Payment as fees or author’s rights?
After nine years of struggle, confusion and (for freelances often expensive) tax reviews, the Flemish Association of Journalists (VVJ), together with the main Flemish editing companies, reached a ruling with Belgian tax authorities as to which part of the freelance’s payment can be considered as ‘author’s rights’ and which part ‘fees’ (for work). The deal of the ruling: 50 % is for ‘author’s rights’ and 50 % for ‘fees’.
It makes a huge difference in Belgian tax law. Since 2008, income from author’s rights has been taxed at 15 % (but de facto 7.5 % to 12 %, because of high deemed costs), while normal fee income is taxed at 25 % to 50 % (everything above € 38,000 a year is taxed 50 %).
Apart from the difference in tax, there is also a consequence as to contributions for social security. These contributions (21 % of the income) are only due on income from fees, not on income from author’s rights. That means that on half of their total income (the 50 % author’s rights), freelances don’t have to pay social contributions. This has no consequences for their social security – freelances are considered self-employed and have no right to unemployment benefit, and the benefits (allowances) in case of sickness are a fixed amount per day, irrespective of income or contribution.
In the past nine years freelance were tempted (i.e. encouraged by the editing companies) to declare all (100 %) of their income as ‘author’s rights’, in order to pay very little tax. Tax controllers often reviewed those tax declarations into 100 % income from work, which resulted in thousands of euro tax arrears (and social contributions) to be paid by the freelances. Moreover, it depended on whether or not the individual journalist’s tax declarations were controlled, and the way a controller viewed the situation (in some regions they were more severe than in other). In short, there was huge legal inequality and legal uncertainty.
Since the ruling – starting on July 1 of 2017 – this uncertainty has come to an end. 50 % is the accepted rule. Freelances however need to have a written contract with their clients (editing companies, broadcasters, …) in which it is stated that they are paid 50 % in author’s rights and 50 % fees.
However – a VAT requirement arises
The main Flemish editing companies have taken the opportunity to draw up new contracts and to tell their freelances that these contracts are no longer a ‘contract of publication’ (which obliged them to publish everything the freelancer presented them). VAT authorities considered these contracts as exempt from VAT.
In consequence, freelances now have to add 6 % VAT on their invoices (unless their total yearly turnover is less than € 25,000), whereas before they were exempt from VAT because tax authorities automatically considered their work to be delivered with a ‘contract of publication’.
For freelances this means significant additional accounting work, keeping track of all costs and working out their VAT declaration every quarter, in the same way as a company. It also means significant extra cost in accountancy fees.
The French speaking counterpart of the VVJ, the AJP, did not participate in the ruling. On VAT, AJP considers that freelances should decide by themselves whether they work with or without VAT.
(with thanks to Ivan Declercq for the information and original article).