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Where Taxpayers and Advisers Meet

Withholding tax for video game royalties.

FouFouFar
Posts: 5
Joined: Sun Jan 25, 2015 5:27 pm

Withholding tax for video game royalties.

Postby FouFouFar » Sun Jan 25, 2015 5:41 pm

Hi,

We are close to sign a publishing deal with an UK based company for the release of a video game that we have developed.

If i understand correctly, there is a "tax relief" for the video game industry, (I think tax relief mean no tax at all)...

-Does this also apply to royalty payments to alien entities/persons?

-Does this mean that the UK based publisher will send us the full royalty payments without deducting any withholding tax percentage?

-If that is not the case, are there any forms to fill in order to get full or partial tax exemption according to double taxation treaties (Something similar to form W8BEN in the case of US)

I will really appreciate if someone could help and clear things up for us.
Thanks in advance & cheers.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: Withholding tax for video game royalties.

Postby GlobalTaxAdviser » Mon Jan 26, 2015 12:56 am

Hi

25% tax relief for production costs came into effect last year for UK Video Games companies. The criteria is very strict and only for games that pass the UK cultural test. You will also need to get a certificate but this will not apply to you if you are based overseas.

You don't mention the country you are from and yes you need to complete a form to get double tax treaty relief. With certain countries like the US there is 0% withholding tax on royalties and interest

Kind Regards

Sash

FouFouFar
Posts: 5
Joined: Sun Jan 25, 2015 5:27 pm

Re: Withholding tax for video game royalties.

Postby FouFouFar » Mon Jan 26, 2015 11:58 am

Thanks a lot for your very helpful reply.

I have the double taxation treaty between UK and the country I am based in, it says: "Royalties may also be taxed in the Contracting State in which they arise and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the royalties" So I guess 10% is the max percentage for the UK publisher to withhold in case a valid "double tax treaty relief" form is filled. My questions are:

1- What would be the the max withholding tax amount if no "double tax treaty relief" form was filled.

2- Form DT-Individual is what I need to fill in order to get double treaty benefits, right? (It seems complicated btw, compared to the US version, which is one page long)

Thanks again.

FouFouFar
Posts: 5
Joined: Sun Jan 25, 2015 5:27 pm

Re: Withholding tax for video game royalties.

Postby FouFouFar » Mon Jan 26, 2015 12:10 pm

Can someone please clear the confusion here? The web page below says under the "Royalties WHT" section: "However, certain types of royalties, such as film royalties and equipment royalties, will generally not be subject to UK WHT."

http://taxsummaries.pwc.com/uk/taxsumma ... DCN-89HU8L

According to the uk tax law, which royalties aren't subjected to Withholding tax, beside films and equipments royalties (It seems that this is another matter than "tax reliefs" discussed above, since it's about WHT) Are video games or Computer Softwares not subjected to UK WHT as well)?

Would really appreciate any help.
Thanks.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: Withholding tax for video game royalties.

Postby GlobalTaxAdviser » Mon Jan 26, 2015 2:49 pm

Thanks a lot for your very helpful reply.

I have the double taxation treaty between UK and the country I am based in, it says: "Royalties may also be taxed in the Contracting State in which they arise and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the royalties" So I guess 10% is the max percentage for the UK publisher to withhold in case a valid "double tax treaty relief" form is filled. My questions are:

1- What would be the the max withholding tax amount if no "double tax treaty relief" form was filled.

2- Form DT-Individual is what I need to fill in order to get double treaty benefits, right? (It seems complicated btw, compared to the US version, which is one page long)

Thanks again.
The WHT would be 20% and yes its complex hence why having an accountant on board may help

FouFouFar
Posts: 5
Joined: Sun Jan 25, 2015 5:27 pm

Re: Withholding tax for video game royalties.

Postby FouFouFar » Mon Jan 26, 2015 5:34 pm

It looks like films and equipments royalties aren't subjected to Withholding tax in the UK, among other types of royalties...Are video games/computer softwares not subjected to UK Withholding tax as well?

Thank you.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: Withholding tax for video game royalties.

Postby GlobalTaxAdviser » Mon Jan 26, 2015 6:37 pm

Hi

There are lots of tax benefits for the file and television industry but not so much for video games. Though again if the games are developed in the UK there is generous tax relief if the criteria is met

I understand Royalties exemption cover films not video games.

Kind Regards

Sash

FouFouFar
Posts: 5
Joined: Sun Jan 25, 2015 5:27 pm

Re: Withholding tax for video game royalties.

Postby FouFouFar » Mon Jan 26, 2015 8:30 pm

Thanks a lot man for all the useful information.
Cheers.


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