The announced reform of the copyright tax favor system has already been widely reported in the press. A recently submitted draft law sets out the contours of this reform. Below you can find an overview of the key points of this reform. The new legal text is (presumably purposely) very vague and thus open to different interpretations. This article includes our understanding of the text that has now been submitted to the King for ratification.
Who will be able to benefit from it in the future?
The purpose of this reform is to return to the “original objectives” of the tax regime, i.e. the protection of creative activities that generate variable and uncertain revenues.
Consequently, the question arose as to whether employees would still be able to benefit from the scheme in the future, since they are remunerated for their services on a regular basis?
However, the new draft law does not explicitly exclude regularly earned income from the preferential rate. As a result, it will remain possible for both employees and self-employed persons to make use of the regime.
Will certain sectors (such as the IT sector) be excluded?
One of the biggest political stumbling blocks in the reform was the question of who will be able to benefit from the favored tax regime in the future?
A priori, no sector will be excluded from the regime, but the text was kept so vague that there is no certainty about this at present.
What new conditions apply?
Anyone wishing to take advantage of the regime must now have a “work of art certificate,” which must be issued by an Artwork Commission that has yet to be established. As long as there are no rules for this, according to the minister, the existing artists’ cards must be looked at by way of tolerance.
If you do not have a work of art certificate, there is a second possibility to take advantage of the favorable tax treatment, namely if it is demonstrated that the copyrights to the protected work have been “assigned or licensed to a third party for communication to the public, for its public performance or for its reproduction.
Is the beneficial valuation of copyright remuneration capped?
Yes. Already before the reform, the advantage only applied up to an annual maximum ceiling of 37,500 euros (indexed amount for fiscal year 2023: 64,070 euros). This maximum ceiling will be retained.
Furthermore, two new thresholds are introduced.
First of all, the ratio between the remuneration for copyright and the total remuneration (including the remuneration for the services provided) may from now on not exceed 30%. A gradual, phased entry into force is provided for:
- for fiscal year 2024, a maximum ratio of 50%,
- for fiscal year 2025, a maximum ratio of 40%,
- from assessment year 2026, a maximum ratio of 30%.
In addition, a second limitation applies depending on the average copyright income enjoyed in the past. Thus, the tax regime cannot be enjoyed if the average copyright income of the four previous taxable periods has exceeded the absolute maximum ceiling of 37,500 euros.
Will there be any changes to the cost flat rate or annual maximum allowance?
The fixed costs and the maximum amount remain unchanged, except for people who would fall out of the system under the new scheme. For the latter, the amounts of the fixed costs, as well as the maximum amount, will be halved in one transition year, 2023. Today, the fixed cost is 50% up to an annual income from copyright of 17,090 euros. For 2023 (fiscal year 2024), this fixed cost will therefore only apply up to half of that amount. They will also have to deal with a halving of the maximum amount of 37,500 euros.
As soon as there is more clarity on the new interpretation of the copyright regime, we will send out a news release, and we will organize a Webinar.
