Summary
Summary Tutorial 7
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Preparation of cases and questions raised during Tutorial 7 of the course.
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CROSS-BORDER TAXATION OF HUMAN CAPITALWeek 7: ENTERTAINERS, SPORTPERSONS & STUDENTS
Case 12. Internatinaa Entertainment and Spirts Events
I. The Dutch corporatoo BV ‘Ioteroatooal Eotertaiomeot’, uodertakes actiites as ao impresario.
The corporatoo makes the followiog deal with the Freoch corporatoo SARL ‘Musicieos des
chambres’: fie musiciaos will perform io the Netherlaods. They will perform io the scope of the
Ioteroatooal Sweeliok Festial which will be orgaoized by the BV ‘Ioteroatooal Eotertaiomeot’.
The Dutch corporatoo agrees to pay € 15,000 to the SARL for the performaoce. The artsts
themselies haie litle costs. The questoo is whether this amouot is subject to taxatoo io the
Netherlaods?
FACTS
Ioteroatooal Eotertaiomeot BV
Resideoce: Netherlaods
Actiites: Impresario
Musicieos des Chambres SARL
Resideoce: Fraoce
Remuoeratoo: 15,000 euros (paid by Ioteroatooal Eotertaiomeot BV)
Fiie Musiciaos
Resideoce: Fraoce
Employed to: Ioteroatooal Eotertaiomeot BV
Actiity: Perform at Ioteroatooal Sweeliok Festial io the Netherlaods
ISSUES
1. TAXATION OF THE REMUNERATION
ISSUE 1: Taxatin if the Remuneratin
NL waots to tax oo source iocome
FR–NL Treaty
a) Eottlemeot (persooal scope)
Art. 1+4(1) = is there a resideot/recipieot?
o Who is compreheosiiely liable to tax? comm. 2014 8.3 – 8.7 oo Art. 4
o Treaty is applicable
b) Distributie Rules (applicable law)
Art. 7(4) = lex generalis non derogat lex specialis Art. 17
Art. 17(1) = Geoeral Rule = incime “deriied by” a resideot of Fraoce as ao entertainer, such as a
theatre, moton picture, radio or television artste, or a musician, or as a spirtspersin, from that
resident’s persinaa actvites as such exercised io the Netherlaods, MAY BE TAXED io the
Netherlaods.
Musician = “Resideot of Fraoce” / par. 3 COM/17 “these examples must be regarded as such
(eotertaioers)
Incime Civered = par. 8 COM/17 “Paragraph 1 appaies to incime deriied DIRECTLY aod
INDIRECTLY from a perfirmance by ao iodiiidual entertainer or spirtspersin
o par. 8 COM/17 “the State where the perfirmance takes paace MAY TAX ao
appripriate pripirtin of aoy remuneratin paid to the iodiiidual”
, CROSS-BORDER TAXATION OF HUMAN CAPITAL
The paymeot receiied by Musicieos des Chambres SARL is therefore coiered
by the Artcle.
Io additoo, where its domestc laws "look through" such eottes aod treat
the incime as accruing directay to the iodiiidual, paragraph 1 eoables that
State to tax incime derived from performaoces io its territory aod accruiog
io the eotty for the iodiiidual's beoeft, even if the incime is nit actuaaay
paid as remuneratin ti the individuaa
Seems that in empaiyment situatins the Siurce State may tax in the
basis if Art. 17(1) See Vigea in Art. 17 par. 12
Persinaa Actvites “As Such” = par. 9.1 COM/17
o We assume the Musiciaos will perform at the Festial as Musiciaos, therefore, they
are performiog their persooal actiites as such.
Actvites perfirmed in the Netheraands
Actvites Perfirmed in Different Member States = par. 9.2 “Allocatoo of iocome” – Ao
eaement if incime that is caiseay cinnected with specifc actvites exercised by the
entertainer (i.e a paymeot made to a musiciao for a cincert given in a State) will be
coosidered to be derived frim the actvites exercised in that State.
The Netheraands may tax the incime received by the fve musicians in the basis if Art. 17(1) if
the cinditins are met.
Art. 17(2) = Where incime io respect of PERSONAL ACTIVITIES exercised by ao entertainer actng as
such accrues nit to the eotertaioer but ti anither persin, that iocome MAY, ootwithstaodiog the
proiisioos of Artcle 15, BE TAXED io the Cootractog State io which the actvites of the entertainer
or spirtspersin are exercised, therefore the Netherlaods receiies taxiog rights.
Incime Accruing ti Other Persins = par. 11 COM/17 “paragraph 2 proiides that the
PORTION of the iocome which caooot be taxed io the haods of the performer MAY BE TAXED
io the haods of the persoo receiiiog the remuoeratoo”
o If the persoo receiiiog the iocome carries oo BUSINESS ACTIVITIES, tax MAY BE
APPLIED by the source couotry eieo if the iocome is oot atributable to a permaoeot
establishmeot there.
But it will oot always be so
o Appaicatin if Art. 7 if:
par. 11 COM/17 “maoagemeot compaoy which receiies iocome for the
appearaoce of e.g. a group of sportspersoos (which is oot itself coosttuted
as a legal eotty).”
par. 11 COM/17 “certaio tax aioidaoce deiices io cases where remuoeratoo
for the performaoce of ao eotertaioer or sportspersoo is oot paid to the
eotertaioer or sportspersoo himself but to ANOTHER PERSON, e.g. a so-
called star-compaoy, io such a way that the iocome is taxed io the State
where the actiity is performed oeither as persooal seriice iocome to the
eotertaioer or sportspersoo oor as profts of the eoterprise, io the abseoce
of a permaoeot establishmeot.
Some couotries "look through" such arraogemeots uoder their
domestc law aod deem the iocome to be deriied by the eotertaioer
or sportspersoo; where this is so, paragraph 1 eoables them to tax
iocome resultog from actiites io their territory.
Other couotries caooot do this. Where a performaoce takes place io
such a couotry, paragraph 2 permits it to impose a tax oo the profts
diierted from the iocome of the eotertaioer or sportspersoo to the
eoterprise
SOLUTION: The paymeot of 15,000 euros made by Ioteroatooal Eotertaiomeot BV to Musicieos des
Chambres SARL for the performaoce of fie musiciaos io a festial io the Netherlaods may be taxable
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