Inspired by a recent tax reform that entered into force on 1 January 2023, a Royal Decree of 7 April 2023 introduced a new social security regime for compensation received by employees for the transfer or licensing of copyrights or neighbouring rights.
The Royal Decree was published in the Belgian State Gazette on 14 April 2023 and entered into force with retroactive effect from 1 January 2023.
Compensation granted by employers to their employees in return for the transfer or licensing of copyrights and/or neighbouring rights which employees created in the performance of their employment was until now, pursuant to case law of the Belgian Supreme Court, subject to social security contributions. These consist of approximately 28% employer’s contributions (for white collar employees, usually higher for blue collar employees) and 13.07% employee contributions.
Pursuant to the new social security regime, this will no longer be the case provided that certain conditions are met.
Personal scope – The new social security regime applies to original owners of said rights:
(i) who hold an artwork certificate evidencing that they perform professional art practice in (audio)visual arts, music, literature, performance, theatre, choreography or comics (including technical and supporting activities); or
(ii) absent such artwork certificate, provided that the work for which they receive the compensation is intended to be disclosed to the public or is intended for reproduction (e.g. texts to be published in marketing materials or on a website, graphics such as images or videos, software applications, etc.).
Conditions – To qualify for the social security exemption, the compensation must cover:
(i) the transfer or licensing of the copyrights or neighbouring rights by the original owner of those rights; and
(ii) original works of literature or art.
Moreover, the compensation must be granted with a view to the actual exploitation or effective use of the copyrights and/or neighbouring rights (except where that was not possible due to circumstances which are not in the contracting parties’ control).
Capped at 30% – The compensation for the transfer or licensing of copyrights and neighbouring rights is no longer subject to social security contributions provided that:
(i) the amount of such compensation during the four quarters of the relevant calendar years does not exceed 30% of the result of the sum of:
the total remuneration subject to social security contributions that the employee is entitled to, and
the total amount of the compensation granted by the employer to the employee in return for the transfer or licensing of those rights;
(ii) both the aforementioned remuneration and compensation must be determined at market rate, noting that it will be the employer’s responsibility to keep supporting documentation available for the National Social Security Office; and
(iii) the amounts of the compensation must be mentioned in the quarterly social security contributions filed by the employer in the quarter in which it is granted.
Any compensation granted in excess of the aforementioned 30% cap will be subject to social security contributions.
Prohibition of wage conversion – The Royal Decree explicitly provides that the exemption from social security contributions will not apply if the compensation is granted to replace or convert existing remuneration and/or compensation, irrespective of whether these are subject to social security contributions.
In such case, the total compensation will nonetheless be subject to social security contributions.
Subject to strict conditions to be observed, employers who had already duly declared the compensation in return for the transfer of or the granting of a license on the copyrights and/or neighbouring rights as movable income in the personal income tax declaration in 2022 can exceptionally still benefit from the social security exemption.
Action is however required, as the relevant employers will need to declare said amounts to the National Social Security Office by the end of 2023.
Note that regularisation is also possible for the years 2018 until 2022, in which case the relevant declarations to the National Social Security Office need to be completed by 30 June 2023.
Evaluation in two years – The Royal Decree provides that the impact of this new social security regime on the financing of the social security system, including potential improper use, will be assessed two years following its entry into force.
The National Labour Council’s advice will be requested in this respect.
Our Employment & Benefits team would be delighted to address any queries you may have in relation to this new social security regime applicable to compensation granted in return for the transfer or licensing of copyrights and neighbouring rights.