Defined the concept of «royalty» – payments made to artists, musicians and other creators who own intellectual property by the distributor, publisher, or manufacturer that sells the creator’s property. These licensees pay royalties to the creator, the licensor, either upon the sale of an item or each time an item is used. Royalty payments are made according to carefully constructed contracts, so it’s important to employ an accurate accounting system to keep track of them. This ensures that payments are rendered in a timely manner and in the correct amount. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments. Accounting processes vary based upon the nature of payments made and other contract stipulations, so it’s important to know the specific entries required for each type of transaction. Revealed the peculiarities of royalty accounting at domestic enterprises. Payment made by the lessee on account of a royalty is normal business expenditure and will be debited to the Royalty account. It is a nominal account and at the end of the accounting year, balance of Royalty account need to be transferred to the normal Trading and Profit & Loss account. Royalty, based on the production or output, will strictly go to the Manufacturing or Production account. In case, where the Royalty is payable on sale basis, it will be part of the selling expenses. Considered the main aspects of royalty taxation. According to sub-para. 196.1.6 of para. 196.1 of Art. 196 of the Tax Code of Ukraine royalty payment transactions in cash are not the subject to value added tax (Consequently, if payments under the contract are to be classified as royalties, then transactions for making such payments are not the subject to VAT. If payments can not be classified as royalties, such transactions are to be the subject to VAT on general terms at a rate. According of TCU, the subject to taxation of the income tax is determined by adjusting the financial result before tax (profit or loss), determined in the financial statements of the enterprise in accordance with National Accounting Standards or IFRS, on the differences that arise in accordance with the provisions of this section. Determining of the financial result in accordance with the Accounting Standards means the need to apply all necessary provisions, including those relating to costs. 

intellectual property, non-vestment assets, royalties, licensing agreement, accounting, taxation