Article 17(3) for Artistes and Sportsmen: Much More than an Exception

Most states in the world apply Article 17 (introduced in 1963) of the OECD Model Convention for the taxation of non-resident artistes and sportsmen granting the right to levy withholding tax on the performance fee to the state of performance. In 1977 the OECD introduced Article 17(2) ensuring also the taxation of payments to others than the artistes and sportsmen, for example, so-called ‘artiste-companies’ or any third party involved. To avoid double taxation states either apply the tax credit or the tax-exemption method. Inadequacies were discovered and, therefore, the Commentary on Article 17 advised in 1977 to exclude cultural exchanges and subsidized artistes and sportsmen from Article 17. The majority of all states soon started to use this exception as Article 17(3) in their bilateral tax treaties thereby granting the taxing right to the state of residence. The question of unequal treatment between a subsidized and a commercial theatre group arises. It might lead to the conclusion that an Article 17(3) clause in a bilateral tax treaty between EC Member States does not correspond with the freedom and non-discrimination principles of the EU.