What is royalty?
Refers to the money paid for the use of patents, trademarks, copyrights or similar exclusive rights owned by other economic units. Royalty income shall be confirmed according to the date when the franchisee pays the royalties in the Contract. For example, the income obtained by individuals from providing the right to use patents, trademarks, copyrights, non-patented technologies and other franchises.
Before using this right, the non-obligee must obtain the consent of the obligee or pay a certain fee, otherwise it will be regarded as infringement and bear legal responsibility. There is no essential difference between royalty and license fee, and the agreement is used together.
Does royalty not include VAT?
Article 12 of the pilot implementation measures for changing business tax to value-added tax stipulates: "The sale of labor services, intangible assets or real estate in China refers to:
1. The seller or buyer of services (excluding leased real estate) or intangible assets (excluding the right to use natural resources) is in China;
2. The real estate sold or leased is in China;
3. Selling the right to use natural resources in China;
4. Other circumstances stipulated by the Ministry of Finance of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China.
Article 13 stipulates: "The following situations do not belong to selling services or intangible assets in China:
1. Overseas units or individuals sell services that completely occur overseas to domestic units or individuals;
2. Overseas units or individuals sell intangible assets that are completely used overseas to domestic units or individuals.
3, overseas units or individuals to domestic units or individuals to rent tangible movable property for overseas use.
4. Other circumstances stipulated by the Ministry of Finance of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China. According to the above provisions, value-added tax is not levied on intangible assets that are used completely abroad, and value-added tax is withheld if they are used inside or outside China.
Can the payment of royalties from domestic to overseas be exempted from VAT?
According to the principle of determining the source of income stipulated in Article 7 of the Regulations for the Implementation of the Enterprise Income Tax Law of People's Republic of China (PRC), as long as the payer of the royalties is in China, regardless of whether it is used completely abroad, the income tax shall be withheld according to law.
Scope of royalties
1 is the after-sales service reward under the simple goods trade;
2. It is the remuneration obtained by the seller for providing services to the buyer during the product warranty period;
3. It refers to the money obtained by institutions or individuals specializing in engineering, management, consulting and other professional services to provide related services;
4. Other similar remuneration stipulated by People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China.
It can be seen that the definition of royalties is still basically limited to all kinds of licensing income related to intellectual property rights. What is the difference between exemption, tax exemption and reduction in VAT tax preference?