Royalty fees refer to payments for the use of patents, trademarks, copyrights or similar proprietary rights owned by other economic units. It is a payment as property income, not a payment for commodity operations. Expenses incurred for the use of proprietary assets of other units can only be covered by property income derived from the use of such assets. However, expenses incurred in the manufacture of patented products, the use of patented methods or trademarks, including technical or management services, should be registered as production expenses of the product. The use of exclusive rights is subject to restrictions. Enterprises must use these economic rights within the scope permitted by the exclusive right holder. Anyone who exceeds the scope and time limit will be punished.

According to the "State Administration of Taxation on the issuance of the Agreement between the Government of the People's Republic of China and the Government of Singapore *** on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income" and the interpretation of the provisions of the protocol Notice" (Guoshuifa [2010] No. 75) stipulates: "3. The third paragraph is the definition of the term "royalty" and needs to be understood from the following aspects:

1. Use or the right to use the rights in question

Royalties shall first of all relate to the use or the right to use the following rights: all forms of literature and art constituting rights and property, relating to industry, commerce and intellectual property rights identified in texts and information relating to scientific experiments, regardless of whether these rights have been or must be registered with the prescribed authority. It should also be noted that this definition includes both payments made in the context of a licence, as well as payments made as a result. Compensation paid for infringement.

2. Equipment rental

Royalty fees also include income from using or having the right to use industrial, commercial, and scientific equipment, that is, equipment rental. It does not include the part of the payment involved in the financial lease agreement that is deemed to be interest when the ownership of the equipment is finally transferred to the user; it also does not include income obtained from the use of real estate, and the provisions on income from real estate in the agreement are applicable to the income obtained from the use of real estate.

3. Payments for using or having the right to use special technology

Royalties also include income from using or having the right to use special technology related to industrial, commercial, and scientific experience. It refers to undisclosed information or materials of a proprietary technical nature that are necessary for the production or process duplication of a certain product. Royalties related to proprietary technology generally involve the technology licensor agreeing to transfer its undisclosed technology. Licensed to another party so that the other party can use it freely, the technology licensor usually does not personally participate in the specific application of the licensed technology by the technology transferee, and does not guarantee the results of the implementation. The licensed technology usually already exists, but it also includes the application. The technology is developed and licensed for use based on the needs of the technology transferee, and the use restrictions such as confidentiality are listed in the contract. For example, based on the needs of a Chinese pharmaceutical company, a U.S. company specially developed a new drug, and the U.S. side transferred the drug. The formula is licensed to a Chinese company for the production of new drugs. The contract stipulates that the U.S. side retains ownership of the drug formula, and the Chinese side only has the right to use it and is responsible for keeping it confidential. It cannot provide the drug formula to others for use without the consent of the U.S. company. In this case, the payment made by the Chinese company for the right to use the drug formula is a royalty..."

Warm reminder: The above explanation is for reference only and does not make any suggestions. , if you need to solve specific problems (especially in the fields of law, accounting, medicine, etc.), it is recommended that you consult professionals in relevant fields in detail.

Response time: 2021-11-19. For the latest business changes, please refer to the official website of Ping An Bank.