A copyright licence agreement is a common tool for the lawful use of creative work in business. Authors and businesses ask when a work is a copyright work, how to set the remuneration and what the tax and contribution obligations are. We answer the most frequent questions from practice.
In our previous article we explained what a copyright licence agreement is, how it works and in which situations it is worth using – for example, also for the efficient payment of funds from your own s. r. o. (limited liability company).
In this article, we focus on the most frequent questions our clients ask us when considering whether the copyright licence agreement regime in the author in their own s. r. o. model may be suitable for them.
1. Is my work a copyright work?
This is an entirely fundamental question that anyone considering receiving licence remuneration through a copyright licence agreement should answer. To put it somewhat poetically – where there is no copyright work, there is no copyright licence remuneration.
A copyright work is defined by Act No. 185/2015 Coll., the Copyright Act, both positively and negatively.
Under Section 3(1) of the Copyright Act, the subject matter of copyright is a work in the field of literature, art or science which is the unique result of the author’s creative intellectual activity and is expressed in a form perceptible by the senses, regardless of its form, content, quality, purpose, form of expression or degree of completion.
The Act also gives examples of works, such as:
- a literary work,
- a verbal work,
- a dramatic work,
- a musical work,
- an audiovisual work,
- a work of fine art,
- an architectural work,
- a work of applied art,
- a cartographic work,
- another artistic or scientific work, if it meets the statutory conditions.
Neither scope nor quality is decisive. A literary work may be a 1,000-page book of poetry, but also a short article, a blog post, a leaflet or a brochure. An audiovisual work is not only a feature film, but also an advertising spot, a corporate video or a short “reels” format. What is decisive is whether it is the unique result of the author’s creative activity.
The Copyright Act also expressly lays down what is not subject to copyright protection.
Under Section 5 of the Copyright Act, the following, for example, are not considered subject matter of copyright:
- an idea,
- a procedure, system or method,
- a concept or principle,
- a discovery or information, even if described or incorporated in a work.
This gives rise to a fundamental principle: copyright protects the expression of an idea, not the idea itself.
It is therefore not possible to “license” know-how as such. Only its specific expression in a form perceptible by the senses can be licensed. Know-how can be protected as a copyright work only if it is expressed in a specific way – for example, as a written manual, a technical drawing, software code or a marketing strategy elaborated in a document – and at the same time meets the condition of uniqueness as the result of creative activity.
Before preparing a copyright licence agreement, we always thoroughly assess which of the client’s works meet the definition of a copyright work according to the above criteria. We then prepare the agreements individually, tailored to the specific client.
2. Can I use a copyright licence agreement in my own s. r. o.?
The simple answer – yes. But there are rules.
The author of a work can only ever be a natural person. That person has the right to remuneration for the use of their work – regardless of whether or not they are also a shareholder or managing director of the company that uses the work.
In practice, this means that if, for example, you have created a website, marketing materials, training materials, sales texts, videos or a software program, and your s. r. o. uses these works in its business to earn, secure and maintain income, it is legitimate and economically justifiable for it to pay licence remuneration for their use.
Beware of transfer pricing:
In the author-in-their-own-s. r. o. model, the transfer pricing rules must be respected, since related parties are involved (you as a natural person and your own s. r. o.). The amount of the licence remuneration must be set in accordance with the arm’s length principle, i.e. within reasonable market limits. Remuneration set disproportionately high may be challenged by the tax administrator.
In addition, when preparing the agreement, we always assess whether your work falls under the regime of an employee work, which is subject to special rules under the Copyright Act.
3. Are contributions payable on copyright licence remuneration from 2026 under the measures of the third consolidation package?
Here it is essential to distinguish whether the income is passive or active.
If the works were created, for example, while you were self-employed at the beginning of your business and, after successfully getting it off the ground, you switch to doing business through an s. r. o., this is a typical example of a situation in which you merely grant your company a licence to use works that have already been created. In such a case, the income is passive, and even after the adoption of the consolidation package no social security or health insurance contributions are payable on it.
This regime can also be used if you already have an s. r. o. but, freely – as part of your own creative activity and without a specific commission – you create a work as an author, for example photographs, music, illustrations or other copyright content. This includes, for example, creation aimed at self-fulfilment, expressing one’s own experience or sharing knowledge and opinions (for example blog articles or videos on one’s own YouTube channel). If the s. r. o. subsequently concludes that it can use the work in its business – for example to increase sales or its visibility – and the author grants it a licence to use it, the regime of passive licence income not subject to contributions can be defended in such a case as well.
Conversely, if a new work is created on commission, or if works are created repeatedly, systematically or continuously, the income is generally active (i.e. active creative activity). Such income is already subject to contributions. In such a case, the agreement should be drafted as an agreement on the creation of a work and the grant of a licence, which means that the remuneration will also have two components – one for the active creation of the work and a passive one for the grant of the licence. However, no legal regulation determines the exact ratio between the active and passive components of the remuneration. This means that, for example, splitting the remuneration into 40% for the creation of the work and 60% for the licence to use it is in principle a matter of agreement between the parties, as long as such a split is justifiable in the circumstances of the specific case. In the case of active income for the creation of a work, however, you cannot avoid paying at least minimum contributions (or micro-contributions, depending on income).
4. Is withholding tax deducted directly by the company or taxation in the author’s own tax return more advantageous?
There is no universal answer to this question. It depends mainly on the amount of the licence remuneration, the author’s other income and whether, and to what extent, the author can claim expenses.
For income from a copyright licence, the author generally has two taxation options. The first is withholding tax, where the tax on the entire remuneration is withheld and paid to the state directly by the entity paying the remuneration to the author. The second option is for the author to calculate and pay the tax themselves through a tax return filed after the end of the relevant calendar year.
Withholding tax may be attractive mainly because of its simplicity – the author receives an already taxed amount and does not have to file a tax return. However, if the author decides to tax the income through a tax return, they may in some cases achieve considerably more favourable taxation, in particular thanks to claiming lump-sum expenses.
For passive income from copyright licences, it is possible to claim lump-sum expenses of 60% of income, up to the statutory limit (currently EUR 20,000 per year).
Put simply, for a certain range of income, taxation through a tax return may be considerably more advantageous than withholding tax – the effective tax rate may be around 8%. For higher income, however, this advantage gradually decreases. It is always advisable to calculate the specific model individually.
Conclusion
A copyright licence agreement is a legitimate and lawful tool that can be efficient from both a business and a tax perspective.
The key, however, is to:
- correctly assess whether the work is a copyright work,
- correctly set up the contractual documentation,
- determine the amount of remuneration appropriately.
If you are considering using a copyright licence agreement in your business, we recommend an individual legal and tax assessment of your specific situation.
If you are interested in legal services in connection with the preparation of a copyright licence agreement, you can contact experts in this field here.
