Is copyright exempt from VAT?
To ensure the correct application of the VAT regulations regarding copyright, we should begin by noting that Article 20.26 of the VAT Act states that:
“Professional services shall be exempt, including those for which the consideration consists of copyright, provided by visual artists, writers, literary, graphic, and photographic contributors to newspapers and magazines, musical composers, authors of plays and screenplays, and those who adapt, write, or provide dialogue for audiovisual works, as well as translators and adapters“
The contribution of original works by photographers and illustrators, and texts written by a journalist
The transfer of rights for publication in print or digital format, the transfer of the right to use a logo, and the transfer of the rights to exploit theatrical works by the author himself are recognized as exempt under Article 20.26 of the VAT Law.
VAT exemption is also recognized for royalties on literary works created by individuals and for the writing of texts for publication in magazines.
The transfer of copyrights by a professional individual who is the creator of a sculpture, painting, or graphic novel to a third party shall be exempt; however, the author’s own exploitation of the work is not exempt and would be subject to tax. Similarly, the transfer of musical works by the composer—if the composer is an individual—is exempt.
- The exemption under Article 20.26 is granted to:
- The assignment of copyrights by individuals who are authors of storylines, adaptations, screenplays, or dialogue for motion pictures and other audiovisual works; this does not extend to other copyrights, even if they pertain to such works.
- Services for condensing catalog text and services for adapting text language for children.
- For textile products, the copyrights to designs used for prints.
Only copyrights licensed by individuals will be exempt; those licensed by a limited liability company, a general partnership, etc., will never be exempt…
It should be noted that when composers, writers, visual artists, and all those mentioned above in Article 20.26 of the VAT Law engage exclusively in activities that are considered exempt, they are not required to file VAT returns, which greatly facilitates their compliance with tax obligations.
It should also be noted that when the aforementioned activities are carried out in conjunction with other activities that are subject to VAT and not exempt from it, tax obligations become more complex, since in addition to the requirement to file VAT returns, the deductibility of VAT is limited to the proportion of activities eligible for deduction out of the total activities performed.
This is a very complex topic. If you have any questions or would like to add anything else, please leave us a comment. Thank you.
Montse Santamaría Peralta
