On 30 December 2022, the programme law concerning, among others, a major reform of the favourable tax regulations on copyright remuneration was published in the annexes to the Belgian Official Gazette.
As such, the reform has come into force on 1 January 2023 (with certain transitional measures).
1. Purpose of the reform
The announced purpose of the reform was to go back to the original intent of the special tax regime, that it would apply on those artistic jobs that suffer from irregular and volatile income, such as painters, authors, musicians, etc.
In this respect it is important to note that the Council of State itself critiques whether the reform attains this goal. We also fail to identify to what extent such purpose would be reached.
2. Changes compared to the current regime
Due to the nature of the reform and its ongoing evolution, we only touch the major modifications in this blog.
The most impactful change to the scope of the regime is that its beneficiaries must either possess an artwork certificate (*) or alternatively – as a failsafe – assign or license the rights in their copyrighted work to a third party for communication to the public, public performance or reproduction.
(*) As referred to in Article 6 of the Law establishing the Artwork Commission (…). Whereas this law is itself still pending in the House of Representatives.
Pursuant to the explanatory memorandum of the aforementioned draft law, the artwork certificate shall be issued by the to be established Arts Work Commission. This Commission will establish a register of the conditions for the granting of the artwork certificate as well as concrete examples of practices that fall within the conditions to ensure a uniform interpretation. We wish to emphasize that as the commission does not yet exist, nor does such a register.
It is however stated that in order to receive an artwork certificate, such person must be a natural person that
- provides an artistic contribution necessary for the creation or performance of an artistic work.
What this entails is a matter of fact but the artistic aspect must be the primary consideration of the contribution.
By matter of example, below you will find some of the activities that are expressly excluded by the explanatory memorandum :
- for lack of artistic character : drafting a contract for a group of singers; looking after the administration, programming or communication of a cultural centre; devising and executing the marketing campaign for a film; writing an article for a travel magazine ; handling an artist’s public relations and press contacts ; …
- due to the artistic character not being the primary consideration: giving classes, workshops and trainings; administrative, business, communication, legal, marketing, IT assistance; a photographer for portraits, events, publicity leaflets; vlogging or blogging; create birth cards; tattooing; creating websites; activities as influencers; designing posters or flyers,…
- due to the primary goal being entertainment: balloon folding, children’s makeup, applying glitter tattoos, …
This means a de facto exclusion of a majority of professions that produce copyrights, except for the minority who fall under the scope of the aforementioned failsafe, which will not apply for services benefiting for example private individuals or fall into a B2B context.
It is to be noted that following a political dispute, it has been agreed that there will be no restrictive interpretation of the reformed tax regulations and as such no profession will be explicitly excluded. As set out above, given the significantly reduced scope of the new tax regime this will nonetheless lead to a de facto exclusion for a large number of people. Especially due to the vagueness of the political compromise, it will unfortunately remain up to the fiscal authorities to sched clarity.
4. Absolute cap
The absolute cap €37.500 (non-indexed) that can benefit from the favourable tax regime is maintained. However, the tax regime shall no longer apply when the annual average gross income from copyright received during the four preceding taxable periods exceeds the absolute cap of €37.500 euros (non-indexed).
- Gross copyright income : €40.000 for the 2023 taxable period.
- Gross copyright income amounts to €100.000 euros, €70.000, €50.000 and €60.000 euros for the taxable periods 2019 to 2022, respectively; i.e. average gross income for the four taxable periods preceding 2023 is €70.000, which is higher than the absolute cap of €64.070 euros (€37.500 indexed).
- The special tax regime is not applicable for the 2023 taxable period and the gross income in the amount of €40.000 euros will be taxed as professional income (with credit for the withholding tax deducted from this amount).
5. Relative cap
A new relative cap is introduced (a codification of an existing practice) whereas the favourable tax regime shall not apply where the ratio between the remuneration for the transfer of copyright and the total remuneration (including for the service provided) is higher than 30% (50% for the tax year 2024 and 40% for the tax year 2025 as transitional measures). In other words, copyright income exceeding this ratio will be taxed as professional income. This percentage is notably very severe for the remaining beneficiaries under the new regime compared to current practice of the tax ruling commission.
- An artist transfers his copyright to a transferee who exploits those rights and pays him copyrights (€45.000) and a fee for the services he performs in the transferee’s company as artistic director (€30.000), i.e. for a total yearly amount of €75.000.
- Applying the relative cap, the favourable tax regime is applied to €22.500 (30% of €75.000) and the remaining €52.500 is taxed as professional income.
- Should the total remuneration have been €210.000, of which €70.000 as copyright income, then the relative cap of 30% would be respected, however the absolute cap of €64.070 euros (€37.500 indexed) would be exceeded and therefore the favourable tax regime would apply to €64.070 (equal to the absolute cap) and the remaining €145.930 is taxed as professional income.
6. Transitional period
As a transitional measure, the existing regime remains applicable until the end of 2023 (assessment year 2024), subject to a reduction by the absolute cap in half, along with a respective reduction of the thresholds for the deductible expenses.
Current status of the reform on the day of adaptation of this blog (03/01/2023): The programme law has been published in the annexes to the Belgian Official Gazette dd. 30 December 2022 and has meanwhile come into force.
All comments and analyses included in our blog posts are for information purposes only and do not amount to legal advice.
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