Royalties after the fiscal reform

The federal government reached an agreement on the reform of the taxation of income from intellectual property rights just before the Christmas holidays. Although there was commotion about the interpretation of the material scope, the initial texts were adopted by the Parliamentary Committee.

There had been talk for some time that the federal government wanted to restrict the designation of revenues from copyright. The government wanted to return to the original aims of the law. Below are some of the key points from the amended regime that came into effect on 1st January 2023.

Limitation of the material scope: nature of income

After several days’ disagreement about whether certain professional categories could be excluded from the favourable regime, it was decided that there would be ‘no restrictive interpretation’. The favourable regime does not therefore exclude any sectors.

However, titles 6 and 7 of the Code of Economic Law, which deal with computer programmes and data banks, will no longer be referred to, so that there is, according to the minister, a limitation to the scope. Merely referring to title 5 of the Code of Economic Law suggests that the tax authorities may no longer consider software development as a work of literature or art.

An exploitation requirement was also enshrined in law. We were already familiar with this condition, but it had not previously been set down in law. It means that the transferred or licensed protected works must be exploited. It is sufficient that the revenue is derived from transfer or licence ‘with a view to’ exploitation or actual use. This is a test of intention. If it is subsequently not exploited, the favourable tax regime can still be used.

Limitation of the scope of personal application: status of the beneficiaries of the revenues

The holder of the intellectual property or related rights must satisfy a certain status in order to benefit from the new tax regime. Either he must hold an ‘artistic work certificate’ ("kunstwerkattest") or he must transfer or licence the rights to a third party ‘for communication to the public, for public performance or for reproduction’.

The term ‘public’ means that it must involve a ‘fairly large number or people’. It must concern groups of some size and not be limited to specific individuals who belong to a private group. It consequently seems that those who mainly make their creations available in a one-to-one context are excluded.

Introduction of a number of cumulative restrictions and maximum amounts

µThe proportion between a traditional remuneration and the payment of royalties will shift to 70-30 for everyone, with income from intellectual property rights therefore amounting to a maximum of 30% of the total remuneration. The remaining 70% of the total payment will be taxed as professional income. There is a transitional period of two years. There is a 50/50 limit for the assessment year 2024, 60/40 for the assessment year 2025 and the new 30% limit will apply from 2026.

The absolute limit of €37,500 to be treated as income from moveable assets (indexed €70,220 for assessment year 2024) remains in force.

If your average income for the last four years exceeds the maximum amount, you can no longer qualify for the favourable tax regime.

Transitional regime 2023

Income no longer covered by the reformed scope will be subject to a short transitional regime for the calendar year 2023. The basic amount of € 37,500 will be halved in the transitional year, although indexation will be taken into account.

Expense allowances ("kostenforfaits") will also be halved. 50% and 25% of the expense allowance deduction is still applicable, but only to the half of the basic amounts in art. 4, 1° KB/WIB92 (to be indexed for assessment year 2024).