Are Royalties From Books and Literary or Musical Works Taxed Differently by the BIR? The 10% Final Tax Under NIRC Section 24(B)(1)

Royalties an individual earns from books, other literary works, and musical compositions are subject to a 10% final withholding tax under NIRC Section 24(B)(1) — exactly half the 20% final tax that applies to royalties in general. The publisher, label, or platform paying the royalty withholds the tax before releasing payment, and the author or composer receives the net amount with no further income tax due on that specific royalty.

For how withholding certificates work on other kinds of passive income, see Withholding Tax on Interest, Royalties, and Dividends and Final Withholding Tax vs Creditable Withholding Tax.

What does NIRC Section 24(B)(1) actually say? #

Section 24(B)(1) of the National Internal Revenue Code sets the general final tax on royalties at 20%, then carves out a lower 10% rate specifically for books, literary works, and musical compositions. This is the same provision that sets final tax rates on interest, prizes, and other passive income for individuals, and the royalty clause reads:

“A final tax at the rate of twenty percent (20%) is hereby imposed upon the cash and/or property dividends… royalties, in general… except on books, as well as other literary works and musical compositions, which shall be imposed a final tax of ten percent (10%).”

The preferential rate exists to encourage local publishing and music composition — a policy carve-out embedded directly in the rate structure rather than a separate exemption a taxpayer has to apply for.

What counts as a “book, literary work, or musical composition” royalty? #

The 10% rate applies specifically to royalty payments tied to authorship of a book, other literary work, or musical composition — not to every payment an author or musician receives. A royalty, in the tax sense, is a percentage-of-sales or per-unit payment for the right to reproduce, distribute, or perform the copyrighted work. Common examples that qualify:

• A novelist’s per-copy royalty from a publishing house
• A textbook author’s percentage-of-net-sales royalty from an educational publisher
• A songwriter’s mechanical or performance royalty from a record label or streaming platform’s local licensing arrangement
• A composer’s royalty from a collecting society for public performance of a musical work

What does not qualify for the 10% rate: a flat commissioned writing fee, a ghostwriting fee, or a one-time buyout of rights that isn’t structured as an ongoing royalty. Those are professional fees subject to expanded (creditable) withholding tax reported on BIR Form 2307, not a final tax on royalty income — a distinction that matters because a creditable certificate lets the writer claim the amount withheld as a tax credit on their annual return, while a final tax on a true royalty settles the liability outright.

Worked example: a textbook author’s royalty statement #

A local publisher paying a textbook author a royalty computes the 10% final tax on the gross royalty before releasing the net amount — the author never reports this specific income again.

A Philippine publisher sells ₱2,000,000 worth of a nursing review textbook in a calendar year under a 10%-of-net-sales royalty agreement with the author:

The publisher remits the ₱20,000 to the BIR and issues the author a certificate of final tax withheld reflecting the transaction. Because this is a final tax, the author does not add the ₱200,000 gross royalty back into other taxable income when filing an annual return — it’s already fully settled at 10%, compared to what would have been a ₱40,000 final tax bite at the standard 20% royalty rate on the same amount.

How does this compare to other royalty income? #

Royalties outside the books/literary/musical carve-out — software licenses, franchise fees structured as royalties, patent and trademark royalties — stay at the standard 20% final tax rate under the same NIRC Section 24(B)(1).

A composer earning royalties both from streamed music (10% rate) and from licensing a jingle for a corporate brand campaign structured as a separate IP license (potentially the general 20% rate, depending on characterization) needs to track which payment falls under which bracket — the paying entity’s withholding certificate should reflect the correct rate, and a mismatch is worth raising with the payor before it snowballs into an underwithholding issue on their end.

Frequently asked questions #

What tax rate applies to royalties from books in the Philippines? #

Royalties earned by an individual from books, as well as other literary works and musical compositions, are subject to a 10% final withholding tax under NIRC Section 24(B)(1) — half the standard 20% final tax rate that applies to other types of royalty income.

Who withholds the 10% tax on book or music royalties? #

The publisher, record label, streaming platform, or other entity paying the royalty to the author or composer is the withholding agent responsible for deducting the 10% final tax before remitting the net royalty and for remitting the withheld amount to the BIR.

Does the 10% rate apply to all income an author earns from a book? #

Only to royalty payments — the per-copy or percentage-of-sales payment tied to the intellectual property itself. A flat fee paid to a ghostwriter or a lump-sum commissioned writing fee is professional income subject to expanded withholding tax under BIR Form 2307, not a royalty subject to the 10% final tax.

Do royalties from software or a franchise get the same 10% rate? #

No. Software licensing royalties, franchise royalties, and royalties on patents, trademarks, or other intellectual property outside the books/literary/musical carve-out are taxed at the standard 20% final tax rate under NIRC Section 24(B)(1).

Does an author still need to file an income tax return if royalties were already taxed at 10%? #

A final tax already settles the tax liability on that specific royalty income, so it isn’t added back into the author’s other taxable income. An author with other business or professional income still files the usual quarterly and annual income tax returns for that separate income.

Summary #

NIRC Section 24(B)(1) draws a clean line between royalties in general, taxed at a 20% final rate, and royalties on books, other literary works, and musical compositions, taxed at a preferential 10% — a distinction the paying publisher, label, or platform must apply correctly at the point of withholding, since the author has no further filing obligation on a properly withheld final tax.