The definition of royalties differs per country and per tax treaty. It should be noted that the tax definition of a royalty payment differs markedly from its civil law or common law counterpart. The royalty definition, for tax purposes, broadens the legal royalty concept substantially (to ensure more withholding tax income for the source country). Generally, the definition of royalties for taxation purposes contains ”all cross border payments” under whatever name and in whatever form, for:
– operational leases and rentals
– the ”sale” of non-standardised software
– technical services
– consultancy services
– licensing of patents, trademarks, logo’s etc.
– cinema and movie broadcasting rights
– the sale of music CD’s and tapes by artists
– the sale of books
– image rights concerning sportspeople and artists
More than 75% of the world’s money flows, if not interest or dividend, is probably a royalty in the sense of tax laws and tax treaties!