TONO continues its VAT guarantee for members who have established VAT-liable businesses for their work as songwriters, composers, lyricists and music publishers. They do not have to pay VAT on TONO income until the Norwegian Tax Administration presents new regulations.
/ 16/01/2024 / Kristian DugstadThe Norwegian Tax Administration announced on December 23, 2021 that they were in the process of studying new regulations for value added tax on collectively collected royalties from TONO, Gramo Norwaco, etc. TONO has not received any indication as to when this regulation will be completed.
TONO has received verbal assurances from the Norwegian Tax Administration that they will not initiate inspections of VAT-liable TONO members who do not calculate and pay VAT on their TONO income as long as they are working on developing the new regulations.
Current regulations do not allow for the collection of value added tax from customers for collectively collected fees, and it does not appear reasonable that licensees must calculate and pay VAT on TONO revenues in Norway before new regulations are in place.
In November 2022, TONO presented a guarantee to its VAT-liable members.
– We want to give TONO members who have established companies for their music creation, and who are liable for VAT, a reassuring assurance that it is completely risk-free not to calculate and pay VAT on TONO income until new regulations are in place. Even though we have received assurances from the Norwegian Tax Administration that they will not conduct a VAT audit of TONO members who do not pay VAT on TONO income, we give the members an obligation that we will pick up the bill if that should happen, says Martinsen.
The obligation covers TONO revenues generated in Norway, i.e. remuneration for the use of music by Norwegian businesses. When it was presented, it was initially for remuneration paid in 2023. The guarantee is now being continued and applies until new regulations are in place.
The payment obligation requires that the TONO member notifies TONO of any inspection by the Norwegian Tax Administration as soon as it is initiated. TONO will also have the opportunity to contest any claims from the agency on behalf of the licensee, and the payment obligation does not cover subsequent calculations that may be due to other errors in VAT processing attributable to the TONO member.
TONO can also reassure members with VAT-liable businesses that they do not need to pay VAT on TONO revenues generated abroad. The Norwegian Tax Administration has clarified to TONO that TONO is understood as an "intermediary" between the licensee and the customer under current VAT regulations.
The TONO member's customer relationship is thus considered to be direct with a customer abroad. This means that TONO members liable for VAT are on an equal footing with other Norwegian VAT-liable businesses when it comes to export revenues.
TONO's commitment means that creators with a Norwegian VAT-registered enterprise and who are TONO members have a lower VAT risk than if they were instead a member of a collective management company in another country.
When current regulations define TONO as an intermediary, copyright income generated in Norway becomes subject to VAT, regardless of which "TONO company" one is a member of, Norwegian or foreign.
With this new initiative, TONO wants to strengthen TONO's collective management, for the benefit of all TONO members.
– It is the collective management model that gives TONO the strength to ensure authors the strongest possible position in the music economy, and it is in the interest of the entire TONO community that there are as many of us as possible. If Norwegian TONO members report a transfer to management companies in other countries, it is a loss for TONO and for our collective management, which also affects our broad membership base, says Martinsen.
The measure will also help facilitate future Norwegian music exports:
– If Norwegian music exports are to be strengthened, it is important to keep Norwegian rights in Norwegian hands. Real measures are required to prevent Norwegian songwriters, composers and lyricists from moving all or part of their activities to other countries. We now want to give TONO members the security that the tax authorities have not been able to give them while we wait for new VAT regulations. With this measure, the risk of any subsequent calculation of VAT has been effectively removed, says Martinsen.