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Belgium: VAT ruling, copyright transferred to company by individual director

Belgium: VAT ruling, copyright transferred to company

A ruling provides that generally, individual directors do not need to apply for a value added tax (VAT) number when they receive consideration for the transfer of a copyright to the company.

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Individuals who are directors or managers of a company do not act independently, but act on behalf of and in a fiduciary relationship to the legal entity. Thus, when acting in the normal course of their statutory duties, these persons typically are in a “subordinate relationship” with regard to the legal entity, and as such, they are not subject to VAT for the assignments carried out in this context (unlike legal entity administrators, who are subject to VAT).

However, when the individual director also performs special tasks that go beyond the normal exercise of that person’s statutory functions, these services may be subject to VAT, and VAT registration may be required. There can be uncertainty as to this position—for instance, when does the normal exercise of a director’s mandate end and when does the special mission begin?

In the ruling, this distinction centered on the collection of royalties in the following situation:

  • A director (a natural person) transferred a copyright to the company for which he exercises his mandate as director, and he received consideration for this transfer.
  • The question posed was whether such a transfer of the copyright is considered to be part of the normal exercise of the individual’s mandate as director.

The position taken in the ruling is that the consideration received in the context of an assignment of the copyright falls within the normal activities of the director’s mandate. Thus, there was no requirement for the director to comply with or obtain a VAT number.


KPMG observation

The ruling appears to provide what might be called an “administrative tolerance” meaning that there could be a requirement for the person to register for VAT purposes if the assignment of a copyright occurs on a regular basis. Note that this position seems applicable to consideration received by employees who transfer a copyright as part of their employment contract. By definition, workers do not act on an independent basis because there is always a relationship of subordination with the employer.

Read a September 2020 report (French) prepared by the KPMG member firm in Belgium

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