Publication date: 14.01.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
Contractual legal relations in the field of intellectual property in most cases are accompanied by such a concept as "royalty", which is a reward that the owner of property rights to the object of intellectual property rights will receive from the user.
- According to Art. 1107 of the Civil Code, the transactions on the basis of which property rights to such objects can be acquired, changed or terminated are: a license agreement, a license, an agreement on the creation to order and use of an object of intellectual property rights, or an agreement on the transfer of exclusive intellectual property rights and others.
- The first of the above deserves special attention in the context of reveling the topic of royalties, since one of its essential conditions is the license fee, and therefore, when concluding it, a legal analysis of a contract is highly desirable.
- When concluding the contract, the parties can agree on the payment of remuneration to the right holder in a clearly established amount, which will accordingly have the legal meaning of royalties.
Features of royalty:
- First of all, it is worth deciding what exactly the remuneration in the form of royalties will be paid for.
- According to the tax legislation, the calculation of payments for the use of literary works, works of art, science, computer programs, films, organizational broadcasts, trademarks, patents and other objects of intellectual property rights will be considered royalties.
Exceptions are the cases provided for in paragraph 14.1.225 of the Code of Criminal Procedure, namely: in the case of limiting the use of a computer program by the end user or limiting its functional use, if the right to distribute copies of software products was transferred without the right to reproduce them, in case of acquisition a copy of the object of intellectual property right for final consumption or for the purpose of resale, if things containing the object of intellectual property right were purchased for the use of possession or disposal of them - in this case, the payment of remuneration will not meet the definition of royalty based on tax purposes .
The payment of royalties is the responsibility of users, which is noted when concluding a contract, determining the size of the payment and the form of its payment, therefore, a detailed analysis of documents is mandatory.
- Regarding the form, remuneration can be paid both in the form of a one-time payment and in the form of a periodic fixed rate or interest (royalty), for example, for each sold copy of the work.
- Current legislation establishes the possibility of exercising property rights to copyright objects by authors, their representatives, and collective management organizations.
- If the author transferred his rights management authority to a collective management organization, then this organization will agree with the users on the amount of remuneration and will regulate the issue of its collection.
- If the user does not fulfill his contractual obligation and does not pay the royalties, the direct subject of the copyright, or the collective management organization can apply to the court with a lawsuit, in which to justify the claim for the recovery of remuneration and compensation for moral damage, if such was caused .
The main aspects of royalty taxation:
- If the royalty is paid in cash or in the form of securities, then such remuneration will not be subject to VAT, but if a non-cash form is used, then payment of tax is required at the rate of 20%.
- As for the personal income tax, in this aspect, royalty taxation is similar to dividend taxation, and the rate of such tax will be 18%.
- Also, do not forget about the maintenance of the military levy (1.5%).
- In the case of receiving remuneration in the form of royalties of the FOP, which is a single tax payer, this amount will not be considered business income.
Analysis of contracts by a lawyer:
- Since the size of the royalty and the procedure for its payment is determined in the license and other agreements and is their essential condition, a legal analysis of contracts is absolutely necessary.
- The lawyer will develop a draft of the contract, conduct an analysis of contract for compliance with all legal requirements, and also take care of the procedure for agreeing the essential conditions with all parties.
- In the case of non-fulfillment of the user's obligation to pay royalties, the lawyer will help protect the violated right by using both pre-trial dispute settlement methods and by filing a lawsuit in court.
