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Copyright currently benefits from favorable tax treatment. The increase in the use of this system by taxpayers is explained by the fact that tax authorities have made it one of the targets of tax audits. Moreover, considering that this exceptional regime has been overextended in recent years, the government has approved a program bill to reduce this tax loophole.

When are copyrights valid?

A work benefits from copyright protection if it meets the following two conditions: (i) it must be expressed in a certain form that allows it to be communicated to the public, and (ii) it must be original, that is, it must be marked with the identity of the author. author. This includes writing texts, creating visuals by graphic designers, creating websites, creating plans by architects, creating computer programs, etc. affects various areas such as

In this case, the author (the creator of the work) has the exclusive right to use his work or transfer the exploitation right. So, for example, a computer scientist creates a computer program for which he assigns rights to the employer. In return, he receives a reward for his royalties.

Current tax regime:

Currently, the income obtained from the granting or licensing of copyright is classified as movable income (Articles 17, 1, 5 of the CIR). This income retains the status of disposable income, even if allocated to the professional activities of the beneficiary, as long as it does not exceed the indexed annual ceiling of 37,500 (ie 64,070 for tax year 2023). Income is taxed at a separate rate of 15% of net income up to an annual indexed ceiling of 37,500, and beyond this limit the tax rate depends on the nature of the income: if it is professional income, it will be a piecemeal progressive rate. can be applied (Article 37, para. 2 CIR); and in the case of portable income, the rate will be 15%. In addition, the current plan provides an affordable payment discount package. This flat rate is 50% for the first income of 17,090 (tax year 2023) and 25% in the second bracket from 17,090 to 34,170.

Target controls:

The tax administration is quite hostile to the scope of taxpayers’ appeal to the copyright system and conducts targeted inspections on its application.

These inspections begin with an information request in which the administration asks the taxpayer about the nature of the work, its price and how it was determined, its authenticity, and the means used to produce it. The management systematically asks to send it (the concession agreement) and also to prove that the work is being exploited by the (concessionaire).

Tax authorities attack the authenticity of the case or the case of making it public, especially by misinterpreting the ECtHR’s decision of 13 February 2014 – usually wrongly.

This excessive administrative positioning is undoubtedly very useful in discouraging some taxpayers who prefer to accept the position of the tax authorities to avoid a legal dispute. Other cases will inevitably go to trial, creating significant avoidable legal litigation.

What reform?

The finance minister wants to tighten the criteria for applying to the copyright regime. More precisely, he wants to return to the original goals of this regime, namely the application of a special tax regime to illegal and accidental incomes when engaged in artistic activity.

In the current state of the initial draft (as approved by the Council of Ministers in the second reading), the following points can be particularly noted:

Tax advantage (ie taxation at the rate of 15%) will be available only for illegal income. Authors whose average royalty income over the previous four years exceeds the annual index ceiling of 37,500 will be excluded.
If royalties exceed 30% of all premiums earned from tax year 2026, the tax advantage will no longer apply.
Even if no sector is excluded a priori from the copyright tax regime (especially programmers, coders, etc.), one must either have a certificate to claim the regime’s application. Being able to demonstrate that it was done for the purpose of public communication or public reproduction as part of the work in art or the grant of rights (or the grant of a license).
Fixed payment half price will decrease.
The 15% rate will not apply to the portion of the income which is considered more portable and exceeds the indexed annual amount of 37,500 (this income will be taxed at the rate of 30%).

The entry into force of these new rules is scheduled for January 1, 2023. They will apply to income from that date. However, the transitional regime is for tax years 2023-2025.

Sylvie Leyder
Haitham Khamri
Cabinet Hirsch & Vanhaelst

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