What are royalties?
Royalties constitute royalties paid to a subject for the economic exploitation of an intellectual property on works of human intelligence (such as, for example, literary, artistic, musical works, etc.).
When these fees are paid to non-residents , they take the name of cross- border royalties.
The amount paid by the company as royalties is deductible from the corporate profit.
The royalties license agreement
In order to pay royalties to a person (corporate body or individual), a contractual relationship must exist between the lender company, which acquires the economic exploitation title of the intellectual property, and the beneficiary, who confers the aforementioned title.
The legal link is a contract called an intellectual property licensing agreement or, more briefly, a royalty license agreement .
In the literary field, the contract is also referred to as a ‘publishing right agreement’.
Tax procedure for the payment of cross-border royalties on literary works
An Anglo-Saxon company wishing to make the payment of royalties to non-UK resident beneficiaries must follow the following procedure.
- Download the publishing rights agreement . Link to the contract .
- Request a receipt from the recipient of the royalties. To generate a receipt in pdf, the beneficiary can use an online software: Link 1 or Link 2 .
- Ask your accountant to issue the CT61 model . Link to request the issue of model CT61 to Ltd24ore .
- Obtain the data for the payment of the withholding tax and pay the amount due to HMRC.
What is the CT61 model?
The CT61 form is required to declare to the UK tax authorities the amount of royalties paid by a UK company to a non-UK resident individual and calculate the related withholding tax.
The amount of the withholding tax, to be applied for the purposes of the Income Tax in the UK, must be determined on the basis of the Double Taxation Convention stipulated between the United Kingdom (country of residence of the company) and the country of residence of the beneficiary of the royalties.
Such tax paid in the UK may constitute a tax credit in the beneficiary’s country of residence, according to the domestic tax legislation applicable there.
The withholding of royalties in the Double Taxation Conventions entered into by the United Kingdom
To help you determine the applicable withholding tax based on the country of residence of the natural person beneficiary, you can view the table below which lists the main countries.
|Village||Withholding (%) (natural person beneficiary)||Convention against double taxation|
|Italy||8||Italy: tax treaties|
|France||0||France: tax treaties|
|Germany||0||Germany: tax treaties|
|Spain||0||Spain: tax treaties|
|Portugal||5||Portugal: tax treaties|
|United Arab Emirates (UAE)||0||United Arab Emirates: tax treaties|
|USA||0||USA: tax treaties|