Assignment Of Copyright – Is Royalty Withholding Tax Payable?

Businesses in the software, publishing, media and internet industries may prefer to assign, rather than licence, copyright and intellectual property for commercial reasons. However, the Australian Taxation Office (ATO) has recently stated in Taxation Ruling TR 2008/7 that an Australian Company (AusCo) that pays for an assignment of copyright from a Foreign Company (ForeignCo) may be liable to royalty withholding tax even though the assignment appears to be an outright sale and not a licence or royalty arrangement.

For Australian tax purposes, an AusCo that makes a payment to a ForeignCo that is a "royalty" is liable to withhold royalty withholding tax from that payment and remit the tax withheld to the ATO. If the payment is not a royalty, no withholding tax is payable.