Self-Publishing and Taxes

01. INTRODUCTION

Do you want to know what is the best tax approach to sell your Ebook?

You want to know if it is cheaper for you to sell directly or indirectly your Ebook?
Once an ebook is created, the author often wonders what is the best way to sell the ebook to the public.
In addition to the mere economic point of view, tax laws must also be taken into consideration in order to understand what’s more convenient: a direct transfer or rather done through portals that deal with ebooks sale.

02. DIRECT TRANSFER

The method of selling the ebook directly on your site is the direct selling method and allows you to have total control over the sale.
To do this, you will need to create your own website, purchasing both the space on a professional hosting and a domain for your website.
Once the site has been created, you will need to be able to create a landing page dedicated to the book you want to advertise in order to entice your visitors to become customers and buy your product.

This is not a trivial matter!

The main “problem” of selling ebooks directly involves commercial and marketing matters.
If you are unable to bring large amounts of traffic to your web page, then the chances of selling the ebook directly will be very reduced.

02. DIRECT TRANSFER: Taxes
From a tax point of view, the direct sale of an ebook to the public falls within the discipline of direct electronic commerce (direct e-commerce).

Based on the legal definition, the sale of Ebooks on the website is considered a provision of services.

This means that directly selling the Ebook on your site makes the site owner a person who professionally carries out a commercial activity.

02. DIRECT TRANSFER: setting up your own business (UTR) 
This means that selling the ebook directly exposes the author to carry out a commercial activity.

Activities that must be carried out through the opening of UTR, which involves registration to the Chamber of Commerce and so on.

It is also necessary to present the communication of the start of the activity in one’s own Municipality of residence.

It should be noted that transactions related to e-commerce are not exempted from the obligation to issue an invoice.

In other words, for each sales copy of the ebook you will have to issue an invoice to the customer., and in order to do this it is necessary to have customer’s details to be able to issue an invoice.

02. DIRECT TRANSFER: NO OCCASIONAL ACTIVITIES
If you think this business can only be managed through the release of a receipt for occasional sale, you’re wrong.

There is so much junk information online about this.  Information dictated perhaps by the wish to make life easier for those who are starting this business.

I don’t want to deceive you, the occasional sale is correct when the seller does not carry out any activity for the sale. In fact, the same happens occasionally, by pure chance.

When you open a website and create a special page for the sale of an Ebook, it seems logical that the purpose of all this is to get to the sale of the ebook.

For this reason, the sale of ebooks is a commercial activity in all respects, to be exercised exclusively with UTR.

03. INDIRECT TRANSFER

The most common method for ebook sales today is indirect transfer. This method of sale is chosen by the authors who want to dedicate themselves exclusively to writing, leaving the economic and marketing aspects to third parties.

Through indirect transfer, the author transfers the right of economic exploitation of the work to third parties.

This sale method involves the payment of a percentage on each sale of the work.

One of the advantages here is the absence of need to have a UTR number.

The discipline related to the transfer of copyright therefore does not require a UTR number or great marketing knowledge.

In this case the author of the book is called to sign a tied contract to transfer of exploitation rights to the online portal, which will entirely take care of the promotion and sale.

The author will receive a fee (in the form of royalty) as a percentage of each sale.

03. INDIRECT ASSIGNMENT: taxes
The author of an ebook is the owner of the copyright on the work from the moment of its creation.

Of course, in order to prove it to third parties, registration of the work to the SIAE would be necessary.

The exploitation of copyright is not subject to the application of VAT, therefore it is absolutely not necessary to open the VAT number to become an author, publish and distribute your work.

03. INDIRECT ASSIGNMENT: tax discipline 

The sale of ebooks indirectly, through the transfer of copyright is governed by the law. The legislation states that the author of an intellectual work has the exclusive right to use it economically in any form and way. The original title of the purchase of copyright is constituted by the creation of the work as a particular expression of intellectual work. 

This right is divided into three parts: Right to advertise the work; Right to use the work economically; Finally, the right to claim authorship of the work. The right to advertise the work and to use it economically is a property right, and as such it may be transferred.

 Instead, the right of authorship of the work is personal and can never be transferred. 

03. INDIRECT ASSIGNMENT: Royalties 

The author’s remuneration for his work following the sale or concession protected by copyright laws are classified as self-employment income,  if they are not achieved in the commercial business.

Therefore, the author of an ebook has the right to have third parties (usually publishers or dedicated web portals) manage the sale of ebooks he has written, receiving an income that is classified fiscally as income from self-employment. To manage this remuneration from a tax point of view, it is necessary to issue a receipt for the exploitation of author’s rights towards the portal or the publisher that deals with the management of the commercial rights of the work. The author is entitled to these proceeds deriving from the assignment of copyright flat-rate deductions that we are now going to see specifically.

03. INDIRECT ASSIGNMENT: flat-rate deductions
The author is entitled to these proceeds deriving from the assignment of copyright flat-rate deductions to the following extent:

• 25% of the proceeds themselves if the beneficiary is 35 years of age or older, on the date of receipt of the declared income;
• 40% of the proceeds themselves if the beneficiary is under 35 years of age.

On such income, net of the deductions indicated above, (if the publisher or the web portal are subjects resident for tax purposes in Italy), a withholding tax of 20%.

03. INDIRECT TRANSFER: non-resident publishers
If, on the other hand, the fees deriving from the transfer of copyright are paid by subjects (publishers or web portals) that are not resident for tax purposes in Italy, withholding tax will not be applied.

Then the remuneration will flow in full in the tax return and will be fully taxable for personal income tax purposes.

The author who has received fees for the sale or concession in use of a work protected by copyright rules is obliged (in any case) to declare such fees.

This applies both in the event that the remuneration comes from the publisher or portal web fiscally resident in Italy, both in the event that the same is resident for tax purposes abroad.

 

04. ONLINE PORTALS SALE

On these portals, the author of the ebook does not sign a contract related to the exploitation of copyright.

But in these cases it is a simple contract linked to the distribution of his work.
The difference between this type of contract (distribution) and the economic exploitation one lies in the fact that with a distribution contract no right is granted to third parties to exploit the work.
In these cases the portals act only as a means of distributing the work.

04. SALE ON ONLINE PORTALS
When we are faced with a distribution contract, the legislation on the economic exploitation of copyright cannot be applicable.
This means, that the activity we are carrying out is a commercial activity. For this reason,  a UTR number, along with tax-related obligations are mandatory as previously explained for the direct sale.  

05. CONCLUSIONS

A very common mistake is to believe that any type of contract can fall within the favorable tax discipline related to the exploitation of copyright. 

Unfortunately this is not the case. The online portals sign distribution contracts for the work. Only publishing houses usually offer copyright contracts.

As an author, you should pay attention to this type of situation,  also because the administrative penalties for such mistakes are important ..

Here’s why it’s been a great choice to be part of The publishing services.

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