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  • 2. Intellectual Property and Value Added Tax
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Another project by Bolder. To give an example, Bolder's VAT number is VAT FI21724876

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Design services are value added tax services, for which the rate is 23%. [1]

In accordance with Section 45 of the Value Added Tax Act, certain royalties are exempt from VAT. [2] Royalties from the use of the works are charged VAT free in accordance with the detailed provisions in Section 45.   In accordance with Section 131 of the Value Added Tax Act, acquisitions made for this activity are not VAT deductible. [3] 

When a royalty is the result of a tax exempt sale, according to the Value Added Tax Act, the royalty must also not be charged inclusive of VAT. Works whose royalties are charged exclusive of VAT are e.g. furniture and architectural works that meet the threshold of originality.  If a piece of furniture or a building is also design protected, the royalty is charged for the design protected part using a VAT of 23%.

The tax authorities or the designer may ask the Copyright Council, which is under the Ministry of Education and Culture,  for their opinion on whether the result of the design work is sufficiently independent and original enough to meet the threshold of originality. If the designer deemed the compensation from the work as a royalty, which he or she has charged exclusive of VAT and the tax authorities later decide, for example based on the Copyright Council's advice, that the activity is the VAT inclusive sale of design services (as the work doesn't meet the threshold of originality), the designer will have to pay the VAT retrospectively even though they didn't charge for it.  For example, the Copyright Council's case 2007:18, concerned the threshold of originality for illustrations and logos, and whether the compensation received for them was VAT inclusive or not. [4]

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Industrial property rights and value added tax

Compensation from the use of industrial property rights are always VAT inclusive and the rate is 23%. Compensation e.g. for the use or sale of a model right or trade mark right is VAT inclusive sale.

Notes and References

[1] Value Added Tax Act

[2] Value Added Tax Act § 45

[3] Value Added Tax Act § 131

[4] Copyright Council's case 2007:18