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Appendix III. TAXATION OF AUTHORS' RIGHTS AND PATENTS.

Summary by M. Clavier of the Replies received to the Questionnaire.

Twenty-one countries replied to the questionnaire concerning the fiscal system applicable to: (1) authors' rights, and (2) periodic payments derived from patents. The following tablesnote give a summary of the replies received by the Secretariat.

We think it may be useful to analyse the data set out in the above tables, so as to obtain a general survey of certain points of special interest.

I. AUTHORS' FEES.

Many countries have combined their replies to questions Nos. I and II. That is logical, because the manner in which income is taxed depends on the nature of the income.

This being borne in mind, the replies on the main points may be grouped as follows:

  • (1) When the income from authors' rights is collected by the author himself, it is usually regarded as professional earnings. In Spain, however, it is treated as income derived from capital in the form of movable property.
  • (2) When the income is collected by the heirs or assigns (legatees, donees), it is regarded as:
  • (a) Income derived from movable property: in Austria, Belgium, Germany, the Netherlands, Spain and Switzerland;
  • (b) Income derived from the exercise of a profession: in Bulgaria, Czechoslovakia, Greece, Hungary, Italy, Roumania and Sweden.
  • (3) When the income is collected by grantees, it is regarded as:
  • (a) Income derived from the exercise of a profession: in Belgium, Bulgaria, France, Greece, Italy, Sweden and Switzerland (if derived habitually in the exercise of a profession);
  • (b) Income derived from movable property: in Great Britain, Netherlands, Poland, Roumania, Spain and Switzerland (if only derived from time to time).
  • (4) When the income is collected by companies or other bodies specially instructed to collect it:
  • In Belgium, the tax of 2 per cent on professional earnings is levied at the source. This, however, is treated only as an instalment on the regular payments which will have to be made by the authors themselves subsequently, if they are domiciled or resident in the country.
  • In Canada, the agent (trustee) or collecting company must declare the income, but the person on whose behalf it is collected pays the tax.
  • In France, such income is taxed in the name of the beneficiaries. This is also the case in Denmark.

There seems to have been a misunderstanding concerning this question. Most countries have replied as though the question referred, not to companies entitled to collect income derived from authors' rights for and on account of the authors, but to companies exercising rights acquired by themselves for their own benefit. This question has therefore been confused with the next concerning tranfers or grants.

Sale or Grant of Authors' Rights. Division of income.

Division between a number of years is the practice in Austria, Belgium and France.

In other countries, the tax is levied as and when the income accrues, only if the sale is effected against periodical payments or payment by instalments. This is the case in Bolivia, Denmark, Finland, Great Britain, Italy, Poland, Roumania and Spain.

There is no division in Bulgaria, Czechoslovakia, Germany, Great Britain, Greece, Hungary, the Netherlands, Sweden and Switzerland.

In Canada, no tax is levied in respect of the sale or grant of authors' rights, the transaction being regarded as equivalent to a sale of capital.




  ― 18[4220] ―

Foreigners.

In Austria and Germany, foreign authors only pay taxes if they have some permanent establishment or agent in the country.

In Belgium, the 2 per cent tax on professional earnings deducted at source is final. No other taxes than this are subsequently levied on foreign authors.

In France, taxation is only leviable if the author is domiciled or resident in the country.

In Sweden, foreign authors are only liable to taxation if they have a fixed establishment in the country or collect income in the form of royalties paid by a Swedish enterprise.

In Norway, foreigners are not taxed unless they rent a studio in which to work or premises for the exhibition, on payment of an entrance fee, of works of arts or for their sale.

II. PERIODICAL PAYMENT ON ACCOUNT OF PATENTS.

No special comments. The system is everywhere practically the same as that applied in the case of authors' fees.

FISCAL SYSTEM APPLICABLE TO AUTHORS' RIGHTS.

Questions I and II.

I. What is the fiscal system applied to authors' rights when the latter are collected:

  • (a) Directly by the author, his heirs or assigns (donees, legatees, etc.);
  • (b) By grantees;
  • (c) By companies or other bodies especially entrusted with the collection of such income?

II. According to circumstances, is such income regarded as derived:

  • (a) From transferable securities;
  • (b) From the exercise of any trade or profession;
  • (c) From any other claim or source?

Replies.

Germany.

The tax is payable by the person or company for whose account the sums are collected.

The income may be derived from a trade or industry or the exercise of an independent profession.

Otherwise, the income is deemed to be derived from the leake or transfer of articles or rights.

As regards persons or companies subject only to restricted taxation, the sums in question are liable to income tax and to the corporation tax, unless they have already been taxed as income derived from an industry exc [?] in Germany through a permanent establishment or representative.

Austria.

Authors' rights are taxable in all cases, except in respect of foreigners who exploit their rights in Austria without maintaining a special establishment for that purpose.

Income is deemed to be derived from undertakings for gain, except where the right is exercised indirectly under an assignment for payment to a third person (publisher, heirs or legatees). In this latter case, it is regarded as the exploitation of working capital.

Companies exploiting authors' rights are taxable in the same way as undertakings engaging in a lucrative operation.

The remuneration paid to the author for the assignment of his rights is deducted from the profits if it includes definite sums or a percentage of the gross receipts.

If the rights are collected in the form of shares in the company, the deduction is not allowed.

Belgium.

1. — Income collected directly by the author: professional earnings. Taxes payable: tax on professional earnings and super-tax.

2. — Income collected by the heirs or authors' assigns: use of a transferable right (publication or reproduction). Tax payable: movable property tax.

3. — Income collected by grantees: this is liable to the professional earnings tax leviable on the person who collects them, less the amortisation of the price of the grant (number of years remaining to run before the work becomes public property).

The grantor (author) is taxable on the proceeds from the grant, less the expenditure mentioned (see later: Division).

4. — Income collected by companies or bodies especially entrusted with the duty of collection.

In order to avoid certain difficulties, the professional earnings tax is deducted at source at the rate of 2 per cent of the amount of the income, less only the cost of collection.

Deduction of tax is final as regards foreign authors.

As regards authors domiciled or resident in Belgium, this payment only constitutes provisional taxation subject to subsequent adjustment.

Bolivia.

Author's rights, being considered as intellectual capital, are the exclusive property of the author, his heirs or grantees as are the profits derived from their exploitation.

Income derived from these rights is considered to be derived from the [?] of a profession, and is therefore taxed as professional earnings, (personal services).

Bulgaria.

The authors themselves are not liable to taxation on profits (schedular tax).

The profits of assigns and grantees are taxable as commercial profits for the year in which they were collected.

All beneficiaries (including the authors themselves) are liable to the supplementary tax on total income in respect of income collected.

Canada.

I (a) and (b). — If the author or granted is resident in Canada, he is taxable on the total income derived from all sources, and credit is given for taxes paid to foreign countries.

I (c). — While the agent (trustee) or company collecting the income must make a return, it is the person on whose behalf the income is collected who pays the tax.

II. — The income from authors' rights is deemed to be received from carrying on business in Canada.


  ― 19[4221] ―
Denmark.

Authors' rights are subject to income tax and—if they are assigned—to the capital tax.

The tax is levied on the person who collects the rights (authors or assigns).

The tax is not deducted at source if the income from the rights is collected by companies. It is collected only rom [?] the author.

Nature of income.

As regards the author: income derived from personal work.

As regards the grantee: profit on the capital used for the purchase of the right. Spain.

From the fiscal point of view, authors' rights are regarded as income from movable property.

The rate of the tax is reduced when the income is collected by the children or widow.

There is at present no definite case-law on the matter. Finland.

There are no special legal provisions with regard to authors' rights.

Income derived from those rights [?], and the rights themselves, are liable to income and capital tax.

No distinction is made as regards the persons who receive the rights on the income derived from [?] different sources. France.

1. — Income collected by the author himself, his heirs or assigns, is subject to the tax on profits derived from non-commercial professions and to the general income tax, (if the beneficiaries are domiciled in France).

2. — Income collected by companies or other bodies: tax levied on the beneficiaries (as profits from non-commercial professions).

Nature of Income.

Derived from the exercise of a profession or lucrative occupation.

Note. — At the request of the persons concerned, the annual taxable profit may be determined by deducting from the average receipts for the previous five years the average amount of expenditure incurred during those same years.

Taxpayers must adhere to this system for the following years. Great Britain.

1. — When rights are collected by the author himself: an author resident in the United Kingdom is assessable to United Kingdom income tax. An author not resident in the United Kingdom is liable to bear United Kingdom income tax by deduction at the source from all royalties relating to sale of books, etc., in the United Kingdom.

2. — The same system applies when the rights are collected by grantees.

A person transferring rights is assessable to income tax in respect of the profits derived

1. — Rights collected by the author himself; income derived from the exercise of a profession or vocation.

2. — Rights collected by grantees or by authors not resident in the United Kingdom: the income is regarded as arming from the ownership of property.

3. — Profits from the purchase or sale of authors rights are regarded as derived from the carrying one [?] of a trade or business. Greece

Tax on authors' rights where the income does not exceed 150,000 drachma. Over that sum, the income is subject to the 8 per cent tax on the net income from liberal professions.

In practice, however, authors are not taxed, since they are not, as a rule very wealthy.

As there are no special legal provisions, income collected by the heirs or assigns is taxable under the law concerning the taxation of net income (commercial transactions)—i.e., tax on authors' rights up to 150,000 drachma and tax of 10 per cent on the remunder.

Consequently:

(1) Income from a profession where the taxable party is the author himself.

(2) In all other cases, income from a commercial enterprise.

Norway.

Income derived from the reason [?] of author's rights or of rights in artistic [?] property is regarded as having been earned by personal activities.

It is therefore taxable at the place of residence of the owner or at the head offices of the company to which the rights have been transferred.

Persons residing abroad are not taxed in Norway on income of this kind, unless they rent in that country a studio in which to work, of premises for the exhibition, on payment of an entrance fee, of works of art of for their sale. The same rules apply when the rights are transferred to a company or commercial undertaking. National companies or companies engaged in business within the country are alone taxable. If the company has its head offices in Norway, it is also taxed in respect of income acquired abroad by the exploitation or sale of rights.

Hungary.

Income collected:

(a) By the author: tax on personal profits in the place of his [?] domicile;

(b) By his heirs, etc., or grantees same system;

(c) By an institution set up for [?] the purpose: at the seat of the institution.

(d) By a company: at the place of its registered head offices

Nature of Income.

As income derived from an enterprise if an institution has been set up or if the person concerned exercises a profession in connection with this object.

If no profession is exercised, the income is regarded as income “from another source” (but never as income from a claim).

Italy.

Authors' rights are subject to the tax on movable property

(a) As professional earnings in the [?] name of the author, her heirs or [?];

(b) As income derived from an enterprise when the income is collected by a grantee

As professional earnings when the income is collected in the name of the grantee, but on behalf of the author if the latter draws a fixed annual sum or percentage on turnover, sales, etc.

If the author draws a percentage of the net profits, he is regarded as a partner, and a tax is levied on the whole of the profits. Consequently: professional earnings in the case of the author and his assigns and income from an enterprise in the case of a grantee exploiting the rights which he has acquired.


  ― 20[4222] ―

Netherlands.

As earned income when the author himself collects the income or delegates certain rights [?] to a publisher.

Income collected by heirs, douces, legatees [?] to grantees: income from movable property (capital sum) or from an occupation carried on at the person's own place of residence (his assent [?] to the performance).

Cession in return for an annuity. There is at present no law concerning the classification of [?] such annuities [?]i.e., whether they should be taxable as income from movable property (the amount of the capital sum [?]) or as earned income.

In the heirs [?], etc., ceded the right [?] in return for an annuity, such income would probably be taxable as income from movable property (the amount of the capital sum).

Poland.

As income tax only when authors do not carry on their own business (such as printing, publishing, etc.); otherwise, they are liable to income tax and to the industrial tax. Authors are treated very generously in the matter of the amount of costs and expenditure to be deducted.

Income collected by companies: this is dealt with under the fiscal [?] regime applicable to commercial enterprises.

Income collected:

(a) By the author: professional earnings.

(b) By heirs, assigns or grantees; income from claims and other similar sources (capital);

(c) By companies or other bodies [?]; system applicable to commercial enterprises [?]

Roumania.

Income collected:

(a) By the author, his heirs [?] or assigns: professional earnings;

(b) By grantees: transferable income;

(c) By companies or other bodies: transferable income accruing from the cession of rights in property. Income considered to be derived from movable property (capital) in the event of participation in the profits of the enterprise to which the rights are ceded.

Sweden.

In general, foreigners are only liable to taxation if they have a permanent establishment in Sweden, of if they receive [?] a royalty [?] from a business in Sweden.

Income collected by a professional author is treated as income derived from earning on a business.

Income collected by the hears, etc., of a professional author: income derived from [?] carrying on a business.

Grantees, if the income is collected in the form of a royalty: income from carrying on [?] a business.

If the grantee is a publisher or theatre manager in professional), the income derived from explorting the neglets [?] as regarded as income from a business [?] .

The total amount paid for the rights is deducted at once, as expenses.

Switzerland.

Income collected:

(a) By the author; product of his labour;

(b) By his heirs or assigns: the authors' works are regarded as transferable securities: this capital is thus liable to the tax on capital, and in certain cantons [?], to income tax;

(c) By grantees: if they exploit the rights as a profession, the sums received are liable to income tax (or to the tax on the product of labour). In all cases, the tax on capital is payable in respect of the price paid.

Consequently:

(a) Tax on transferable securities levied on heirs and assigns and on grantees who concern themselves only occasionally with the exploitation of the rights [?].

(b) Professional income: in the case of authors, companies and grantees collecting lees by way of business.

Czechoslovakia.

Income collected (a) by the author or his heirs, if they exploit the rights as a profession: [?] income tax and general profits tax.

If the author carries on this profession solely as a subsidiary occupation, the income is not taxable.

If the heir (legatee [?] or donee) is a company, it is not liable to income tax, but to the general or special tax on profits. For purposes of taxation, account is taken of the number of years the profession from which the income is derived has been carried on [?].

Cession against a single payment:

Grantor (author): income tax.

Grantee: income tax and general profits tax in respect of the income derived from the exercise of the right. If the grantee is a company, it is only liable to the general or special tax on profits.

FISCAL SYSTEM APPLICABLE TO AUTHORS' RIGHTS.

Question III.

III. In the case of the sale or cession of authors' rights either against immediate payment of the actual price or in the form of securities or shares in an undertaking exploiting the authors' rights referred to, is the income from such sale or cession divided between several years for purposes of taxation?

Replies.

Germany.

In the case of sale or cession, the proceeds are only taxable of the assigned authors' rights formed part of a working capital. In that case the profit constitutes a part of the working profit.

Distribution over a number of years is not allowed.

Austria.

In practice, the income is divided between a number of years equal to the years during which the author has exercised his activity.

Belgium.

Division between a number of years equal to that for which the establishment of the instalments is authorised (together with the year of the cession regarded as the last).

Taxes payable: tax on professional earnings and supertax leviable on the grantor.

Bolivia.

Profits derived from sale or cession of author's rights are regarded as taxable income in respect of all sums collected by the beneficiary or beneficiaries during each year.




  ― 21[4223] ―

Bulgaria.

There is no division.

Canada.

Sale or cession. — Whatever the form of payment, the transaction is treated as the sale of a capital asset. The moneys received are not taxable as income.

Denmark.

Sale or cession. The profits are taxable in their entirely as income acquired at the time of sale and without distinction as to how the price was paid (cash or shares).

In the case of shares, taxation is levied as and when the profits accrue.

Spain.

The tax is payable in so far as the price of sale can be demanded by the author or his assigns. There is as yet no definite case-law on the subject.

Finland.

Whether the tax on the income is payable in a lump sum of spread over several years depends on the conditions governing the sale or cession.

France.

Cession to a publisher for a lump sum or against a royalty fixed per year or per copy sold.

Grantor: tax on income derived from non-commercial professions and general income tax.

The Council of State may, however, decide—as it has already done with respect to patents—that this profit is not taxable.

Grantee: liable in his capacity as publisher to the tax on industrial and commercial profits (and to the general income tax).

Great Britain.

There is no division. Any receipts liable are regarded as entering into the income or profits of the year in which they are paid.

Greece.

In case of cession to a joint-stock company, the system of joint-stock companies applies.

There is no division.

Hungary.

There is no division.

Italy.

The tax is levied at the time of the cession on the basis of the actual or computed price.

In some cases, there is an annual tax on the periodical payments.

Norway.

The sale or cession against immediate payment in cash is a taxable transaction. In the case of payment effected [?] in any other manner, the income is asseased at the selling value of the property at the time of cession. When payments are effected as and when sales or performances take place, or when payments are made in instalments, the income is held to be acquired on the date of each payment.

No cases are known in which author's rights or artistic property have been transferred in Norway in return for securities or shares in an undertaking.

Netherlands.

Sale against immediate payment. Up to the present, the administrative authorities have never taxed the grantor, unless the latter operates the same undertaking.

There is no division.

Poland.

Division according to existing circumstances.

Roumania.

Cession:

(a) Against immediate payment, the total income is taxed at the time of the cession;

(b) Against periodical payments the incidence of the tax is at the time of such payments;

(c) Payment in shares: the dividends are taxed at the time of their declaration.

Sweden.

There is no division.

Taxation is levied at once.

Switzerland.

There is no division.

The sum obtained is included in the income of the year of payment.

Czechoslovakia.

Cession against periodic payments.

Grantor, the heir: income tax and tax on annuities.

Grantee: as above.

If the heir cedes the rights against immediate payment, the proceeds are not taxed unless the sale occurs in connection with the operation of an undertaking for gain.

There is no division.




  ― 22[4224] ―

FISCAL SYSTEM APPLICABLE TO PERIODICAL PAYMENTS DERIVED FROM PATENTS.

Question IV.

IV. Same questions as under I to III concerning income from patents, if the fiscal system applied to the latter differs from that applicable to authors' rights.

Replies.

Austria and Cermany [?].

Same system, mutalis [?] mutandis, as applied to authors' rights.

Belgium.

The amounts paid for the use or concession of a patent are liable to the tax on movable property.

If the use of the concession is granted professionally, the proceeds therefrom are considered as income liable to the tax on professional earnings.

Sale or cession.

If the operation is directly or indirectly connected with the grantor's professional occupation, he is liable to tax in respect of the proceeds of the sale, less the price paid for acquiring the patent or its constitutive value (cost of research and study).

It is distributed over several years: same system as applied to authors' rights.

Bolivia.

Income derived from industrial patents is liable to the tax on capital investments.

If, however, the patent is not exploited on an industrial scale by the inventor, who merely receives an annual payment, such income is liable to the tax on professional earnings (personal services).

Bulgaria.

Inventors are subject to taxation as persons exercising a liberal profession and their assigns as persons exercising a trade, with respect to the year in which the profit [?] was collected.

Profits are taxable at source.

Canada, Denmark and Finland.

Same system as for authors' rights.

Spain.

Income from patents worked by an industrial undertaking is taxable as part of the net profits of the said undertaking.

Where the person receiving such income is economically independent of the undertaking, deduction is allowed, but not otherwise.

Neither is it allowed in the case of a foreign branch.

France.

An inventor who sells his patent is not liable to income tax (decision of the Council of State), even if the sale is made against annual or periodical payments.

Grant of working licences: the income received is liable to the tax on profits derived from non-commercial professions and to the general income tax.

This also applies to licences granted abroad, provided the beneficiary is doed [?] in France.

Grantee (generally a manufacturer) the profit [?] is included in the working profits and is liable to the tax on industrial and commercial profits and to the general income tax.

Companies: same system as applies to authors' rights.

Nature of income: derived either from the exploitation of an undertaking or lacrative [?] occupation.

Distribution over several years: see Note to the table concerning authors' rights.

Great Britain.

I. — (a) A patentee is liable to United Kingdom income tax in respect of all payments collected by him. Payments from British sources are received after tax has been deducted.

In the case of a patentee not resident in the United Kingdom, the tax is deducted at the source from all royalties or periodical payments which he is entitled to receive from persons in the United Kingdom.

(b) The same system appllea when payments are collected by grantees.

II. — (a) Payments collected by patentees or by grantees: the income is regarded as arising from the ownership of property.

(b) Profits derived from the purchase or sale of patents are regarded as derived from the carrying on of a trade or business.

III. — There is no division. Any receipts liable are regarded as entering into the income or profits of the year in which they are paid or payable.

Greece and Hungary.

Same system as applied to authors' rights.

Italy.

Same system applied to authors' rights. Periodical payments are, however, always held to be income derived from industry where the invention has involved the inventor [?] in a considerable outlay of capital.

Norway.

Same system as applies to authors' rights. It should, however, be noted that payments made against the cession [?] of rights in connection with patents are usually made in the form of an annual payment or in the form of an industrial participation. If the holder of a patent takes an active part in its exploitation, income is not considered to be [?] derived there from until the person concerned has received his share in the profits of the undertaking.

In cases of cession in return for an industrial participation, profits are assessed on the actual market value at the time of cession.

Netherlands, Poland, Roumania and Switzerland.

Same system as applied to authors' rights.

Sweden.

Same rules as applied to authors' rights. However, income derived from exploiting a patent is almost without exception regarded as income derived from carrying on a business.

Czechoslovakia.

Same system as applied to authors' rights. Payments for concessions are taxable even if the rights are exploited abroad, in so far as the grantor is resident in Czechoslovakia.

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