Taxation of International Performing Artistes
The Problems with Article 17 OECD and How to Correct Them. Doctoral S. 10
The tax rules for international performing artistes are very different from normal tax rules. For instance, taxation occurs in the country of performance, regardless of whether an artiste is self-employed or an employee. Since 1963, the OECD has adopted this special rule in Article 17 of its Model Convention as an anti-avoidance measure, and most countries have taken it over into their tax treaties and national rules. This book provides a clear outline of the relevant rules and considerations. Unfortunately, these special tax rules lead to obstacles. This book considers the problems regarding, for example, the determination of taxable income and the non-deductibility of expenses and tax credits in the country of residence, and gives clear examples of excessive taxation. The top stars with their high earnings may be able to avoid these difficulties, but other artistes can experience substantial problems when performing abroad. Research in the book indicates that the tax revenue accruing from this special taxation is a negligible proportion of a country's budget. Recent cases before the European Court of Justice have led to awareness of these problems.
The conclusion is that some parts of the special artiste tax rules need to be adjusted in the Member States of the European Union, making the taxation of artistes fairer. This book shows that options are available to improve the taxation of international performing artistes. Some options can be implemented at short notice, but the position could also be drastically amended by completely removing the obstacles for international performing artistes without affecting countries' tax revenue.
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Chapter 1 Introduction, aim of the thesis and research methods 1.3. Special taxing rules for artistes (Article 17 OECD Model Tax Convention) This thesis is about the taxation of international performing artistes. Their performance income is often generated in many countries other than their country of residence, and this performance income is subject to special tax treatment. The taxation of international activities in both the residence and source country is not particular to performing artistes it is also applied to other taxable persons. They will be taxed in the country of residence on their worldwide income, i.e. regardless of where their income originates, but their income from foreign sources will also very often have been taxed in the source country 1 . If unmitigated, the effect will be double taxation, which obstructs internationaltrade or services.Countries have concluded bilateral tax treaties in which they have divided the taxing rights between each other in order to eliminate double taxation. These treaties are usually based on the OECD Model Tax Convention, which gives general rules for the allocation of taxing rights to the various types of income. At least four articles of the OECD Model Tax Convention are directly relevant to the taxation of international performing artistes 2 : Article 7 Business profits, including income from self employed services:no taxation in the source country, unless there is a permanent establishment 3Article 15 Income from employment: taxation in the source country,unless the artiste is employed and paid by an employer in the residence country and stays in the source country for less than 183 days Article17 Artistes and sportsmen: taxation in the source country and Article 23 The methods for elimination of double taxation. It is remarkable to note that artistes are not taxed in accordance with the normal allocation rules, but that Article 17 gives them a special position in the OECD Model Tax Convention. The current text of Article 17 is as follows: Article 17 OECD Model Tax Convention 1. Notwithstanding the provisions of Articles 7 and 15, income derived by a resident of a Contracting State as an entertainer, such as a thea1 The various reasons for this source taxation will be discussed in Chapter 2 of this thesis. 2 Also Article 12 - Royalties may be relevant in some respect. The OECD Model Tax Convention allocates the taxing right for royalties to the country of residence. 3 Income from selfemployed services fell under a separate article in the OECD Model Tax Convention,Article 14, until the year 2000, when it was removed and the income was brought under Article 7. But treaties concluded before the year 2000 will still contain such an article 14.tre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State. 2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may,notwithstanding the provisions of Article 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsmanare exercised. The article makes it clear that the general rule for business income from Article 7 does not apply to artistes. This means that the source country has the right to tax the performance income when the artistes are selfemployed,even if their fees are business income and they do not have a permanent establishment in the country of performance. Nor does the general rule for income from employment from Article 15 apply to artistes. This means that artistes who are employees may also be taxed in the country of their performance, even if they are employed and paid by a company in their residence country and travel abroad only for shortterm performances.It is fascinat