Taxation of author's and licence remuneration
Under Bulgarian tax law, income originating from the subject matter of copyright and royalty payments is also taxed. The taxation regime is regulated respectively in ITNPA, CITA and VATA.
Subject matter of copyright
According to Art. 3 (1) CNRA, subject matter of copyright is any work of literature, art and science, which is a result of creative activity and is expressed in whatever manner and in whatever form (such as literary, musical, photographic works, performing-art works, films and the like).
Author's and licence remuneration
"Author’s and licence remuneration" are payments of any type received for the use or the right to the use of any copyright regarding a work of literature, art or science, including films, records of radio or TV broadcast or software; the use or the right to the use of any patent, integrated circuit topology, trade mark, industrial design or useful model, plan, secret formula or process; the use or the right to the use of an industrial, commercial or scientific equipment or information regarding an industrial, commercial or scientific experiment.
Taxation under ITNPA and CITA of persons receiving author's and licence remuneration
According to Bulgarian law and the taxation regime applicable to natural persons, the income originating from the transfer of rights is income from a source in Bulgaria and is taxed under Art. 12 ITNPA. The basis of taxation is determined by way of subtracting the operating expenses recognised by statute from the income received by 40 %, along with the insurance contributions made.
Regarding legal entities, according to Art. 195 CITA, when legal entities, unincorporated associations and State-budget enterprises withhold author's and licence remuneration from foreign legal entities, which have not been received through a business activity establishment within the country, the tax is final. The tax amount is 10 per cent, with exception of Art. 200a (1) CITA.
According to Art. 200a (1) CITA the tax rate on income originating from the subject matter of copyright and royalty payments is 5%, if the following conditions are simultaneously fulfilled:
- the income belongs foreign legal entity from an EU-Member State or to a foreign person with permanent establishment in an EU-Member State;
- the local legal entity, paying the income, or the person, paying the income that has its permanent establishment in Bulgaria, is a connected person to a foreign legal entity - owner of the income, or to a person, whose permanent establishment is owner of the income.
Where income taxable at a reduced tax rate has been taxed at a higher such rate, the owner of the income is entitled to request restoration of the tax, but not later than one year from filing the request for restoration.
If the authors of the works who surrender their rights to collective rights management organisations are natural persons, who are not traders, their taxable income pursuant to Art. 29 (1), item 2 ITNPA, it is the amount allocated to them by the organisation and is defined in the bilateral distribution protocol, reduced by the operating expenses by 40 per cent.
Taxation of author's and licence remuneration under VATA
Activities performed by collective rights management organisations (CRMO) are subject to VAT. This comprises two main distinct supplies, namely:
- assignment of copyright by the authors or holders of copyright to the CRMO and
- providing the assigned copyright by the CRMO to users.
Each of these supplies has a separate basis of taxation and a separate date of occurrence of the chargeable event.
The invoice is mandatorily issued not later than 5 days after the date of occurrence of the chargeable event for the supply, and in the cases of advance payment, not later than 5 days after the date of receipt of the payment.
In terms of the supply between the authors or holders of the copyright and the CRMO, the chargeable event occurs on the date on which the right holders approve the amounts specified and allocated to them by the CRMO and a bilateral protocol is signed. CRMOs have the right to withhold the VAT as tax credit of the right holders.
Insurance contributions for remuneration received from the assignment of copyright
Holders of copyright over the works listed in Art. 3 (1) CNRA may grant the right of use of those works in return for remuneration.
Author's remuneration is received from the assignment of rights to use the subject of copyright, legally protected by the CNRA, and therefore does not constitute income originating from labour activity and is not subject to insurance contributions.
Where the self-insured persons have no other taxable income, the final amount of the insurance income is equal to the minimum such income for the self-insured persons.
Remuneration received from artistic activity on the creation of the work subject matter of copyright can be obtained under a contract of employment or a non-employment relationship. When working under a contract of employment insurance is carried out under Art. 4 (1), item 1 CSR. When working under a non-employment relationship insurance may be conducted in the same manner as insurance of persons performing professional activities at their own risk and expense - scientists, culture figures etc., or as work under a civil contract.