Use of foreign magazine title is a taxable trademark licence

The Italian Tax Authority (TA) has clarified the tax regime that applies to royalties payable for the use of foreign magazine titles (Resolution 2003 183/E). It held, among other things, that payments made by an Italian publisher for the use, on an exclusive basis, of a foreign magazine's title fell within the definition of trademark licence, requiring deductions for tax in both the licensor's and the licensee's countries of origin.

An Italian publisher that publishes in Italy a magazine edited by its French parent company asked the TA for a declaration as to whether various payments it had made to the French company could be treated as copyright royalties which, under the Italian-French Convention on Prohibition of Double Taxation, are not subject to deduction of tax at source.

In its opinion, the TA noted that there were distinctions between the payments made by the Italian publisher for the:

• use, on an exclusive basis, of the title of the corresponding French magazine;
  
  
• sale of advertising space in the magazine; and
  
  
• right to publish photographs and Italian translations of articles originally published in the French magazine.

According to the TA, the first two types of payment fell within the definition of trademark licence and these royalties were subject to the regime set out in Section 1 of Article 12 of the convention, which provides for concurrent taxation in the licensee's and licensor's countries of residence. This is in the form of a duty of 5% on the gross amount of the licence fee.

Conversely, the publication of photographs and Italian translations of articles that originated from the French magazine were to be considered as copyright royalties, for which the convention establishes that taxation is applied only in the copyright holder's country of residence.

The opinion of the TA appears to diverge from the clear indication contained in Article 100 of the Italian Copyright Act (Law 633/1941) and prevailing case law on the matter, which seem to suggest that newspaper and magazine titles are protected by copyright. It should, however, be mentioned that some court precedents have conceded that titles can be treated as trademarks, in the light of their distinctive function.

Francesca Rolla, Lovells, Milan