Constitutional Court justifies excluding IT sector from favourable tax scheme for copyright royalties

Royalties generated from the transfer or licensing of copyright-protected works can benefit from favourable tax scheme. But this scheme would have excluded the IT sector since the 2022 legislative reform. In its ruling of 16 May 2024, the Constitutional Court rejected the appeal that some IT companies had petitioned. They sought annulment of the tax scheme on grounds of alleged prohibited discrimination (no. 52/2024).

Background and context

Tax legislation provides for favourable treatment of income generated from royalties received from the transfer or licensing of copyright-protected works (Art. 17, §1, 5° Income Tax Code 1992). This type of income is taxable at only 15% if certain conditions are met, after deducting fixed costs.

Ever since 1 January 2023, the tax scheme for royalties generated from the transfer or licensing of copyright-protected works has been reformed thoroughly. One of the changes brought by the reform was that the term “copyright-protected work” was given a narrower definition. From then on, only:

  • protected works that qualify as being within the scope, as referred to in Book XI, Title 5 of the Code of Economic Law; and
  • those that relate to original literary or artistic works, as defined in Art. XI.165 of the Code of Economic Law, or performances by actors, singers, musicians, as defined in Art. XI.205 of the Code of Economic Law.

There was a lot of uncertainty about whether software falls under this definition. During the parliamentary preparations, the minister of finance made several clarifications from which it could be inferred that software would not be covered. The Office for Advance Tax Rulings seemed to have followed this position (ruling no. 2023.0659, 3 October 2023).

Afterwards, a few IT companies lodged an appeal with the Constitutional Court, seeking annulment of the ruling and suing on grounds of alleged discriminatory treatment. After all, this led to prohibited discrimination.


The Court’s considerations

In its ruling of 16 May 2024, the Constitutional Court held that there is no question of prohibited discrimination.

The Constitutional Court concluded that there was clearly a distinction in treatment. The legislature would have certainly had the intention to exclude computer programmes (as being works that are similar to literary works) from the scope of application of the new legislative provision.

This distinction stems from a relevant criterion, however, given the purpose of the rule. The legislature’s purpose would have intended to revert to the original purpose of the rule, and that is to provide for an appropriate scheme for royalties that are generated from the irregular and changeable manner consequent to artistic activities. Such aspect of changeability would not exist for the IT sector. Computer programmes would rather be developed as part of stable economic implementations.


Effects of this in practice

From a legal perspective, there is a lot to be said about this conclusion. But the tone has clearly been set. Royalties generated from the transfer or licensing of computer programmes would not qualify for the favourable tax scheme.

But this does not mean that the IT sector would be completely excluded from this rule. After all, the sector creates other copyright-protected works besides computer programmes. The Office of Advance Tax Rulings has already issued positive rulings in relation to marketers (ruling no. 2023.0888, 30 January 2024), website designers and graphic designers (ruling no. 2023.0936, 16 January 2024). One must therefore analyse in detail the performances executed and the works created.

For several years, the tax authority has conducted audits relating to the tax scheme for copyright royalties. In practice, it seems that the tax authority has also considered certain clarifications or limitations of the new scheme (since 2023), although the audit concerns the old tax scheme. This trend is expected to continue, however. But if the audit concerns the 2022 income year or earlier, then these clarifications should not be relevant. Nevertheless, you should still be attentive and vigilant.


Do you have any more questions about the impact that this ruling has on the tax scheme for copyright royalties? Please contact Luk Cassimon (, Wylma Gashi (, or your usual point of contact at Monard Law.


This article is written by

Looking for advice on a specific topic?

We will guide you to the right person or team.