How is the share of copyright determined?
Since the introduction of the new flat-rate taxation of income regime resulting from the transfer or surrender of copyright and related rights in 2008, one question has regularly come to the forefront: How should we determine the share relative to the transfer or surrender of those rights? First observation: there are no legal provisions that set out the amount of consideration for the transfer or surrender of the intellectual property rights of authors and artists. Second observation: the Code of Economic Law stipulates that the property rights are movable, assignable and transmissible, in whole or in part, in accordance with the rules of the Civil Code. Among the principles of the Civil Code, we will point out the contractual freedom of the Parties.
The Minister of Finance has recalled, in response to a Parliamentary question of 12 January 2016, that the Circular of 4 September 2014 provides that in principle, the distribution between the income from movable assets and professional income is carried out on the basis of the agreement between the parties to the extent that this agreement reflects the reality. The tax authorities pay particular attention to the legal and factual circumstances of each case. If the object of the agreement focuses exclusively on the transfer or surrender of intellectual property rights, it will not be necessary to make a distinction in terms of consideration. As this covers exclusively the transfer or surrender of rights, it will be qualified as income from moveable assets and will be taxed as such. In contrast, when the object of the agreement touches on both the services performed as well as on the transfer or surrender of intellectual property rights, the parties would be well advised to provide for separate remuneration for the services and for the transfer or surrender of the rights. Nevertheless, this is not a legal requirement. We note that the Code of Economic Law stipulates that the agreement must, subject to certain exceptions, mention the “Author’s Remuneration”, namely the amount of consideration for the transfer or surrender of the rights. Contrary to what the tax authorities assert, it cannot be inferred from the absence of this mention that the transfer or the surrender took place free of charge.
The Minister of Finance pointed out that the circular of 4 September 2014 applies to all tax authority officials, including those at the Special Inspection of Taxes (ISI).
In conclusion, it is particularly important to precisely define the subject of the agreement as well as the amount of consideration. The latter will be fixed by the parties bearing in mind that it must correspond to the equivalent of what two independent parties would have fixed in a fully competitive situation.