We’ve reached ‘Z’ in this A to Z of sync music rights series. Z is for ‘Zero Rated’ referring to the subject of VAT and cross border trade. If you want to license a title from an overseas music rights holder, with no affiliated UK office, make sure you understand where you stand with respect to VAT.
If your brand or agency is UK based, typically you’ll need to secure sync licences from the local UK offices of music publishers and record labels even if the song or recording being licensed originates overseas e.g. USA. Certainly for the “major” record labels (Universal, Sony, Warner) and “major” music publishers (Universal, SonyATV, WarnerChappell), the reciprocal arrangements between their offices dictate that a UK licensee must secure a licence from the local UK office, even if the title in question isn’t UK controlled.
However, in some cases, you might need to license a title from a small independent music rights owner overseas who has no local UK office or affiliate. In this instance, that music rights owner is an exporter and the brand or agency licensee is the importer.
Zero Rated Music Rights
Here’s where you need advice from your colleagues in Finance or your accountant on VAT and equivalent sales taxes in other territories. For those markets that would usually charge sales tax on business services to domestic clients, it’s usual that exporters of such services zero-rate sales tax to non-domestic clients. Currently, the system within the European Union dictates that the exporter requires the importer’s VAT or Sales Tax Registration Number to be included on the exporter’s invoice.
So, if you’re a UK brand or ad agency, acting as the licensee on a sync licence with a European licensor, they will (or at least should) request your VAT number before raising their invoice. How this changes post-Brexit remains to be seen. Nonetheless, make sure that you get advice from someone properly qualified on UK VAT and overseas sales tax rules before proceeding.
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