What is a royalty?
According to Article 20 of the "Implementation Regulations of the Enterprise Income Tax Law of the People's Republic of China" (Order No. 512 of the State Council of the People's Republic of China): Article 6 of the Enterprise Income Tax Law ( The term “royalty income” as mentioned in item 7) refers to the income obtained by enterprises from providing the right to use patent rights, non-patented technologies, trademark rights, copyrights and other franchise rights.
What is the difference between a franchise fee and a royalty?
Royalty income refers to the income obtained by enterprises from providing the right to use patent rights, non-patented technologies, trademark rights, copyrights and other franchise rights. Royalty income is recognized based on the date on which the royalties are payable by the franchisee as stipulated in the contract.
Franchise fee can be understood as the fee charged for franchising a certain product or service. For example, Olympic licensed products charge a franchise fee, and the franchisee pays the Olympic Organizing Committee a certain percentage of sales. Rights fee. The proportion of franchise fees is generally 5-15% of the retail price of the product. Royalties for the provision of equipment and other tangible assets are recognized when the assets are delivered or ownership of the assets is transferred.
What is a royalty?
Answer: Royalties include:
(1) Patent or proprietary technology royalties; (2) Trademark royalties;
(3) Copyright royalties;
(4) Distribution rights, sales rights or other similar rights fees.
The taxable conditions for royalties are:
(1) The royalties are related to imported goods;
(2) The royalties The payment constitutes a condition for the sale of imported goods into the territory of the People's Republic of China.
What is the difference between franchise fees and royalties in tax law?
Royalty fee is the usage fee paid by the user of the asset to the asset provider (the asset provider must provide corresponding services) during the use process (because the equipment or other tangible assets only need to be used for a period of time) can be used by a single user, so it is called a franchise fee); for example, company A provides a piece of machinery and equipment to company B and promises to be responsible for repairing the equipment within two years, and company B has to pay the corresponding price, then The price received by Company A when it actually performs repairs is the franchise fee, which should be recognized when it provides repair services. .
Royalty income refers to the income obtained by enterprises from providing the right to use patent rights, non-patented technologies, trademark rights, copyrights and other franchise rights.
What does a royalty include? What are the taxable conditions?
Answer: Royalties include:
(1) Patent or proprietary technology royalties;
(2) Trademark royalties; < /p>
(3) Copyright royalties;
(4) Distribution rights, sales rights or other similar rights fees.
The taxable conditions for royalties are:
(1) Royalties are related to imported goods;
(2) Royalties The payment constitutes a condition for the sale of imported goods into the territory of the People's Republic of China.
Scope of royalties
It is important to note that the State Administration of Taxation clarified the following four types of royalties in the form of a notice (Guo Shuihan [2009] No. 507) , does not belong to royalties: 1. It is the remuneration for after-sales service under pure goods trade; 2. It is the remuneration received by the seller for providing services to the buyer during the product warranty period; 3. It is specializing in engineering, management, consulting, etc. Payments received from relevant services provided by professional service organizations or individuals; 4. Other similar remuneration stipulated by the State Administration of Taxation. It can be seen that the definition of royalties is still basically limited to various licensing income related to intellectual property rights. (2) Application of franchise Article 8 (c) of the Agreement stipulates: “As a condition of the sale of the valued goods, the buyer must directly or indirectly pay the royalties related to the valued goods, as long as the royalties are not included in the "actually paid or payable price" shall be included in the dutiable value.
The conditions for royalties to be included in the dutiable value of imported goods: 1. Relevant to the assessed goods: Determining whether a royalty is related to the assessed goods mainly depends on the specific payment object, which is a relatively complicated matter. When we analyze the payment relationship between the goods to be valued (tangible goods) and rights, information or services (intangible goods), we should generally grasp a basic principle: whether the importer can obtain tangible goods without purchasing intangible goods. If the answer is yes, it can be determined that the franchise fee has nothing to do with the goods being valued, and they should be valued separately as much as possible; if the answer is no, it can be determined that the franchise fee is related to the goods being valued. The right to reproduce imported goods has nothing to do with the goods being valued. 2. As a condition of the sale of the valued goods 3. As a condition of the sale of the valued goods paid by the buyer and not yet included in the actual price payable: the payment of the royalty must be a condition of the sale of the valued goods, This is an important criterion for judging whether the cost becomes part of the dutiable value of the goods being assessed. The sales mentioned here refer to export sales in the importing country. Therefore, after the relevant goods are imported, the royalties incurred when the importer resells the goods in the importing country, even if it becomes a condition of resale, cannot become the duty-paid value. part of.
How to define royalties?
Recently, Suzhou Industrial Park Customs reviewed the price and paid taxes of 330,000 yuan for a pharmaceutical company within its jurisdiction, targeting the company’s imported goods in 2006. of royalties. Since 2004, the customs has assessed and paid a total of 7.46 million yuan in royalties and taxes. It is understood that a lack of understanding of the relevant regulations on royalty taxation is the main reason for corporate tax evasion. For this reason, the customs reminds import and export enterprises to fully consider the royalties when declaring the duty-paid value. The "Measures of the Customs of the People's Republic of China for Examining Import and Export Dutiable Values" defines it this way: Royalty fees refer to the patent, trademark, and proprietary rights that the buyer of imported goods obtains from the intellectual property right holder and the right holder's valid authorizer. Fees paid for the licensing or transfer of technology, copyrights, distribution rights or sales rights. According to this definition, it is not difficult to find that royalties have three characteristics: first, they are property rights brought about by the results of intelligence and talent; second, they are used by others after paying a fee, rather than owned by rights. The third is that the right owner charges usage fees based on the actual use of the rights by others. According to this measure, royalties that meet certain conditions should be included in the dutiable value and declared to the customs when the goods are imported. Customs regulations stipulate that when royalties for imported goods have nothing to do with the goods and their payment does not constitute a condition for the sale of the goods to the territory of the People's Republic of China, they will not be included in the scope of customs taxation. In other words, everything else must be included in the dutiable value. The following four situations are considered that royalties are related to the goods: first, they are used to pay for patent rights or the right to use proprietary technology, and the imported goods fall into one of the following situations: (1) they contain patents or proprietary technology; The second is produced using patented methods or proprietary technology; the third is specially designed or manufactured for the implementation of patented or proprietary technology. Second, it is used to pay for trademark rights, and the imported goods fall into one of the following situations: first, the goods are attached with a trademark; second, the trademark is attached after import and can be sold directly; third, the trademark rights are already included at the time of import, and after slight After processing, it can be sold with a trademark attached. Third, it is used to pay for copyright, and the imported goods fall into one of the following situations: 1. Imported goods containing software, text, music, pictures, images or other similar content, including tapes, disks, optical disks or other similar media ; The second is imported goods containing other copyrighted content. Fourth, it is used to pay for distribution rights, sales rights or other similar rights, and the imported goods fall into one of the following situations: first, they can be sold directly after import; second, they can be sold after light processing. In this example, the royalties involved in the company’s imported goods mainly include two aspects: first, the fees paid externally for the formula and technology of manufacturing, using, and selling drugs (i.e., proprietary technology fees); second, the fees paid for the finished drugs. Trademark rights fees. After investigation, the declared price of the company's finished drugs at the time of import already included proprietary technology royalties. The production and processing of raw materials is mainly completed domestically. These two proprietary technology royalties do not need to be included in the duty-paid price of imported goods. . As for the trademark royalties for imported raw materials, since the domestic production exceeds the scope of light processing, there is no need to calculate taxes.
However, the trademark rights royalties for drugs imported in finished product state should be included in the duty-paid price and tax paid. In recent years, as the government continues to strengthen the protection of intellectual property rights and corporate brand awareness continues to increase, the proportion of royalties in products has gradually increased. In order to ensure that all national tax receivables are collected and maintain good import and export business order, the customs will increase its investigation and punishment of non-active tax payment of royalties.
What does royalties refer to
For details, please refer to Customs Order No. 148, which means whether the customs-paid price of the software you import includes royalties (patent fees, technology fees, etc.)? The criterion is whether you have signed a separate agreement to import the software. Whether you have to pay additional royalties. Otherwise, you will not be able to get the goods. Or you will not be able to get the goods at the original import price.
Overview of the meaning of royalties
(1) Meaning Royalties refer to any payment made by people for the use of rights, or intangible properties such as information and services. For example: Income obtained by individuals from providing the right to use patent rights, trademark rights, copyrights, non-patented technologies and other franchises. Non-rights owners must obtain the owner's consent or pay a certain fee before using the rights, otherwise it will be considered an infringement and will be held legally responsible. Royalties and license fees are not essentially different from each other, so the Agreement uses them together.
What taxes are imposed on royalties?
The royalties depend on whether the transferor is a company or an individual
1. If it is a company, it pays corporate income tax
2. If it is an individual, it pays personal income tax. If the one-time income does not exceed 4,000 yuan, subtract 800, and the tax rate is 20%. If the income exceeds 4,000, subtract 20%, and the tax rate is 20%.
3. VAT will be levied after the business tax to value-added tax.