performing abroad and taxation ietm 17 october 2014 – sofia, bulgaria dr. dick molenaar - all arts...
TRANSCRIPT
![Page 1: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/1.jpg)
PERFORMING ABROAD AND
TAXATION
IETM17 October 2014 – Sofia, Bulgaria
Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus UniversityRotterdam, the Netherlands
Dr. Harald Grams – Grams und Partner – Bielefeld, Germany
![Page 2: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/2.jpg)
2
SPECIAL RULES ARTISTES/SPORTSMEN
Since 1963 in OECD Model: Art. 17“because of practical difficulties”
Art. 7 (+ 14) - Companies and self-employed: are taxed in country of residence, unless they have a permanent establishment in the country of work
Art. 15 - Employees: are taxed in the country of work, unless
The employer is based in the residence country The salary is paid in the residence country Less than 183 days in the country of work
![Page 3: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/3.jpg)
3
PERFORMANCE INCOME
Art. 17 OECD Model - Artistes and Sportsmen: Taxing right for the source country, overruling other treaty provisions
Measure to counteract: tax avoidance non-compliance
Art. 23 – Elimination of double taxation with tax exemption or credit in the residence country
![Page 4: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/4.jpg)
4
ARTICLE 17(2)
Introduction in 1977
Also payments to others than the artiste or sportsmen fall under Art. 17
But limited approach, i.e. only in abusive situations
Extended to the unlimited approach in 1992, after the 1987 OECD Report
![Page 5: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/5.jpg)
5
1987 OECD REPORT
Clear expression of mistrust (§ 7 and 8):“clear evidence of non-compliance”“rarely disclose casual earnings”“sophisticated tax avoidance schemes, many involving
the use of tax havens, are frequently employed by top-ranking artistes and athletes”
“relatively unsophisticated people – in the business sense – can be precipitated into great riches”
“travel, entertainment and various forms of ostentation are inherent in the business and there is a tendency to be represented by adventurous but not very good accountants”
![Page 6: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/6.jpg)
6
NO DEDUCTION OF EXPENSES
§ 94 of the 1987 OECD Report
(§ 10 of the OECD Commentary on Art. 17)
“The article says nothing about how the income concerned is to be computed. It is for a Contracting State’s domestic law to determine the extent of any deductions for expenses. Domestic laws differ in this area, and some provide for taxation at source at an appropriate rate based on the gross amount paid to artistes and athletes. Such rules may also apply to income paid to groups or incorporated teams, troupes, etc.”
![Page 7: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/7.jpg)
7
PROBLEM OF EXCESSIVE TAXATION
Insufficient tax credit in residence country, because of high withholding tax
Example: 2.000 gross – 1.200 expenses = 800 profit
Withholding tax: 20% x 2.000 = - 400 Tax credit: 30% x 800 = 240
Insufficient tax credit = - 160
![Page 8: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/8.jpg)
8
PROBLEMS WITH TAX CREDITS
It is often problematic to achieve a tax credit in the country of residence. Examples are:
No tax certificate available Name of group, but credit in name of artists Conflict with monthly salary administration No acceptance by local tax inspector
This leads to international double taxation
![Page 9: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/9.jpg)
OPTION: ARTICLE 17(3)
OECD Commentary on Art. 17 gives the option for a tax exemption at source
14. Some countries may consider it appropriate to exclude from the scope of the Article events supported from public funds. Such countries are free to include a provision to achieve this but the exemptions should be based on clearly definable and objective criteria to ensure that they are given only where intended. Such a provision might read as follows:
“The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed in a Contracting State by artistes and sportsmen if the visit to that State is wholly or mainly supported by public funds of one or both of the Contracting States or political subdivisions or local authorities thereof. In such a case, the income is taxable only in the Contracting State in which the artiste or the sportsman is a resident.”
Very often used, e.g. in 44% of UK and 74% of German tax treaties
9
![Page 11: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/11.jpg)
11
EUROPEAN UNION (ACHIEVED)
No direct influence on artiste and sportsman taxation, but indirect through EU Treaty
Gerritse: ECJ 12 June 2003, C-234/01 Scorpio: ECJ 3 Oct 2006, C-290/04
Entitled to deduction of expenses ! Normal tax rates Not yet in every EU country, such as Italy and Portugal
But withholding tax is allowed after ECJ 18 Oct 2012, C-498/10 (X NV (= Football club Feyenoord))
![Page 13: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/13.jpg)
ROTTERDAMS PHILHARMONISCH ORKEST
13
![Page 14: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/14.jpg)
WITHIN TEMPTATION
14
![Page 15: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/15.jpg)
15
THE NETHERLANDS - 2007
The government had decided not to tax non-resident artistes and sportsmen from treaty countries anymore
94 treaty countries Although the NL has the taxing right under Art.
17 of the treaty But tax revenue is too low and administrative
expense are too high
Return to normal taxing rights of Art. 7 and 15
![Page 16: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/16.jpg)
16
EXEMPTIONS SPORTS EVENTS
Winter Olympics – Feb 2010 – Vancouver Olympics – Aug 2012 – London
Tax exemption for sportspersons The IOC uses this as a condition for the Olympics bid Clear sign that Art. 17 OECD is considered an obstacle Only effective with tax credit method in residence state Double non-taxation if tax exemption method applies
Also 2011 ICC World Cup Cricket – India / World Cup Rugby – New Zealand
Champions League Final 2011, 2012 and 2013 / EURO 2012 – Poland + Ukraine
Diamond League July 2013 – London / Commonwealth Games 2014 – Glasgow
![Page 17: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/17.jpg)
2014 UPDATE OECD MODEL
OECD has denied the proposal to delete Article 17
Options for exemptions and deductions in treaties:1. Limitation to business activities, exclude employees2. Deduction of expenses3. Minimum threshold of 15.000 per artiste per year4. Exemption for activities supported by public funds5. Exemption for teams, troupes and orchestras6. Exemption for Art. 17(2), when no participation in profits
Technical changes for the Commentary on Article 17
17
![Page 18: PERFORMING ABROAD AND TAXATION IETM 17 October 2014 – Sofia, Bulgaria Dr. Dick Molenaar - All Arts Tax Advisers / Erasmus University Rotterdam, the Netherlands](https://reader036.vdocuments.us/reader036/viewer/2022072005/56649cf35503460f949c0fdf/html5/thumbnails/18.jpg)
PRACTICE
National tax exemption in visiting country? If not, tax exemption possible under tax treaty? If not, deduction of expenses possible? If not, split contract between production and artiste fee? Minimum amount for individual artistes?
If tax is withheld (or paid on top of net fee), ask for tax certificate
Tax credits in residence country, for which foreign tax should be withheld from fees of individual artistes, because only they can apply for tax credits in their income tax returns
Eliminate double taxation, also in case of net fees !!
18