The tax regime for copyright income has been modified by the program Law of December 26, 2022.
What does the new law provide?
The objective of the new law is to reduce the scope of the tax regime introduced in 2008. The system of taxation as movable income at the rate of 15% (after deduction of lump-sum expenses) is maintained, but important changes have been made:
- Reinforced eligibility conditions leading to the exclusion of certain authors
- Limitation of the amount benefiting from the regime when the transfer of copyright is coupled with services
- Exclusion for authors who receive regular copyright income in excess of €70,220
These changes come into force on January 1, 2023. However, a transitional regime of one year is foreseen for authors who benefited from the 2008 regime during the year 2022 (see below).
Reinforced eligibility condition leading to the exclusion of certain authors
The new regime will apply only to income obtained from the assignment (or licensing) of copyrights for the purpose of exploitation or actual use by the assignee, the licensee or a third party.
The author must either have a certificate of artistic work or justify that the debtor of the copyright (employer, management company or client) acquires the copyright for the purpose of “communication to the public” or “reproduction”.
The notions of “communication to the public” and “reproduction” are not defined in the law. The explanatory memorandum refers to the case law of the European Court of Justice. According to this case law, the notion of “public” refers to an indeterminate number of potential recipients and implies, moreover, a fairly large number of persons. With regard to the “indeterminate” character of the public, it must be a question of making a work perceptible in any way appropriate to “persons in general”, as opposed to specific persons belonging to a private group.
The intention seems to be to deny the application of the tax regime to creations intended for internal or limited use by the employer, management company or client who acquires the author’s rights. The precise scope of this new condition may be difficult to assess in many situations and will most certainly give rise to intense discussions with the Advance Rulings Department and with the tax authorities’ auditors.
Application of the new regime to IT
The continuation of the tax regime of copyright income to IT creations was the subject of heated discussions during the adoption of the law. The text of the law remains very imprecise on this issue. Legal arguments exist both to defend the application of the new regime to computer creations and to defend their exclusion.
The Ruling Commission has very recently taken the position that the IT creations are not eligible anymore to the favorable tax regime.
Limitation when the assignment of copyright is coupled with services
When the transfer of copyright is coupled with a service (e.g. an employee who transfers his copyright to his employer or a company director who transfers his copyright to his company), the copyright taxable as income from movable property will be limited to a percentage of the total remuneration received. The percentages will be as follows:
- Income 2023: 50%
- Income from 2024: 40%
- Income from 2025 onwards: 30%
This new limitation is in addition to the absolute ceiling of €70,220 (indexed amount for 2023 income). In practice, it should not impact salaried workers and it should not impact, or only to a very limited extent, company directors in most sectors of activity.
Exclusion for authors who receive regular copyright income in excess of €70,220
The law provides that the tax regime for income from movable property will not apply if the average of the copyright income received during the 4 previous taxable periods exceeds the absolute limit of €70,220 (indexed amount for the 2023 income). Once this new limit is exceeded, the favorable tax regime will no longer be applicable at all for the income of the 5th year.
According to the explanatory memorandum, this new limitation is justified by the fact that the favorable tax regime is reserved for copyright income “received in an irregular and random manner”.
In most sectors of activity, this exclusion should not have any concrete impact.
The law contains a transitional regime for taxpayers who received copyright income in 2022 that was eligible for the 2008 regime but excluded from the new regime in 2023.
This transitional regime allows the favorable tax regime to apply to 2023 income with the restrictions of the new regime and with specific restrictions.
These specific restrictions are as follows:
- The absolute limit on copyright income will be reduced by half, i.e. €35,110 instead of €70,220; and
- The brackets for the application of the flat fee will be reduced by half
- 50% flat fee applied on the first bracket of €9,360 (instead of €18,720)
- 25% flat fee applied on the next income bracket of approx. €9,360 to €18,720 (instead of €18,720 to €35,110)