New social security treatment of compensation for copyrights and related rights
20 Apr 2023
After much political debate, the copyright tax regime – which provides for a tax-favourable way to compensate an artist/creator for the transfer of a copyright protected work they created, by applying a 15% flat tax rate – was overhauled by the Program Act of 26 December 2022. Although, in its previous iteration, the compensation for copyrights and related rights was subject to social security contributions, it was already clear that this would no longer be the case in the overhauled regime, if certain conditions are met. We were, however, still awaiting the actual legislative implementation of this exemption from social security contributions.
This waiting game is now over, following the publication of the Royal Decree of 7 April 2023 in the Belgian Official Gazette of 14 April 2023. This Royal Decree details the conditions that need to be cumulatively complied with in order for a compensation for copyrights or related rights to be exempt from social security contributions, conditions that are in line – but not fully correspond – with the tax requirements in this respect.
Exemption from social security contributions
The compensation for the transfer of copyright and related rights (the Royal Decree refers to Book IX, title 5 of the Economic Law Code) will not be subject to social security contributions if the following conditions are cumulatively met:
During the four quarters of the calendar year, the amount of the compensation for copyright and related rights may not exceed 30% of the sum of:
the employee’s total salary subject to social security contributions and
the total amount of the compensation awarded for copyright and related rights to the employee.
If this 30%-limit would be exceeded, only the amount exceeding this threshold will become subject to social security contributions.
Both the salary and the compensation for copyrights and related rights must have been set at a market rate. The employer must keep the supporting documents in this respect available to the National Social Security Office (‘NSSO’);
The amount of the compensation must be mentioned in the DmfA declaration to the NSSO, in the quarter in which it is granted.
Notable difference vis-à-vis the tax requirements is the absence of the latter’s yearly compensation for copyrights and related rights cap of EUR 37,500 (not indexed – EUR 64,070 for income year 2022).
Prohibition of wage conversion and the possibility of regularisation
The Royal Decree also imposes a general prohibition of wage conversion, meaning that the compensation for copyrights or related rights – exempt from social security contribution – can in principle not be granted as a replacement or conversion of existing salary or remuneration elements. An exception is, however, included (provided several strict conditions are met) for employers that already correctly declared a compensation for copyrights and related rights to the tax authorities in the last five years. In such cases, the Royal Decree also includes the possibility for the employer to regularise these compensations for social security purposes, meaning these regularised amounts can no longer give rise to social security contributions, interests or late payment fines. To do so, the employer must declare the amounts that were correctly declared to the tax authorities to the NSSO before 30 June 2023.
Entry into force and evaluation
The Royal Decree retroactively entered into force as of 1 January 2023 and after two years, its impact on the social security financing will be evaluated, together with possible improper use.
If you have any questions regarding the above, or are looking for more guidance in this respect, don’t hesitate to reach out; we’d love to hear from you!
