24-02-2022

Over the past ten years, personal income tax returns including income from the transfer of copyrights have increased tenfold. More and more employers are optimizing their employees’ salary package converting a reasonable portion of the gross monthly salary into copyright compensation.

Beneficial tax treatment

Compensation for the transfer of copyrights is taxed a lot more favourably than salary.

It is indeed treated as moveable income at a rate of 15%, rather than at the normal progressive personal income tax rates that apply to salary.

Prior to taxation, professional expenses may be deducted. This is expressed as a percentage of the total annual amount of copyright compensation.

For a compensation bracket of 0 to 16.680 EUR, 50% can be deducted for professional expenses.

For a compensation bracket between 16.680 EUR up to 33.360 EUR, 25% can be deducted for professional expenses.

Therefore, after deduction of professional expenses, the movable income from the transfer of copyrights up to EUR 16,680 will thus be subject to a 15% withholding tax on 50% of the compensation amount.

The application of this regime has no consequences for the employer from a social security point of view. The National Social Security Office considers these payments to be income subject to social security contributions.

If this compensation scheme involves a decrease of the monthly basic salary, the express agreement of the employee is needed. In any case, the minimum salary threshold in the applicable industry sector must always be respected.

Such a conversion might therefore also have an impact on the employee’s group insurance as the premiums are usually based on the gross monthly salary.

Can anyone apply this?

A work may be protected by copyrights if all of the following criteria are met:

- the work is the result of creative activity, and

- the work is expressed in a concrete form, and

- the work is original.

That being said, the abovementioned criteria are interpreted quite broadly. There is no formal list of creative activities that qualify for copyrights. Because the creation of something original can be interpreted broadly, this optimisation scheme is currently widely used by photographers, journalists, architects, engineers, consultants, software developers and so on.

The government has announced plans to review the scope of this regime and to tackle abuse.

In order to obtain legal certainty about a specific situation, a preliminary tax ruling from the Office of Advance Decisions in Tax Matters can be applied for.