On 24 October 2022, the cabinet approved the draft of the program law which includes the changes to the copyright regime. This approval has been added to the draft law and filed with the Chamber of Representatives. With this approval, drastic changes to the regime, as we currently know it, are coming closer. The legislator intends to make the below mentioned regime applicable as of 1 January 2023.
Back to its roots
The purpose of this legislative change is to go back to the initial scope that the legislator had in mind when introducing the copyright regime. Therefore, this regime would only apply to artistic occupations. These occupations are often subject to more risk such as creative risk, risks associated with irregular income and risks associated with the success of the art created.
The legislator argues that the aforementioned risks distinguish this sector from closely related professional categories such as scientists and industrial inventors. These professionals work with objective elements in a structured professional framework and the income generated from these activities is, for the most part, neither irregular nor volatile.
This change will mean that the software sector (with the exception of video games creators), the marketing sector, the consulting sector, etc. will likely be affected and even excluded from using this regime.
Field of application
The first change can be found under the interpretation of the concept of movable income as mentioned in article 17, §1, 5° of the Income Tax Code. Initially, reference was made to book XI of the Economic Law Code where titles 6 and 7 explicitly cover computer programmes and databases. However, the new draft law explicitly refers to the 5th title of Book XI of the Economic Law Code.
Furthermore, this income must relate to the exploitation or the actual use of original works of literature/art (art.XI.165 of the Economic Law Code) or the executing artists’ performances (art.XI 205 of the Economic Law Code). This requirement had already been imposed by the Belgian ruling commission for any ruling requests relating to this topic.
Finally, those wishing to benefit from the copyright regime, must hold an ‘art certificate’. This certificate is an ‘all-areas pass’ to the social security system for art workers. If this certificate is not available, copyright protected work must have been made available either to the public, for public performance/performance or for reproduction. It is not clear from this condition which extension companies can fall back on. In addition, the term ‘reproduction’ leaves some room for interpretation.
Additional limitations are provided to prevent abuse. The remuneration granted under the copyright regime cannot exceed 30% of the total annual income. This maximum originates from the known practice within the ruling commission where it was assumed that the percentage granted as compensation for copyright could not exceed the 25% threshold in an employee-employer context. It will be possible to take a higher percentage into consideration for income year 2023 (50%) and income year 2024 (40%).
Furthermore, the maximum of EUR 37,500 (indexed EUR 64,070 for income year 2022), as already included in the current copyright regime, will be maintained. This maximum implies that if the compensation granted for a copyright protected work exceeds this amount, the favourable tax regime is no longer applicable to the excess. In order to meet this condition, the average income from copyright and related rights, determined before the application of the aforementioned limitation, received in the four previous taxable periods (excluding the period in which the activity started), cannot exceed the maximum of EUR 37,500.
Finally, the remuneration can only be considered if it is linked to the creation of a copyright protected piece of work.
Transitional regime as of 1 January 2023
Given that the above-mentioned changes will have a major impact on the current copyright landscape, the legislator has opted for a short one-year transition period. During this transition period the taxpayers who have already benefited from the regime in income year 2022 and who therefore cannot benefit from the new regime in income year 2023, can fall back on the old regime for 2023. By using the notion ‘taxpayers’, it seems that the legislator is focussing on individual beneficiaries of the favourable regime and not on the functions for which certain companies have obtained a ruling request on behalf of their employees in the past.
It’s important to mention that additional limitations need to be respected. The maximum amount of income that can fall under the favourable regime will be halved (from EUR 37,500 to EUR 18,750). The applicable lump sum deduction (50% on the first tranche of EUR 0.00 to EUR 10,000 and 25% on the second tranche of EUR 10,000.01 to EUR 20,000) will also be split in half.
According to the text of the draft, which is currently on the table, the legislator intends to make the above-mentioned regime applicable as of 1 January 2023.
The transition period will be applicable as of 1 January 2023 until 31 December 2023.
The required parliamentary procedure needs to be followed before the approved text can be published in the Official Gazette (Belgisch Staatsblad/Moniteur Belge) and enter into force.
How we can help
We can help you to look into your current practice and map and estimate the impact on your population. Moreover, we can help to draft employee communications and review addenda to employment contracts. From a holistic perspective, we can help you to review and redesign your people value proposition to mitigate the impact in terms of employer attractiveness.
For more insights on the impact of these recently announced measures, reach out to your regular PwC contact or Bart Van den Bussche.