Taxing Royalties for Computer Programs

In their practice note nr 2022/C/22 of 25 February 2022 (Dutch/French), the Tax Authorities propose an addendum to their practice note of 21 May 2012 (Dutch/French) on the definition of royalties for copyright and the withholding tax due on such royalties. See also Tax Regime for Royalties under (Tax)Fire.

The practice note refers to

  • a statement of the Finance Minister in Parliament confirming that tax law is based on the reality and that the tax authorities must check that the royalties are paid for the actual transfer of copyright.

  • a decision of the Ghent Court of Appeal of 30 October 2018, that states that the courts and the taxing office are competent to verify that a work of authorship is protected by copyright.

  • a decision of the Supreme Court of 25 June 2020 confirming that decision that had confirmed that texts written by a lawyer as part of his profession do not in themselves constitute a work protected by copyright.

The practice note further confirms that computer programs, including preparatory material, are indeed protected by copyright. This is a useful clarification for the computer development community.

However, the practice note emphasises that the Tax Authorities have the competence to assess whether a work qualifies as a "protected work". This means that the tax authorities will be able to give their opinion on a copyright assignment agreement or a licence agreement to put a stop to arrangements that they may consider a little too fanciful.

Some fear, legitimately, that they will be subjected to purely subjective assessments by the tax authorities. However, it should be recalled that they can do so under the supervision of the courts.