Revenue from granting a license to use the work

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The license is one of the manifestations of copyright and, in accordance with the legal definition contained in the Act on Copyright and Related Rights, it means an agreement for the use of a work. Due to the fact that a work is considered to be any manifestation of creative activity of an individual nature, determined in any form, regardless of its value, purpose and manner of expression, the scope of granting a license may be very wide. In connection with the above, it is necessary to analyze what revenues from granting a license mean.

Proper qualification of the source of income

Revenues from the license granting, i.e. from the use of copyright by authors or the disposal of these rights, occur when two conditions are met:

  • first, it is necessary to have the subject of property rights in the form of a work,
  • secondly, the revenue generated must be directly related to the use or disposal of certain copyrights.

According to the catalog listed in the Personal Income Tax Act, revenues obtained from granting a license may be treated as:

  • income from non-agricultural business activity (Article 10 (1) (3) of the PIT Act),
  • income from cash capitals and property rights (Article 10 (1) (7) of the PIT Act).

Copyrights and all their manifestations may be used in business activities and may be used to implement specific economic activities. Additionally, as results from Art. 55 of the Civil Code, the company's components include proprietary copyrights and related property rights.

As a result, if the license is granted by an entity running a business, the revenues obtained should be classified as derived from business activity. If, on the other hand, the author is a natural person who does not conduct business activity, the generated income should be considered as income from property rights.

At this point, it is worth pointing to the content of Art. 18 of the PIT Act.In the light of this provision, income from property rights is in particular income from copyrights and related rights within the meaning of separate provisions, rights to inventive designs, rights to topography of integrated circuits, trademarks and decorative designs, including the sale of these rights. Due to the wording "in particular", the above list is not exhaustive, which means that other property rights may also be included in this catalog.

On the other hand, as regards the determination of the moment when the revenue from granting the license arises, it should be pointed out that pursuant to Art. 11 sec. 1 of the PIT Act, revenues, as a rule, include money and cash values ​​received or made available to the taxpayer in the calendar year as well as the value of received benefits in kind and other free benefits. Therefore, revenues from licensing should be recognized when they are received.

Additionally, it is worth noting that pursuant to Art. 41 of the PIT Act, the advance for the tax on the income from granting the license is collected by the paying entity, which in this case acts as the payer.

Tax deductible costs when granting a license

As indicated, license revenues may constitute an element of business activity.

According to the wording of Art. 14 sec. 2 point 1 of the PIT Act, income from business activity also includes income from sale of assets used for the needs related to business activity or when running special departments of agricultural production, such as fixed assets or intangible assets, including those whose initial value is less than PLN 3,500, if it exceeds PLN 1,500. Copyrights and related property rights are intangible assets, therefore their use, including granting a license, may be treated as income from business activity.

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In terms of tax deductible costs, it should be noted that the tax deductible costs of rights to intangible property are determined as 50% of the amount of revenues (Article 22 (9) (3) of the PIT Act). This provision clearly mentions authors and performers, i.e. persons who produce intangible goods protected by copyright or related rights (works or artistic performances).

The above method of determining costs in the amount of 50% does not apply to revenues obtained as part of business activity. Pursuant to Art. 22 sec. 12, the costs referred to in article 1. 22 sec. 9 points 3 of the PIT Act, i.e. costs in the amount of 50%.

Revenues from licensing and VAT

For a fee, the transfer of copyrights and the granting of a license to use a work constitute, in the light of the VAT Act, the provision of services. As it follows from Art. 8 sec. 1 of the Act, the provision of services against payment is any service provided to a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods, including, inter alia, the transfer of rights to intangible assets, regardless of the form in which the legal transaction was performed.

It should be noted that in accordance with Art. 15 sec. 3a of the VAT Act, the services of creators and performers, within the meaning of the provisions on copyright and related rights, remunerated in the form of fees for the transfer or licensing of copyright or artistic performance rights or their performance are excluded from the scope of VAT-taxable economic activity performed independently , including remuneration via an organization for collective management of copyright or related rights.

When explaining the above provision, it should be emphasized that if the creator grants the license in person, and not as part of his business, such provision of services is not subject to taxation. On the other hand, in the case of granting a license by an entrepreneur, the output tax must be paid.