There is a new PIT payment procedure for royalties recipients (with a transition period from 1 July - 31 December 2021). The new payment procedure does not apply to collective management organizations (for a list of organizations, see the Ministry of Culture website).
- How are taxes calculated from my royalties?
Until 30 June 2021, the payer of royalties deducts 20% from earned income (after applying the expenses rate), but when you submit your annual tax return, the total withheld tax is calculated according to the progressive PIT rate.
The payer makes the mandatory 5% pension contribution from the payment of the royalties. If the royalties received exceed EUR 500 (and the person is not employed elsewhere or is employed but receives a monthly salary of less than EUR 500), the receiver pays SSIMC on the amount over EUR 500 and submits a self-employed report.
From 1 July to 31 December 2021, the payer of royalties will deduct 25% tax from royalties not exceeding EUR 25 000 per year (without deducting expenses) that consists of 80% SSIMC and 20% PIT. However, if the total share of SSIMC does not reach the minimum level and the person is not employed elsewhere, SSIA will calculate the difference and notify him/her through EDS on how much must be paid to SSIA for the 10% pension contribution.
Ex. In July 2021, Monta performs in a concert for which she receives €400. The royalty payer pays Monta €300, withholding tax of €100 (25%). Monta's SSIMC does not reach the minimum, but she is not employed elsewhere and does not have other income from which SSIMC would be paid and she does not qualify for the minimum SSICM. Monta receives a notification through EDS in November on the amount from which she must pay a 10% pension contribution.
If total royalties exceed EUR 25 000 for the year, the amount greater than 25 000 is subject to 40% tax, which includes the same 80% SSICM and 20% PIT. If the appropriate tax rate is not withheld during the year (because the total amount of royalties is made up of several payments or is from royalties income from abroad), the royalties recipient must submit a 2021 royalties declaration through EDS by 28 February 2022 and pay the outstanding tax by 23 June 2022.
As of 1 July 1 2021, a recipient of royalties can register as “self-employed” with the SRS, choosing to pay taxes tax as a self-employed individual or by registering a micro-enterprise or commercial company.
More information on registration and tax payment for these options is available here.
If you choose to register as a self-employed person, you may apply the 25% or 50% expense rate (as previously) or deduct actual expenses (submitting supporting documents) and also pay SSIMC as a self-employed person. If you choose to register a micro-enterprise, note the changes in the MET regime.
When receiving royalties from a collective management organization, the tax withholding procedure does not change.