is put in a tough position when he has to explain this method to the tax authorities. Finally, the third error we see is the overvaluation of copyright income. The tax authorities, under the law and their mission, take particular care to avoid abuses of this system. Consequently, the erroneous identification of activities protected by copyright or the overvaluation of the percentage of the taxpayer’s overall turnover represented by these activities creates a high risk of tax reassessment. In this case, the taxpayer runs the risk of having to pay the amount of tax and social security contributions that he mistakenly believed he could save and of having to pay heavy penalties also.
These are exceptions. In some cases, we recommend our clients to use the ruling. Firstly, in cases where the tax optimization mechanism for copyright income is implemented on the scale of a group of employees large enough to represent a tax risk for the company even in the case of a limited tax adjustment on an individual level. In other words, if a client wishes to allow a significant number of employees to benefit from this copyright tax optimization system, then it will be necessary to go through a ruling by the SDA. Failing to go through the SDA’s role, a tax audit may become more complicated because the tax auditor will see the size of the group of employees concerned by the copyright income tax optimization system as an opportunity to achieve a financially interesting adjustment even if the probability of its realization is very low. The other case where we can recommend our client to go through a ruling with the SDA, and the one where the client’s eligibility to the system of tax optimization of copyright income seems uncertain – in this case, we believe it is in the client’s interest to clarify the situation with the tax authorities by requesting a ruling that allows him to verify whether or not the application of this system is appropriate concerning his personal tax situation. GOlegal, in any case, is, of course, able to provide the professional and expert assistance required to enable the client to obtain the required ruling and this, of course, according to what the tax authorities consider acceptable.
It depends. As a general rule and as a matter of principle, we do not recommend going through the ruling. To understand this approach, it is necessary to put the ruling in context. When the Advance Rulings Service of the tax authorities is asked by a taxpayer to issue a ruling that points to the probable conformity of his tax situation with the interpretation of the law by the tax authorities, the taxpayer is seeking a form of legal certainty. But as we all know, security comes at a price. The tax authorities and this is a perfectly understandable way, when they receive a request for a ruling within the framework of the optimization of copyright income, will examine the taxpayer’s file but will only grant its validation at the price of a limitation of the tax advantage provided by the mechanism. This limitation is to be considered as the counterpart of the legal security offered by the ruling. In our experience, this counterpart sometimes heavily undermines (25% – 50%) the profitability of tax optimization. For this reason, we believe that, with few exceptions, the ruling does not serve the interests of our clients in an ideal way.
Three elements are checked. First, the tax authorities will check the existence of the contract. Second, they will examine whether the activities described in the contract are those carried out by the taxpayer in the course of his work. Finally – and this is very important – the tax authorities will check whether the quantification of copyright and the valuation of copyright are in accordance with the tax law and the interpretative guidelines given by the tax authorities. Very often, we find that taxpayers copy other people’s contracts or believe that a percentage that seems reasonable to them or their trustee is sufficient will be sheltered. That is not the case. On the contrary, it is of paramount importance to understand the mechanisms by which the identification and valuation of the taxpayer’s copyright can create robust legal certainty and control investigation by the tax administration.
Please note, however: the tax authorities take care to avoid abuses through targeted controls and the pursuit of bad applications of the scheme, which is legitimate in itself. The use of “ready-to-use” agreement models that are not always adapted to your situation risks implementing the inappropriate regime, thus opening the door to obvious tax risk or causing you to lose part of this tax advantage, which is a pity. Only tailor-made advice can achieve the right balance between tax security and tax savings.
Copyright income is taxed at a maximum rate of 15% (the marginal rate is generally between 7 and 11% excluding additional municipal taxes) instead of the usual 40 to 65% (including social security contributions) on your professional income. This tax system, therefore, allows for tax savings, which can be substantial.
Yes, although it is not recommended in absolute terms, it is possible. It is also advisable to issue an invoice and not to use the partner’s current account since the payment of copyright involves the simultaneous debiting of the withholding tax. This approach is possible but may pose a problem since the amount of copyright can, by hypothesis, only be determined with certainty at the end of the tax year.
No. This question has long created unfounded uncertainty about the legal security of the copyright income system. For several years, the advance rulings service of the tax authorities – the SDA or ruling- claimed that the granting of copyright income presupposed a prior increase in the worker’s remuneration. The system, therefore, did not, in absolute terms, make one’s taxes deduction, since one had to pay more, by hypothesis. This condition was, in fact, not laid down by law. Several years after the adoption of the 2008 law, the courts and tribunals decided definitively that no, the income should not be increased to consider part of it as copyright, but that, on the contrary, and as stated in the preparatory work of the law, a pure and straightforward requalification of the amounts paid was sufficient.
The copyright regime has a system of deducting professional expenses. Indeed, taxable income can be subject to standard deductions for professional expenses: restaurant, travel, business gifts, etc. For copyright, the law considers that the author, to be able to create, must also incur certain expenses: visiting other artists’ exhibitions, buying and reading books, traveling, etc. For this reason, professional flat-rate expenditures can be deducted from copyright income: 50% on income up to €15,990, 25% on income between €15,990, and €31,990.
It is generally considered that 50% of the total amount of remuneration can be regarded as copyright. In general, the amount, finely assessed, is below this percentage. However, some professions or taxpayers wish to take responsibility and the financial risk of making a copyright percentage above 50%. In one case we have known of, a taxpayer had attributed 100% copyright to himself, and, during an audit, this figure was validated. Frankly, we would not recommend this type of approach, which exposes the person adopting it to crippling tax consequences.
This calculation is a complex assessment to be made in cases where the objective consists in obtaining optimal results and can be maintained in case of inspection. It is necessary to work with several experts who have up-to-date knowledge of the various aspects of the performance, and will be able to formulate a calculation resulting in the number of copyright royalties that can be paid.
It depends. The eligibility of copyright revenue depends on two variables: the proportion of professional activities covered by copyright and the income base. Assuming that the ratio of professional activities covered by copyright is very high, we estimate that a minimum of turnover is €40,000 .
Of course, let’s take two measurable examples (excluding the NSSO and communal supplements):
1) First example
On December 31, 2018, a creative artist (natural person) will be awarded € 10,000.00 by his or her company:
Gross amount of copyright: €10,000.00
Fixed costs (50% on the range from 0 to 15.990€) : -5.000€.
Taxable amount: 5.000€.
Withholding tax of 15% : -750€.
Net amount to be paid to the beneficiary: 9.250€.
Average tax rate: 7.5%.
2) Second example
On December 31, 2018, the company will award €50,000 in income to a creative artist (natural person):
Gross amount of royalties: 50.000€.
Fixed costs (50% on the range from 0 to 15.990€): -7.995€
Fixed costs (25% on the 31.990€ tranche): -4.000€.
Taxable amount: 38.005€.
Withholding tax to be retained of 15%: -5.700,75€.
Net amount to be paid to the beneficiary: €44,299.25
Average tax rate: 11.4%.
Currently, the amount declared in 2020 to pay income in 2019 is 61,200 EUR. This amount is, of course, a maximum which it is neither possible to exceed nor desirable to aim for because the copyright moment is the result of the evaluation, not the goal itself.
Yes, in principle, this is possible. To be able to confirm this, it is necessary to identify potentially copyrightable performances and to ensure that there is a sufficiently high revenues base to be able to generate copyright income. As detailed above, copyright income is the result of two main variables: the proportion of professional activities covered by copyright and the revenue base. The more activities that are protected by copyright, the less revenue that must be significant. The profile of a private banker generally corresponds more to the second profile.
Yes, initially, the law was adopted in order, among other things, to support the activity of artists economically. Most artists produce original creations in a variety of formats: music, video, sculpture, painting, etc. A significant part of artists may encounter difficulties in generating sufficient turnover during their careers. The copyright income mechanism may allow them to earn more money based on the same turnover.
Yes, absolutely. Architects, for the most part, draw up plans and write documents for the design, preparation, and supervision of each construction site. The drafting of these documents constitutes in itself an original work in the form. The creative intensity can vary depending on whether it is a matter of executing ultra-exact specifications or creating an original construction. Nevertheless, the coding will be protected by copyright in both cases
Yes, it is possible. To be able to implement the copyright regime, two variables are essential: on the one hand, the importance of copyright contract and, on the other hand, the financial basis of calculation. Often managers and CEOs have a rather high remuneration. However, their managerial functions involve a lower share of pure creative production and an increase in management tasks that are necessarily not subject to copyright.
Employers may have several motivations for setting up a copyright system for the benefit of their employees.
On the one hand, it is an excellent way to provide a recurring increase in gross income to its employees (copyright payments) at the cost of a single one-time expense (the setting up of the contract). Copyright, which is less taxed, will increase
On the other hand, the implementation of this system creates loyalty, which is very appreciable, especially for specific more sought-after profiles such as IT developers or other talents. Not only can the employee see that the employer takes care of his interests, but he also enters into a second contractual relationship with his employer that is not automatically transferable to a new employer. Indeed, this contract would have to be reinstated, if necessary, with a new employer, who would not, by hypothesis, be obliged to resort to this system. In other words, by leaving his current employer, the employee risks losing this tax advantage.
Employees benefit from multiple benefits through copyright revenue.
On the one hand, the amount of taxation will be lower because a portion of the money transferred to the self-employed person’s account will be taxed as internal revenues from the movable property (final withholding tax) rather than as a professional income (progressive tax system).
On the other hand, this division in the amounts subject to taxation may also have the effect of reducing the income tax rate since the progressiveness of the tax will then work in the taxpayer’s favor.
The amount paid in copyright does not reduce the social rights of the employee. The employee’s income is considered differently at the tax level (hence the different tax rates). In contrast, on the social scale (any financial payment from the employer to the employee is presumed to be remuneration).
In some exceptional cases, it is theoretically possible for a company to pay a salary considered as such for tax purposes and copyright royalties not considered as salary if the benefits in the two cases are very different. However, in practice, this proves almost impossible to put in place, as it is difficult to determine the distinct nature of the activities in economic terms.
In some exceptional cases, it is theoretically possible for a company to do payroll considered as such for tax purposes and copyright royalties not considered as salary if the benefits in the two cases are very different. However, in practice, this proves almost impossible to put in place, as it is difficult to determine the distinct nature of the activities in economic terms.
Freelancers benefit from a triple advantage via copyright income.
First, the taxation will be lower because part of the money transferred to the self-employed person’s account will be taxed as income from movable property (final withholding tax) rather than as a professional income (progressive tax).
Moreover, this division in the amounts subject to taxation may also have the effect of deducting income taxation since the tax progression will then work in the taxpayer’s favor.
Lastly, the amount paid as a copyright royalty to a self-employed person is entirely outside the basis for calculating social security contributions. If appropriate, this amount results in reducing the number of social security contributions.
A copyright contract primarily contains the names of the parties, a brief description of the copyright regime, an identification of the activities that produce copyright, and the tax valuation of the copyright, expressed as a percentage of your total remuneration.
The contract also contains a series of other clauses to secure the regime thus established by the contract
The most critical element is the establishment of a copyright contract between you, as an individual, and the person who pays you, usually a management company.
Once your contract is signed, you will be able to invoice your copyright to the person paying you and collect this income separately for tax purposes.
The money paid to you under the copyright regime is subject to a final withholding tax payment. The excise bill is much lower than the amount of income tax, and this difference allows you to pay less tax on these amounts and therefore keep more funds for yourself.
Earning more “cash” (cash) by paying less tax. Belgium is the country with one of the highest tax rates in the world, and the worker is heavily taxed. To moderate the income taxes or cash pay, many workers benefit from packages containing numerous benefits in kind: meal vouchers, stock options, company cars, supplementary health insurance, etc.
Besides, a complementary option is to use the copyright income system. This payroll tax option has the unique advantage of reducing the overall taxation of this earned income while allowing you to enjoy it in the form of cash.
Yes absolutely. Copyright income is taxed similarly to simple personal income tax from the moveable property with a 15% rate (it can be less after application to professional fees, while professional income is taxed to 50 to 60%). Our clients record an increase in their net income earned of around €12,000 on average.
This capital gains come from the part qualification money paid by your client or employer as a royalty for your copyright rather than an outright remuneration.