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Clarification by TARS – Charge for website use

2014-03

On 11 April 2014, the Tax Administration of the Republic of Slovenia published on its website an explanation with respect to the payment of a charge for website use and associated rights to database access, rights to participate in online forums, online auctions, etc.

The Tax Administration of the Republic of Slovenia hereby explains, that whenever transactions which allow electronic access to online content by payment for the use of property rights to such content (e.g. to a specific digital product) and payments for information about industrial, commercial or scientific experience (independent of how it is defined in the title of an agreement), such payments may trigger the payment of withholding tax in accordance with the Corporate Income Tax Act (hereinafter: the ZDDPO-2). However, the provisions of the relevant double taxation convention must be taken into account in each specific case, whenever such a convention has been signed.

In accordance with the Commentary to the OECD Model Tax Convention, transactions enabling electronic access to certain online content may in some cases also be considered as payment for the use of the property rights to the content that is accessible online. Such an example is payment for the use of a digital product that was obtained online in a manner granting the recipient the right to further reproduction, processing or distribution of such product for commercial purposes. In this way, the payment was finalised with the aim to use the rights tied to the product and not for the acquisition of the product itself.

Payments for information about industrial, commercial or scientific experience (so-called 'know-how') are associated with the transfer of information that is not protected in accordance with the legislation governing intellectual property protection, but disclose certain knowledge that is gained from past experience that may be used within the scope of performing an activity and the disclosure of which could generate an economic benefit for a company. Due to the nature of the aforementioned information, it is difficult in practice to differentiate between such payments and the payments for services. In this respect, the commentary sets out certain criteria that may be useful to make such distinction. When transferring information on the aforementioned experience by way of an agreement, it is important that the specific knowledge and experience already present is transferred in a manner to allow a contracting party to use it by themselves, requiring no additional activity from the supplier (unlike the provision of service), meaning that the supplier is not obliged to cooperate with the party when the latter uses this transferred knowledge or experience and thereby also provides no guarantee for results from the use of such information. Furthermore, it is important that the transferred knowledge is not accessible to the general public.

In cases when payments for access to content online are payments for the transfer of the aforementioned information in such manner, they can also be defined as payments for the information about industrial, commercial or scientific experience, which impose the mandatory payment of withholding tax in accordance with the ZDDPO-2 or the relevant convention.

Authors

Picture of Sasa Sodja
Saša Sodja
Attorney-at-Law
Ljubljana