Financing through royalties takes the legal form of “contracts for the transfer of turnover” in which a company undertakes to transfer part of its turnover to a third party in exchange for financing. The use of royalties has been democratized in all sectors of activity in recent years, and that changes everything!
Secure your return on investment
Investing in royalties reduces the risk for the investor compared to investing in shares. This is why royalties are widely used for risky investments such as biotechnology or the entertainment industry.
Quick pay
The investor is remunerated quarterly on the basis of the company's turnover. In the case of real estate, the investor therefore directly receives a share of the rents and the selling price of the property.
Even if the company does not make a profit
Many companies do not make a profit in the first few years. Shareholders cannot therefore receive dividends. With royalties, the problem does not arise, if there is turnover, the investors are remunerated! This method of financing is therefore particularly suitable for short-term investment.
Simple and advantageous taxation
Individuals
Investors subject to income tax will be liable for the Single Flat Tax of 30 % (flat tax) on their earnings. You therefore do not pay tax until your investment is reimbursed, then 30% of your capital gains will be subject to tax.
The declaration of your profits is made in part 2 of your declaration: Income from securities and movable capital. More specifically in box 2EE: Other income subject to a levy or a withholding tax.
Companies
When you invest through a legal entity, a claim must be recorded on the balance sheet. As long as the amount invested is not repaid, you do not pay tax. Once the subscription amount has been repaid, you must recognize taxable income corresponding to your capital gains in the income statement. Investment in royalties is a taxable financial product.
Focus on accounting entries:
– At the investment:
Debit of Account 274 – Loans or debit of Account 276 – Other fixed receivables
Credit to Account 512 – Bank
- Repayment :
Credit to Account 274 or Credit to Loans Account or 276 – Other Fixed Claims
Debit from Account 512 – Bank
- Capital gain :
Credit to Account 762 – Income from other financial fixed assets or 763 – Income from other receivables
Debit from Account 512 – Bank*
Royalties and real estate
The novelty with CUBE is to be able to invest in real estate thanks to royalties, here are the advantages:
No property income tax
The investor is subject to the single flat-rate levy. There is therefore no land income added to your declaration, nor additional income tax. For our part, CUBE is liable for corporation tax as well as the contribution on rental income.
Remuneration even in the event of a land deficit
When investing in real estate via a company (SCI, SARL or SAS, for example), optimizing the return requires the amortization of the initial costs (notary, furniture, works, etc.). The company therefore does not make a profit and cannot remunerate its shareholders for the first few years. With royalty contracts, you are paid as soon as the company collects rent!
