The hunt is on: authors – don’t be fooled!
Since 1 January 2008, income that results from the transfer or surrender of copyright has been qualified as income from movable assets and is taxed as such, after deduction of expenses, at the separate rate of 15%. However, the Income Tax Code provides that this income is likely to be reclassified as professional income when the assets are assigned to the exercise of a professional activity by the beneficiary of said income. This reclassification is nevertheless offset, except in the event and to the extent whereby the royalties exceed EUR 37 500 indexed (EUR 58 720 EUR for the fiscal year 2018 income 2017).
It is clear that this particularly attractive rate incites some taxpayers to use their imagination to assign themselves copyright. The tax administration understands this and this year launched an audit into the situation of many taxpayers who have declared copyright income rightly or wrongly. It’s a fair fight. However, it would seem that the computer programme that analyses the tax returns of taxpayers is programmed to automatically generate an alert when the amount indicated in Code 1117 (gross amount of royalties received) exceeds the ceiling for the fiscal year under consideration. In itself, there is nothing shocking about this. What is however shocking is that the tax administration explains to the taxpayer, in the notice of rectification that it sends out, that the maximum allowed amount of royalties to mention in code 1117 is the indexed ceiling amount, and that the balance of the royalties should be reported as profit. Not only is this “standard” notice of rectification unfounded, but furthermore, such a statement is totally inaccurate as the reclassification only comes into operation if the assets at the origin of the income, namely the intellectual property rights of the author, are assigned to the exercise of a professional activity. And the burden of proof of this assignation is borne by the tax administration! It cannot be sufficient to simply make the simple assertion, and still less to claim that the law would limit the amount of copyright qualified as income from movable assets to the indexed ceiling. Authors – do not be fooled by this letter with its convincing, and yet illegal tone. Dispute it!!!