Does value-added tax still apply to copyright levies?

Copyright levies are in no way connected with the value-added tax, as was unequivocally ruled by the European Court of Justice in 2017. Based on a request from a European industry association, and because, for example, one of the EU member states, Slovenia, is currently relaunching and redesigning its levy system, 1cc is assessing the outcome of the ruling almost three years after. The question of whether VAT applies to copyright levies could be answered quickly: All competent bodies in all countries are aware of the ruling and claim to implement it. However, they do so in different ways, and not necessarily in accordance with the ruling.

Today, manufacturers and importers only pay the tax-exempt copyright levies to collecting societies. Calculating VAT and levy separately is not complicated. However, it is questionable to levy the tax on the end customer as the actual debtor. Yet, it happens.

For example, it is often not mandatory for manufacturers and distributors to disclose the copyright levy separately. If the levy is already included in prices, then VAT is also charged on top of it. It is only later that it is deducted again. Finally, the money is collected and goes to the state. Furthermore, competent authorities in countries with percentage levies expressly confirm that the gross sales price of the product forms the basis for calculating the copyright levies. In both cases, the purpose of the ruling is de facto invalidated.

Thus, even three years after the  ruling has been published, there are still some questions left. There is no consistent understanding, and for the time being it remains an accounting challenge for the obligated companies to separate the one from the other.

For more information, please contact: copyright@1cc-consulting.com