Taxation of International Performing Artistes: the problems with Article 17 OECD and how to correct them

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. Most countries have followed the OECD recommendation to tax the performance income of non-resident artistes. Article 17 of the OECD Model Tax Convention sets aside the normal allocation rules of Article 7 (Business Profits) and Article 15 (Income from Employment). The OECD named two reasons for this special treatment of international artistes: (1) top stars are trying to avoid normal taxation by pretending to live in tax havens (tax avoidance); and (2) many are not reporting their foreign performance income in their home country (non-compliance). With Article 17(2) the tax right for the source country has been extended to all payments for a performance, not only when made to the artiste but also to other entities. The OECD believes that taxation at source is a reasonable measure to ensure that every artiste pays his share of his earnings to the government. At the same time, artistes also have to report their foreign earnings and expenses in their country of residence, which will tax its residents on their worldwide income. International double taxation is eliminated by either exempting the foreign income in the country of residence or granting the artiste a foreign tax credit. This suggests that the taxation of the performance income of artistes is balanced, even though it deviates from the normal allocation rules of Articles 7 and 15. But unfortunately it has also increased the risk of practical inadequacies, because the taxable base in the country of performance can be higher than in the residence country, the exchange of information between countries for these often short-term business activities has not been developed properly and tax credit problems often arise in the country of residence. And the artistes in any case end up with comparatively high advisory costs, in the country of performance as well as in the country of residence.

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