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  • 3. Compensation for Copyright or Industrial Property Right
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'FAQ' a work by Satohi Yoshida, Industrial designer and Aalto University School of Art and Design graduate
Photos: Niklas Kullström
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Compensation for use is income that the author of the work or design receives, and which is paid for the financial exploitation of the work.
Compensation for use, which is based on the beneficiary's own activity, is earned income. Also, compensation paid for intellectual property received as a gift, is earned income. However, if the copyright has been transferred by inheritance, will or acquired for payment, the compensation received is capital income

For example, in the case of a book illustrator, a publisher is usually the other agreeing party, who remunerates the author of the book for his work. An industrial designer, on the other hand, may make a licensing agreement with a company, that remunerates him a royalty based on terms of  the licensing agreement.

Although the payment is not considered a salary according to the Prepayment Act, the payer is nevertheless obliged to withhold tax for payments that are considered compensation for use in § 25 of the Prepayment Act, if the recipient was not registered in the prepayment register.

Compensation for use is  a compensation paid for the use of a copyright, a right based on a photograph or a industrial property right, such as the use of a patent or trade mark; a compensation paid for the right of use, or the sale of a right of use; or a compensation paid for information regarding industrial, commercial and scientific knowledge.

Upon application, the prepayment register enters those, who are engaged in business or self-employed activities, whose compensations are not considered salary. A prerequisite for entry into the register is the practice of professional activities with an intent to earn. However, this activity need not be continuous.

You can find more information on intellectual property rights and  taxation from the  tax administration  at  http://www.vero.fi/en-US.