Touring and Taxation Domestically and Internationally

The taxation of international performing artists (and sports figures) is special, because it is different from the normal tax rules. Most countries in the world levy a withholding tax on the performance fees of non-resident performers, even when they are self-employed, their fees are business income and they do not have a permanent establishment in the country of performance. This practice is confirmed in the OECD Model Tax Convention, which devotes a special clause (Article 17) to performers. The OECD believes that taxation at source is a reasonable measure to ensure that every performer pays his or her share of earnings to the government, and almost every country follows this instruction, both in their bilateral tax treaties and in their national legislation.

Because the performers also have to report the foreign income in their residence country, double taxation may occur. But this should be eliminated in the country of residence by either exempting the foreign income or granting the artist or sports figure a foreign tax credit. The OECD Model Tax Conventionadvises to use the ordinary tax credit of Art. 23B, but the tax exemption method is also still used, often in older tax treatiesand by countries, which use a territorial basis for taxation.

This suggests that the taxation of performance income ofperformers is balanced, allowing the country of performancethe right to tax the income but reserving a secondary taxing right plus progression for the country of residence. It may seem that a reasonable allocation of income tax has been created, even though it deviates from the normal allocation rules of the Art. 7 (for self-employed and companies) and 15 (for employees) of the OECD Model Tax Convention, but the reality is that problems may arise.