Photographers, musicians, writers, designers and, increasingly, influencers too are confronted with royalties: fees for the use of their work or their name. Think of a musician who receives a percentage every time their track is streamed, or a photographer who gets paid because a company reuses a photo in an advertisement. From a tax perspective, this quickly raises questions: does this count as business profit, is it a separate source of income, and does VAT need to be charged on it? In this article we explain how royalty income is taxed in most cases and which exceptions apply.
Short answer
Royalties you receive in return for your own work, for example because as a creator you actively exploit copyrights or licences, are usually treated as income from work and fall under box 1 of income tax. That can be as profit from a business (if you are a sole trader or self-employed) or as result from other activities if you are not considered an entrepreneur for income tax purposes. If you receive royalties from a right that you do not actively exploit yourself, for example because you inherited a copyright, the value of that right may instead be taxed in box 3 as wealth. Which situation applies to you depends heavily on the specific circumstances. If in doubt, it is wise to check this in advance with your accounting firm or the Tax Authority.
What exactly are royalties?
A royalty is a fee for the use of a right that belongs to you, such as a copyright, a trademark right, a patent or a neighbouring right. You allow someone else to use, reproduce or exploit your work, and receive a fee in return. That fee can be a fixed amount, but is often a percentage of the revenue generated through the use. Think of:
- A musician who receives an amount per stream or per broadcast via Buma/Stemra.
- A photographer or illustrator who receives a fee for the reuse of images by a publisher or company.
- A writer who receives a percentage of a book's sale price.
- An influencer who licenses naming rights or content rights to a brand.
- An inventor or company that licenses a patent to a third party.
Why the tax treatment is not always the same
The Tax Authority does not have a separate box for "royalties": the tax treatment follows from the nature of the activity from which the royalty arises, not from the word royalty itself. In practice there are roughly three situations.
1. Royalties as part of a business
If you are self-employed or run a sole proprietorship, and the royalties are a direct result of your business activity, for example because as a photographer you structurally license out images, then the royalties count as revenue of your business. They then simply fall under box 1 as profit from business, together with your other assignments. You process them in your annual accounts and income tax return like any other revenue, and they count towards the entrepreneur's allowance and, if you meet the conditions such as the hour criterion (urencriterium), the SME profit exemption.
2. Royalties as result from other activities
If you are not an entrepreneur for income tax purposes, for example because you occasionally write a song or sell a photo without there being a structural business, the royalties usually fall under result from other activities. This is also a form of box 1 income, but you are not entitled to entrepreneur facilities such as the self-employed persons' allowance. You may, however, deduct reasonable costs directly related to generating the royalties from the proceeds, so that you pay tax on the result rather than on the gross receipts.
3. Royalties as an asset in box 3
A less well-known situation arises when you do not actively exploit the underlying right yourself, but for example inherited the right to royalties. The Tax Authority has indicated in its own policy positions that an inherited right to royalties, such as a neighbouring right of a deceased artist, is in certain cases not regarded as income from work but as a property right. The value of that right, generally the present value of the expected future royalties, is then determined once and included in box 3, after which not the annual receipts themselves are taxed but the deemed return on the determined value. This is a specific situation that mainly arises with inheritances and the transfer of rights, and always requires a tailored assessment.
VAT on royalties
Besides income tax, VAT also plays a role. If you are a VAT entrepreneur and you license out a right, this is generally a VAT-taxed service. You charge 21 percent VAT on the royalty, unless an exemption or the reverse-charge mechanism applies, for example for certain services to foreign customers. Here too, the exact VAT treatment depends on who the customer is and where they are established, so this always deserves an individual check.
A specific exception applies to composers, writers, cartoonists and journalists: the Tax Authority grants these professional groups a separate VAT exemption for activities that are part of their own creative or journalistic work, such as composing music, writing and publishing their own work, or editorial contributions to a newspaper, magazine or journalistic website. It does not matter whether you have completed a recognised training. This exemption does not apply to all activities of these professional groups: advertising copy, commercial assignments and non-journalistic work simply fall under the regular VAT rate. A downside of the exemption is that you then cannot deduct the VAT on your own costs either. If you are unsure whether your work falls under this exemption, check this with the Tax Authority or your bookkeeper before issuing invoices.
A few practical examples
A photographer from Zaandam receives around 800 euros a year in royalties because an advertising agency keeps reusing one of her photos in a campaign. She runs a sole proprietorship and structurally provides photography services, so these 800 euros simply count as revenue of her business in box 1.
A composer who does not have their own business writes a jingle for a local radio station on a one-off basis and afterwards receives a small amount each year via Buma/Stemra whenever the track is broadcast. Because there is no sustained organisation of labour and capital, this is result from other activities and is therefore also taxed in box 1, but without the entrepreneur's allowance.
An heir receives, after the death of a family member, the right to future royalties from a music catalogue. She herself carries out no activity to generate this income. In that case, the Tax Authority may classify this right as wealth in box 3, whereby the value of the right is determined once.
What is the best thing to do?
Because the classification of royalty income depends heavily on the specific situation, such as whether you are an entrepreneur, whether the royalties arise from your own active work, and whether it concerns a one-off or structural source, it is wise not to guess this yourself. Present your situation to your bookkeeper or advisor before filing your return, so that royalties end up in the correct category and you are not faced with surprises afterwards in an audit. Also keep clear records of all royalty agreements, settlements and any costs you have incurred to generate this income.
Frequently asked questions
Do I always have to pay income tax on royalties?
In most cases yes, because royalties are regarded as income from work in box 1. Only in specific situations, such as an inherited right that you do not exploit yourself, can part of the proceeds be taxed via box 3 instead of as annual income.
Can I deduct costs from my royalty income?
Yes, costs directly related to acquiring the royalties, such as production costs or costs for rights management, can generally be deducted from the proceeds, both for profit from business and for result from other activities.
Do I pay VAT on royalties I receive from a foreign party?
That depends on where your customer is established and whether it is a business or a private individual. For business customers abroad, the VAT is often reverse-charged to the customer, but this always requires an individual assessment.
I am a writer or journalist, do I always have to charge VAT on my royalties?
Not necessarily. Composers, writers, cartoonists and journalists are entitled to a specific VAT exemption for their own creative or journalistic work, such as publishing their own books or editorial contributions. Activities outside that scope, such as advertising copy or commercial assignments, remain simply VAT-taxed.
I am an influencer and receive a fee for the use of my name and image. Is that also a royalty?
Fees for the use of your name, image or content rights can be treated similarly to royalties for tax purposes, and generally fall under your business income if you do this structurally as a self-employed person. Here too it is important to have the exact nature of the agreement assessed.
Do these rules still apply in 2026?
The main lines as described above also apply for the 2026 tax year. Specific amounts, exemptions and rates can change annually, so it is always wise to check the current figures for the current year.
Want to know more about how royalty income is processed in your specific situation? Read more about our services for creative entrepreneurs.
More background on income from other activities can be found at the Tax Authority.
