Application of 50% deductible costs to royalties

Publication / 02.11.2020

Representatives of creative professions listed in Article 22, para. 9b of the Personal Income Tax Act of July 26, 1991 (among others, architects, journalists, performing artists, IT specialists, university teachers) have received long-awaited clarification on the conditions for the application of 50% of deductible costs to income from the use by creators of copyright or disposal by creators of such rights, contained in General Interpretation No. DD3. 8201.1.2018 of the Minister of Finance dated September 15, 2020, published in the Official Journal of the Minister of Finance dated September 18, 2020 under item 107.

The interpretation clarifies important issues that have so far raised the greatest doubts in practice against the background of the application of 50% deductible costs.

The Minister of Finance has clarified what conditions must be met for the application, including by a payer of income tax (e.g., an employer), of 50% deductible costs with respect to income from the use by authors of copyright or disposal by authors of such rights. In addition, the Interpretation includes clarification of the principles of transfer of copyright from the employee to the employer, the principles of determining and documenting the amount of the royalty under an employment relationship or civil law contract, in particular how to separate it in the contract, the issue of advance payment of the royalty, and the principles of documenting works that are the subject of copyright. Additional explanations are devoted to academics, researchers, employees of research divisions and programmers.