Is remuneration for unauthorized use of copyright subject to VAT?

The VAT treatment of remuneration for the unauthorized use of goods or services typically raises doubts — each case requires an assessment of whether the payment is compensatory in nature or instead constitutes consideration for the provision of services. Polish tax authorities generally take the view that VAT liability depends on whether the entity receiving the payment in some way “tolerates” the unauthorized use of its property (i.e. does not object to such use). 

A similar issue was recently addressed by the General Court of the European Union, which examined whether remuneration for the unauthorized use of copyright is subject to VAT and, if so, at what amount (Case T-643/24, Credidam, judgment of 11 February 2026). The case concerned Romanian tax legislation and may be particularly relevant for sectors operating under comparable legal frameworks. 

The Romanian entity was legally “compelled” to tolerate the unauthorized use 

The case concerned a collective management organization for copyright and related rights in Romania (Credidam), which collects and distributes remuneration due under those rights to performers and phonogram producers. Under domestic legislation, performers and phonogram producers are entitled to a single equitable remuneration for the use of phonograms, including any communication to the public. 

In the event of unauthorized use (in this case, use without the required licence) of protected works, the remuneration payable by the user amounts to three times the fee that would have been due had such a licence been granted. In the case at hand, Credidam sought payment of triple remuneration from an entity that had publicly communicated phonograms and other protected works in its guesthouse without obtaining a licence. 

The Romanian court raised doubts as to whether the remuneration claimed by Credidam should be subject to VAT. The General Court of the European Union was asked to determine: 

1. 1. Whether entities such as Credidam provide services for consideration where a user communicates protected works to the public without holding the appropriate licence? 
   2. Whether the answer to the above question depends on the fact that, under national law, an entity such as Credidam cannot oppose the use, but is merely entitled to remuneration? 

The General Court: Credidam provided a service, and VAT is due on the full amount of remuneration for the unauthorized use of the work 

The General Court emphasized that, under domestic legislation, performers and phonogram producers cannot oppose the use of works in the creation of which they participated. Instead, pursuant to copyright law, they are granted a lump-sum, one-off “equitable remuneration” for the use of those works. The amount of remuneration depends on whether Credidam, acting on behalf of the rightholders, consented to the use. 

According to the Court, the situation at issue constitutes a provision of services for consideration, as the conditions identified in the case law of the Court of Justice of the European Union as decisive for classifying a transaction as a service were met, including: 

1. 1. the existence of a direct link between the service provided and the payment claimed; 
   2. the existence of a legal relationship between the service provider and the recipient; 
   3. the fact that the total absence of payment of the sums due does not preclude the finding of reciprocal rights and obligations arising from the economic transaction concerned. 

The Court also recalled that a taxable provision of services does not necessarily arise from a contract between the parties but may also result from the provision of a service by operation of law. 

Furthermore, the General Court underlined that the taxable amount for a provision of services for consideration is the remuneration actually due or received in respect thereof. The increased remuneration (in this case, amounting to three times the base fee) for the use of works without a licence is a direct consequence of their communication and use without authorization. Therefore, the Court concluded that such increased amount constitutes enhanced remuneration for the provision of a service, rather than a penalty or compensation. 

Potential impact of the judgment in Case T-643/24 on Polish taxpayers 

The judgment may be particularly relevant for sectors in which comparable legal provisions apply — namely, provisions preventing rightholders from opposing the unauthorized use of their property and thus, in practice, compelling them to tolerate such conduct. Under Article 25(b) of the VAT Directive (as well as Article 8(1)(2) of the Polish VAT Act), the provision of services includes, inter alia, an obligation to refrain from an act or to tolerate an act or a situation.  

The judgment is also consistent with the position presented by Polish tax authorities, which argue, among other things, that tolerance of a given situation may be evidenced by the absence of a demand to cease the use of a work. Similar conclusions were reached by the Supreme Administrative Court in its judgment of 25 February 2025 (case no. I FSK 1771/21), in which it held that remuneration for the unauthorized use of a work (design documentation) is subject to VAT. 

The ruling may also be relevant in other situations where the amount of remuneration depends on the fulfilment of certain conditions. In the case examined by the General Court, the remuneration — although increased — remained remuneration for a taxable provision of services. However, as is often the case, each situation requires a separate analysis to determine whether, from a VAT perspective, the same conclusions as those adopted by the General Court in the Credidam case will apply.