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Tax treatment of royalties

Effective 1 January 2020, royalty payments to authors/creators and/or other individuals who are rights holders of copyrights in connection with subsequent use of created works will be taxed as investment income, with no allowable deductions, instead of being taxed as wage income. This applies to works that, pursuant to Article 1 of the Copyright Act, no. 73/1972, have been made available to the public, issued, or published; cf. Articles 2 and 3 of the same Act. The amendment is in line with the agreement among the Government coalition parties concerning Government collaboration and strengthening of Parliament. Included in that agreement is a policy statement on amendments to the tax treatment of music, Icelandic written language, and media, and specifying that royalties shall be taxed as investment income.

In order to amend the tax treatment of royalties, amendments were made to the Income Tax Act, no. 90/2003 and the Act on Withholding of Investment Tax, no. 94/1996 with Act no. 111/2019. Tax on these payments will from 1 January 2020 be withheld at source, thereby aligning the collection of the tax with the fundamental principles applying to withholding of investment tax. This arrangement will also provide for more secure and efficient tax collection. It is assumed that a Regulation will be issued for explanatory purposes and to outline the tax treatment within the confines of the law.

Act no. 111/2019

Economic issues and public finances

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