Belgian minister of finance announces stricter scope of beneficial copyright tax regime

BE Law

In the context of the beneficial copyright tax regime, the Belgian government seems adamant to limit the scope and benefits of this regime. What will be the consequences, and will it survive the Belgian Constitutional Court?

Last year, the Belgian minister of finance announced his plan to tackle tax reform, which would include a closer look at the current beneficial tax regime for income generated through copyrighted works. The federal government has now expressed its intent to limit the scope of this tax regime, which currently entails that the compensation received by an employee or self-employed person for the transfer of copyrights can enjoy a beneficial tax rate. Whereas the tax rate applicable to professional income can reach an amount up to 50% (plus local surcharges), the tax rate applicable to copyright income is only 15% (capped at 64.070 euro). In addition, a very interesting cost deduction is provided.

According to different sources, these copyright income tax rules will be restricted in scope. It will only pertain to what the minister calls “real artists”, excluding the accountants, consultants, marketeers, architects, software developers and lawyers that have benefited from the current broad scope. It looks like only artists, journalists and game designers would fall under the new scope. The draft bill also includes an income cap of 64.070 euro, assessed over a period of four years. If the artist’s average income over the last four years surpasses this threshold, then they will not be eligible for the beneficial regime. Finally, the component in remunerations based on copyright cannot surpass the threshold of 30%. This would thus be a decrease as the previous cap was set at 50% by the Belgian tax ruling commission.

There is little doubt that, if the draft bill becomes law, injunctions will be introduced in the Belgian Constitutional Court questioning the legality of the law in light of the constitutional principle of tax equality. This constitutionally embedded principle states that taxpayers in the same situation should be taxed in the same way. In the case of a different treatment, an objective and reasonable justification should be available. The possible new regulations will have a major impact on i.a. the Belgian software development industry. There will be a schism, where game developers would fall under the new scope, but other computer software developers would not. The question is whether a proper justification for this unequal treatment exists. Not to mention the unequal treatment compared to writers and journalists. After all, computer software is equated to literary and artistic works in current copyright law. Moreover, the narrowed scope will create a dichotomy between the scope of copyright law, and the scope of this tax regime regarding copyright law.

The council of ministers will discuss the draft bill this Friday, October 28, 2022. Stay tuned for our next update where we will discuss the published version of the draft bill.