Background – Income Tax
Income earned by writers, composers, visual artists and sculptors from the publication, production or sale of their works is exempt from income tax in Ireland in certain circumstances. For the year 2015 and subsequent years the maximum amount of income which is exempt is €50,000 per annum.
The exemption applies to certain artistic works which are original and creative and generally recognised as having cultural or artistic merit. Earnings derived from such works are exempt from income tax from the year in which the application was made. The exemption does not apply to PRSI and USC.
In addition to income from the sale of works, the following payments also qualify as exempt income, subject to the overall maximum relief figure:
- Arts Council Bursaries when paid directly to individuals by the Arts Council.
- Residencies when paid directly to the individual by the Arts Council for the purposes of producing a qualifying work. (Income from residencies which relate to teaching art or facilitating other individuals to create works of art or similar type practices do not qualify for exemption.)
- Cnuas payments under the Aosdana Scheme.
- Payments from the sale of qualifying works abroad, which fall within the guidelines.
- Advance royalties.
Where an individual receives advanced royalties, which are attributed to the subsequent publication of a book or other writing, an application must be submitted to Revenue in the tax year in which the royalties are paid, if the advance royalties are to be exempt. Confirmation from the publisher that the book will be published must accompany the application. Where an application is received in the tax year in which the advance royalty is received, but where a determination has not yet been granted, any tax liability arising on the advance royalty must be paid. If a determination is subsequently granted by Revenue, the individual’s tax liability will be reviewed, and any overpayment of tax will be repaid. Advance royalties paid before the year of the application are not exempt.
How to Apply for Artists Exemption
Writers, composers, visual artists and sculptors seeking Artists Exemption should submit an application form to the Revenue Commissioners together with samples of their work and any supporting documentation in the form of testimonials etc. which they consider appropriate.
If you receive income greater than €50,000 during the tax year, you will not be taxed on the first €50,000 but USC and PRSI will still apply. Anything over €50,000 will be subject to Income Tax, USC and PRSI.
An analysis will need to be carried out to determine the income that is exempt under the Artists Exemption and income that is not exempt. If you have a mixture of income that is exempt and not exempt, this will need to be separated.
Artists Exempt Income of €40,000 and non-Artist Exempt income of €10,000. The Artists exempt income is exempt from Income Tax but it is still subject to USC and PRSI. The non-Artist Exempt income is subject to tax at the Author’s marginal income tax rate.
Background – VAT
Authors are deemed to provide a good if the books are printed and a supply of a service if they are in the form of an e-book.
In cases where the Artist Tax Exemption has been granted it is important to note that this applies to income tax only. The exemption does not extend to VAT.
For example – if an author who was granted an Artist Exemption sells a book, it would not be subject to income tax provided the sales were not greater than €50,000 but it would still be VATable.
Sale of books in Ireland
The sale of books in Ireland would be considered a sale of a good. Therefore, if an author supplies goods and their sales of books and other printed matter are greater that the goods threshold of €75,000, they must register for VAT in Ireland. The VAT rate applicable to the sale of books in Ireland is zero.
Supply of Services in Ireland
If an author supplies a service in Ireland e.g. an appearance, talk, interview, reviews etc. and are paid for this service, they will have to register for VAT in Ireland if they reach the service threshold of €37,500. They would be liable to VAT at the standard rate of VAT of 23% on any income earned from the services.
VAT on e-books
All digitised publications regardless of their VAT rate when printed (e.g. a book liable at zero rate) are treated as a supply of services rather than goods and are classified at the Standard Rate i.e. 23%.
Place of Supply for Sales Outside of Ireland
If Authors sell work to private customers (B2C) outside of Ireland then they apply VAT as normal until they reach a certain threshold. Each EU country has a different sales threshold. Once the threshold has been reached, VAT is charged in the country to which they sell e.g. France’s threshold is €35,000. Therefore, if the author supplies goods to France and their sales are below €35,000, they can continue to apply Irish VAT as normal but once they reach sales of €35,000 in France, they will be required to register for VAT in France.
From July 2021, B2C sellers dispatching their goods from a single country will no longer be required to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they may opt to simply complete and file a new OSS filing alongside their regular domestic VAT return that will list all their EU sales. The seller then remits the VAT due to their home VAT authority, which then forwards the taxes to the appropriate countries. This effectively removes the distance selling provisions.
If they sell to a VAT registered company (B2B) in another EU state, the supply can be zero rated and Irish VAT does not apply.
Any sales made to countries outside of the EU, whether dispatched from Ireland or sold from within the non-EU country, is outside the scope of VAT. This means that there is no need to charge VAT, Irish or other, on any sales made to or taking place outside of the EU.
VAT on Royalties
VAT on Royalties received from Ireland, is applied at the standard rate of 23%. No Irish VAT applies if the royalties are received from outside Ireland.
Supply of both Goods and Services
If an author has income from both the supply of goods and the supply of services (e.g. an appearance), it is important to understand when the author will be required to register for VAT in Ireland. This is because there are two different thresholds in respect of both goods and services.
In general, authors whose total turnover from the supply of goods and services does not exceed the goods threshold of €75,000, are not accountable unless they elect to register for VAT. For the provision to apply, at least 90% of that turnover must be derived from the supply of taxable goods.
If an author has total turnover of €76,000 from the supply of both goods and services, and if €68,400 of those sales were derived from the supply of goods, the author would be required to register for VAT in Ireland. (i.e. €68,400/€76,000 = 90%).
If the author had a total turnover of €76,000 and the supply of goods did not exceed €68,400, they would not have to register for VAT, but they can elect to. However, if the services provided reach €37,500, they would have to register for VAT
To learn more and to discuss your situation in detail, please contact Brendan Murphy here https://www.robertsnathan.com/