Copyright compensation – Exemption from social security contributions – not only for the future, but action already required by 30 June 2023

In the past, although not all employers reported it as such, it was generally accepted that copyright compensation paid to employees was subject to social security contributions.

As of 1 January 2023, this is no longer the case. The Royal Decree of 7 April 2023 sets out the conditions that need to be fulfilled for the exemption from social security contributions of copyright compensation paid to an employee.

Particular in this Royal Decree is that it does not only provide for an exemption of compensation paid since 1 January 2023, but also opens the door for a regularization (fully exempt from social security) for copyright compensation that was paid in the past (2018-2022), but not correctly reported towards the social security authorities.

Not correctly reported?

The Royal Decree states that it is not possible to benefit from the social security exemption in case salary or other benefits are converted into compensation for the transfer of copyright. This is a rule which we also see for example with respect to meal vouchers.

A conversion of salary done in the past could however be maintained and thus be exempt from social security as from 1 January 2023, provided that following conditions are met:

• the employer has reported the copyright income to the tax authorities as movable income for income year 2022, or if nothing is reported in 2022, respectively for 2021, 2020, 2019 or 2018;
• the amount of the compensation is limited to the smallest amount of either the amount reported as movable income or the difference between the remuneration reported towards the tax authorities and towards the social security authorities as remuneration for work performed;
• the employer reports before the end of 2023 the converted amount to the social security authorities.

Social security regularization for the past

The regularization on social security is to be situated in light of the above tolerance for the conversion of salary in the past. Employers that did not report copyright compensation to the social security authorities in the past may expect additional social inspections, as they now suddenly report (converted) copyright income to these authorities. They can however regularize the situation for their employees for the period 2018-2022. It is important that the employer reports all copyright compensation income towards the social security authorities prior to 30 June 2023. There is thus a closer deadline than the one for the future tolerance of the ‘converted’ copyright income (i.e. end of 2023).

There was some unclarity on whether these regularization reportings would only exempt the employer from the interest, surcharges and/or other penalties or even so from the regular employer and employee social security contributions. The social security authorities now confirmed that this exemption would also apply with respect to the regular social security contributions. A unique opportunity for employers on having a tabula rasa?

Copyright income exempt from social security contributions is to be reported in the DMFA-declaration under the code 47. The same applies for the income to be regularized.

At KPMG we can assist you with the social security and tax aspects of the copyright compensation, as well as the necessary reportings. Feel free to reach out to Hendrik Putman or Jeroen Vandenbossche.