Online sales of books by Amazon - tax issues

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Internet editions are becoming an increasingly popular form of book publication. The idea of ​​the so-called e-books consists in the fact that the author, after writing a book, publishes it in an electronic version, using internet portals specializing in this type of activity. The most famous of them is Amazon. The sale of books in the online version and the issue of taxation of income on this account requires, first of all, a reference to the Act on Personal Income Tax.

Revenue from publishing a book

In accordance with the catalog of sources of income specified in the Personal Income Tax Act, income obtained on the basis of publishing a book should be classified as income from property rights (Article 10 (1) (7) of the PIT Act). It is also worth pointing to the content of Art. 18 of the PIT Act, according to which the income from property rights is considered, in particular, income from copyrights and related rights within the meaning of separate regulations, rights to inventive designs, rights to the topography of integrated circuits, trademarks and decorative designs, including paid sell these rights.

When books are published via an internet portal, we are dealing with the granting of a license for a literary work. This situation gives the owner of the portal the right to sell books written by the author.

Licensing is regulated in the Act on Copyright and Related Rights. In the light of Art. 17 above of the Act, the creator has the exclusive right to use the work and dispose of it in all fields of exploitation and to remuneration for the use of the work. However, pursuant to Art. 41 sec.2 of the Act, the contract for the transfer of proprietary copyrights or the contract for the use of the work, hereinafter referred to as the license, covers the fields of use explicitly mentioned therein. Finally, it should be emphasized that pursuant to Art. 43 sec. 1 of the Act, if the contract does not indicate that the transfer of the author's economic rights or the granting of the license was free of charge, the author is entitled to remuneration.

Summarizing the above, it should be stated that the profit obtained from the publication of the book on internet portals (eg Amazon) is for the author income from the paid license to a literary work and under tax law it is treated as income from property rights.

Online sales of books - taxation method

If the publication of e-books took place via the Polish internet portal, the portal would be obliged to collect monthly tax advances and show them collectively at the end of the year in the PIT-11 information.

However, if the publication takes place with the participation of foreign intermediaries, then in addition to Polish tax regulations, the given facts should also be analyzed in terms of international agreements on the avoidance of double taxation.

In standard contracts, income obtained under a license for literary works is treated as the so-called license fees. In the light of standard international agreements developed in accordance with the guidelines of the OECD conventions, the notion of royalties is understood as any kind of fees that are paid for the use or right to use any copyright on literary, artistic or scientific work, including copyright related to films. and audio tapes used by radio broadcasting and television stations, patents, trademarks, utility and decorative models, documentation, formulas, production technology, information on industrial, commercial or research experience or skills (know-how).

We will analyze the rules of taxation of royalties on the example of the Polish-American treaty on avoidance of double taxation. Pursuant to Art. 13 sec. 1 and sec. 2 of the same agreement, royalties arising in one contracting state and paid to a resident of the other contracting state will be taxed in that other contracting state. In any event, such debts may also be taxed in the country in which they arise and in accordance with its law, but the tax so levied may not exceed 10% of the gross amount owed.

As a result, a taxpayer subject to unlimited tax liability in Poland (i.e. settling in the country and residing here), the income obtained from such a transaction must be settled in the country according to the applicable tax scale. Additionally, the withholding tax collected by American Amazon will be 10%. The above does not mean, however, that the taxpayer will pay the tax twice for granting the license for the internet portal. The method of avoiding double taxation will apply. This is done in such a way that we will settle the income obtained from license fees in the USA in Poland, and we will deduct part of the tax that was collected and paid to the tax office by the American portal from the levy that we have to pay to the Polish tax office.

Example 1.

A person residing in Poland has written a book that she has decided to publish online. To this end, it sold the license to make the book available to the American portal Amazon. Amazon collected a withholding tax of 10% of the license fee on royalties. For the sake of simplicity, let's assume that the amount of tax collected by Amazon was PLN 3,000. Remuneration for the granted license is also obliged to settle the Polish tax resident before the tax office. The obtained income is taxed according to the tax scale, i.e. at the rate of 18% or 32%. For the purposes of the example, let's assume that the Polish income tax is PLN 7,000. As a result, in order to avoid double taxation of the same source of income, Polish tax will be reduced by the tax paid abroad. This means that ultimately the tax payable will amount to PLN 4,000.