A royalty is a payment you receive because somebody is using your work. Royalties are paid to authors, musicians (or other artists), designers, etc. But what about the Dutch tax on royalties?
What are royalties?
If you make or invent something, you have a property right over it. If people want to use or sell it, you should permit them. The fee that you receive on this is called the royalty. Streaming service Spotify, for example, pays royalties to the artist. And does a publisher sell your book? Then you will receive a part (royalty) of the sales price for each book sold.
Dutch tax and royalties: how does it work?
You must pay tax on royalties in the Netherlands. You include your income from royalties in the income tax return and VAT return.
Income tax on royalties
You pay income tax on royalties. Whether the royalty is taxed in box 1 or box 3 depends on the situation:
Box 1. When you receive royalties as an owner, this is seen as income. The royalties are added to your profits from business, additional activities, and/or salary from employment. You pay tax on your total income in box 1 (income from work and home).
Box 3. If you do not own the product yourself but have inherited the rights, you also receive the royalties. In this case, you pay tax in box 3.
VAT on royalties
When you receive royalties, you usually have to file a VAT return. You can have to deal with all possible VAT rates.
Exempt from VAT. In some cases, you are exempt from VAT:
- Journalists, Writers, and Poets
- Music compositions
- Art education under 21 years
- 0% VAT. The 0% VAT rate applies to user rights abroad. You can think of a performance abroad.
9% VAT. The low VAT rate applies to performing arts. This is when dancers, actors, musicians, artists, and other performers perform.
21% VAT. For all other royalties, you charge the regular VAT rate of 21%. You can think of CD sales, advertising commercials, and merchandise.
We help with your Dutch taxes
Speak directly with one of our tax advisors
Do you receive royalties and could you use some help with your income tax return and VAT return? We are happy to help! Please contact us using the details below.
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