Copyright when you’re self-employed with a company

You probably already know that you don’t necessarily need to write books to earn compensation for author’s rights, or copyright. But did you know that as a business owner, you can also benefit from the copyright regime? In this article, you’ll find out how the system works and what the advantages and conditions are.

💡 Are you a self-employed sole trader? You too can benefit from the many advantages of copyright! Click here to find out more.

What is copyright?

Under copyright law, you, as the creator of a piece of creative work, have the right to determine where, when and how your work is published. You can also sell those rights. In practice, this is not very common, as many people are unaware that they are entitled to earn income from the use of their work. And that’s a shame, because it’s more tax-efficient to sell the copyright than to be paid for doing the work itself.

In order to sell copyright, you therefore need to have produced some kind of creative work. However, there’s no recognised definition of what counts as creative work. Two principles come into play, though: the work must be concrete, and it must be original. 

‘Concrete’ means that the work must be a finished product. A plan, a theory, or a consultation are therefore not considered concrete. ‘Original’ means that your work is unique because you created it. The logic here is that even if two people receive the same brief, they will take a photo, write a text, or design a piece of jewellery differently: the result can therefore only be original.

So far, so good. But if you own a business, there’s a problem… Only individuals can own copyright. So, as a business, in theory you can’t sell copyright. Fortunately, there’s a solution.

How to benefit from copyright when you’re self-employed with a company

Even though some companies invoice copyright to their clients, in reality, this is not allowed. Because only individuals can own copyright. Do you still want to benefit from a more advantageous compensation for copyright as a company director? This is possible, but it works differently than for self-employed sole traders. Here are the steps you need to follow:

1. First, check if your activities are eligible for copyright, i.e. creative work that you do yourself.
2. Next, you need to have a correctly drafted contract with your client. In particular, it must clearly state that there is an assignment, or transfer of copyright.
3. In addition to this contract with your client, you also need to draw up an internal contract. With this contract, you transfer your rights as an individual to your company. You can have this contract drawn up by a lawyer, an accountant, or a specialised company, such as Creative Shelter.
4. Once the admin side is in order, all that’s left is the actual payment. Once a year, you need to calculate the amount to be paid to you as compensation for copyright. In theory, you can calculate it yourself with the help of your accountant, but the tax authorities are not particularly fond of this approach. 

In fact, when it comes to copyright, the tax authorities are always more strict with companies than with individuals. One reason is the potential conflict of interest: on the one hand, your company wants to maximise profits, and on the other hand, you want to earn as much as possible. This potentially makes it difficult to arrive at a fair and market-compliant compensation.

That’s why it’s worth working with a third party, like Creative Shelter. They determine your compensation based on your annual profit. And thanks to this objective calculation, there’s no conflict of interest.

Copyright compensation: what are the advantages?

Firstly, copyright protects your rights as the author of a piece of creative work. This prevents anyone from using or copying your work without your permission. 

But the main advantage is that copyright is taxed at a much lower rate: you only pay a withholding tax of 7.5% to 15%. Compared to the highest tax bracket of 50%, it’s a no-brainer.

How to integrate copyright into your accounting

Usually, it’s your client who pays the withholding tax on your copyright. Otherwise, you’ll end up paying it. It’s therefore in your best interest to give your client clear instructions and make the steps as easy as possible for them.

Since you receive a single payment from your company each year, you are, in a way, your own client. This means you need to pay withholding tax yourself, but only once a year.

Working with copyright has no impact on corporate tax: companies don’t pay any more or any less in tax. The advantage lies in the tax optimisation of the compensation your company pays you.

How to invoice copyright

To invoice copyright, you need to divide the total amount into two parts: the main compensation and the compensation for the assignment of copyright.

The main compensation is typically subject to 21% VAT, whereas you only have to charge 6% VAT for copyright. 

How to declare copyright in your personal income tax declaration

If the payment of the withholding tax has been done correctly, the income from copyright will automatically appear in your tax declaration in Tax-on-web.

You still need to declare this income using tax form 281.45 for copyright compensation.

Want to earn more thanks to the copyright regime?

Does your work meet the criteria for copyright? Then take advantage of this to optimise your taxes. Too few freelancers do it. Contact our partner Creative Shelter if you have any questions.

We’re happy to help you process your invoices and optimise your accounting. Try Accountable for free for 14 days.