Is This "Personal Income" Or Something Else?

TommyK

Hello:

Does anyone know how this sceanario would play out?:

I write a non-fiction book that is marketed and sold by someone in the U.S. (I don't mean a publisher but a POD merchant who markets and sells direct to customers.)

They agree to pay me X% of the net profit of each sale, and send payment everytime it accumulates to a certain amount.

I already know that no witholding taxes will apply from their end so they get the send the full amount they owe and they call it 'author royalties' at their end.

When I receive it, I lodge it in my bank account and it's converted to whatever the € equivalent amount is.

Since Irish people are taxed on all income from worldwide sources, do I simply call it personal income and make a tax return each year, pay the 20% or 42% and 'Bob's yer uncle'? Or is there something else I'm missing?

Tommy.

Reyman

I presume you have not set up a company to process this income?

If not then you're operating as a sole trader and the PRSI rate would be different then if you're a PAYE employee. Normally 3% or 5% depending on your total earned income. You should also be able to set off some 'expenses' of your sole trader job against your income

I've a feeling you should be filling out a different tax return each year than the standard PAYE one and you should be registered as a sole trader with the Revenue.

If you register with the Revenue be careful of the VAT implications

MrPudding

Reyman wrote:

I presume you have not set up a company to process this income?

If not then you're operating as a sole trader and the PRSI rate would be different then if you're a PAYE employee. Normally 3% or 5% depending on your total earned income. You should also be able to set off some 'expenses' of your sole trader job against your income

I've a feeling you should be filling out a different tax return each year than the standard PAYE one and you should be registered as a sole trader with the Revenue.

If you register with the Revenue be careful of the VAT implications

Would the "artists exemption" not come into play here?

MrP

kluivert

Income earned by artists, writers, composers and sculptors from the sale of their works is exempt from tax in Ireland in certain circumstances.

Section 195, Taxes Consolidation Act, 1997 empowers Revenue to make a determination that certain artistic works are original and creative works generally recognised as having cultural or artistic merit. Accordingly, earnings derived from such works are exempt from income tax from the year in which the claim is made.

Guidelines have been drawn up by the Arts Council and the Minister for Arts, Heritage, Gaeltacht and the Islands, with the consent of the Minister for Finance, for determining for the purposes of Section 195 whether a work is an original and creative work and whether it has, or is generally recognised as having, cultural or artistic merit. Revenue may, having regard to the Guidelines, consult with a person or body of persons which may be of assistance to them in reaching decisions in relation to Artists Exemption. A copy of the Guidelines is attached as an Appendix to this booklet.

Revenue can make determinations in respect of artistic works in the following categories:

(a) a book or other writing;
(b) a play;
(c) a musical composition;
(d) a painting or other like picture, and
(e) a sculpture.

Claimants for Artists Exemption must be resident, or ordinarily resident and domiciled, in the State and not resident elsewhere. However, Revenue are prepared to give advance opinions regarding the exemption to claimants resident abroad. If these claimants receive a favourable advance opinion, they are given a formal determination in respect of Artists Exemption on taking up residence in the State.

Artists, writers, composers and sculptors seeking Artists Exemption should submit a claim form to Revenue together with samples of their work and any supporting documentation in the form of testimonials etc. which they consider appropriate. Such claims should also be accompanied by evidence that their work has been published, produced or sold. These claim forms are available at the address below.

The following samples and supporting documents are required for each category:

(a) a book or other writing - 1 published copy of the book;

Claims should be made to :

Office of the Revenue Commissioners,
Direct Taxes: Administration (Artists Exemption),
Blocks 8 - 10,
Dublin Castle
Dublin 2.
Ireland.

TommyK

MrPudding wrote:

Would the "artists exemption" not come into play here?

MrP

I thought that only applied to fiction publications but I'll certainly check it out; tax-free would be as good as it gets.

Tommy.

dermot_sheehan

Artists exemption only covers fiction as far as I know. It would be Schedule D case iii revenue as it comes from outside the state, it'd be the same as a sole trader.

TommyK

Reyman wrote:

If you register with the Revenue be careful of the VAT implications

Actually, the situation with V.A.T. is somewhat 'uncommon.'

The book in question is actually an e-book (downloadable PDF file) and the credit card payment processor (based in the U.S.) operates as the seller, according to it's own terms of business.

The merchant (that would be my buddy in the States that does the marketing and such) actually sells the product to the processor who, in turn sell it to the end customer.

The payment processor is registered for VAT, even though it's U.S. company. It automatically charges VAT on any customers the reside in the E.U. It doesn;t for those who don't. I believe this situation came about as a result of an E.U. Directive relating to e-commerce in 2003.

I don't know where that leaves me: VAT is being charged to E.U. customers and remitted to somewhere (presumably the tax authorities of each relevent country.) The merchant (that's my buddy again) lives and operates in the U.S. and is subject only to U.S. tax law.

I'm not actually selling anything. The merchant is paying me a fee to be allowed to sell the product.

Now I've confused myself more than ever...

Tommy.

antoinolachtnai

I can't see the VAT issue here myself. He will invoice a US company for the royalty and will neither invoice for or receive VAT. He would potentially be able to claim for VAT on purchases, but it would probably not be worth his while. In principle he could even apply for an expemption from paying VAT on goods purchased because a large proportion of the income is coming from outside the State, but again, this would hardly be worth his while.

It is worth seeing an accountant about this if it's going to be more than a thousand a year, if only to set your mind at rest.

Good luck with it, look forward to the free copy :-)