Georgia’s music tax incentives are now law
Music Publishing , Taxation / February 2018

TAXATION Live events sector, recorded music, music publishing, video games   The first-ever tax incentive for Georgia’s music industry, the Georgia Music Investment Act is now in effect The legislation is the result of the Recording Academy Atlanta Chapter and Georgia Music Partners’ joint advocacy efforts for over seven years to enact the first-ever targeted incentive specifically for music in Georgia, designed to reward investment in the music industry through a refundable tax credit. Supporters argue that the incentive will create jobs in music for musicians, logistics consultants, caterers, lawyers, accountants, engineers, producers, stage designers, lighting designers, managers, promoters and booking agents and could created thousands of new jobs in Georgia, following on from the success of Georgia’s film tax credit. Billboard reports that Georgia has a rich musical heritage and has been the home of globally recognised artists inclusdingg  Ray Charles, James Brown, the Allman Brothers, REM, the B-52s, Alan Jackson, Usher, OutKast, Ludacris and many others. Georgia also boasts world class recording facilities and 48 music training and education programs and 15 professional orchestras. The Act, signed into law by Governor Nathan Deal, provides a 15% refundable tax credit granted for the following in-state expenditures: * Musical Recording: An artist, record label or other…

Spain cuts rate of VAT on cultural events
Live Events , Taxation / April 2017

TAXATION Live events sector   Spain’s minister for education, culture and sport, Íñigo Méndez de Vigo, has announced a cut in the rate of cultural value-added tax (VAT) to 10%. The reduction confirms a manifesto promise by Prime Minister Mariano Rajoy’s People’s Party, which last September pledged to reduce VAT for live entertainment, or “cultural shows” (espectáculos culturales) which has stood at a record 21% since September 2012, when Rajoy increased the tax, which previously stood at 8%. The tax hike has been catastrophic for the Spanish live industry where revenues from ticket sales fell 27.51% between 1 September 2012 and summer 2013, and the country’s live music industry has only just recently recovered to its pre-2011 levels.

Coldplay’s Indian debut overcomes legal challenge
Live Events , Taxation / December 2016

TAXATION Live events sector   Coldplay’s debut show in India has been allowed to go ahead, following the failure of a legal challenge in the High Court of Bombay. Anti-corruption activists Anjali Damania and Hemant Gavande challenged a decision by the Maharashtra state government, which had waived entertainment duty on the concert: their challenge was based on the argument that the British band’s performance at the not-for-profit Global Citizen festival would not qualify as an educational or charitable activity, as required by the Bombay Entertainments Duty Act 1923. The event, at the Bandra Kurla Complex in Mumbai, also features Jay-Z, Demi Levato and a host of local acts.   Judges Manjula Chellur and MS Sonak found in favour of Global Citizen and acting advocate-general Rohit Deo, who said the festival was “an eight-hour programme, and the concert by Coldplay is just part of it. The festival is to create awareness of three subjects: gender equality, education and clean water”. Deo said that only 11,000 out of the 80,000 tickets would be sold, and 65,000 would be free to those who have demonstrated their commitment to positive social change – as with previous Global Citizen events: tickets could be won by promoting the charity’s work (by,…

Carolina Country Music Festival gets tax boost
Live Events , Taxation / May 2016

TAXATION Live events sector     The Carolina Country Music Festival will receive $75,000 in accommodation tax revenues to promote its second concert series this June. However Mayor pro-tem Mike Lowder voted against the measure to give the Carolina Country Music Fest $75,000 in accommodation tax funds, after the city agreed last month to give the group $108,000 in in-kind services to police and clean up the event. Lowder noted that groups shouldn’t be allowed to “double dip” into city coffers, especially after the council denied a local organization receiving a-tax money $2,800 in in-kind services for a St. Patrick’s Day event. The State’s accommodations tax is collected when visitors pay to stay in area hotels and at other lodging. Under state law the tax revenue is to be used for advertising and promoting tourism-related activities that increase tourist attendance. Funds can also be used for additional city resources needed to accommodate increases in tourism, like law enforcement, highway and street maintenance and beach renourishment.

UK tax change may impact on record labels and music publishers
Taxation / April 2016

TAXATION Recorded music, music publishing   Music accountancy expert, Nick Lawrence has picked up on one aspect of the new UK Budget that might just deserve the attention of the larger music industry businesses. The UK Spring Budget included one change, relating to withholding tax which may have particular relevance for the worldwide music industry and connected creative sectors even though it is a  result of the tax avoidance schemes set up by the likes of Facebook, Google and others. Now a series of transactions that take place between the two companies involving royalties, where one of the main aims is to effectively transfer profit from the higher to the lower tax jurisdiction will now result in withholding tax applied at the full relevant UK tax rate. Once the 2016 Budget becomes law (July 2016), if royalty payments are clearly and obviously made between the two UK businesses, even if the contract for the transactions is made between the UK-based and the overseas company, the payments will now fall under UK tax rules and be taxed at the appropriate UK rate. Music Business Worldwide says the most important message for any music business of a significant size – where royalties, trade names or trademarks…

UK tax relief can apply to recording advances
Artists , Taxation / March 2016

TAXATION Artistes     The UK’s Treasury minister has confirmed that the 2001 tax relief which allows creators to average their income over two consecutive years can be applied to recording artists when they are paid advances by their record labels.  The relief recognises the volatile nature of earnings in the creative sector – authors and artists often have one very profitable year followed by one that is less so: Where profits are “wholly or mainly derived from literary, dramatic, musical or artistic works or designs” it is possible to average the profits for successive tax years. This reduces the burden of the more profitable year, and can in some circumstances drop one year’s tax bill into a lower band, meaning less tax is due. UK Music and the Featured Artists Coalition sought the clarification on exactly if and when the relief applied to recording artists who receive an advance from a label are covered by the system, because the rule is slightly ambiguous saying that “profits must come from royalties or disposal of the works rather than from the provision of services”. DAvnavces are of course advance payments of royaltieds that may become due at a later date. In a…

Burning Man must pay Nevada state entertainment tax
Live Events , Taxation / March 2016

TAXATION Live events sector     Burning Man tickets will be subject to a live entertainment tax for the first time. The Nevada state Department of Taxation have notified organizers of the iconic Black Rock desert event that as more than 15,000 tickets were sold for the event it qualified it for the tax, the Reno Gazette-Journal reporst that Burning Man,  is required to register for the tax before tickets go on sale. Burning Man attracts 80,000 visitors. “The activities that take place during Burning Man constitute live entertainment, whether or not those activities are provided by patrons of the event. Because Black Rock City is located on public land and access to the area during the event is limited to those who have purchased tickets, it meets the definition of a facility,” wrote Nevada Department of Taxation Executive Director Deonne Contine. “Because Burning Man collects the taxable receipts from those attending the event, Burning Man is the taxpayer and responsible for paying (Live Entertainment Taxes) to the State of Nevada.” Burning Man  had written to the Department of Taxation saying that the festival should be exempt from the amended tax on live entertainment. Burning Man attorney Ray Allen said the 9…

Live sector call for action over threats to festivals and small venues
Live Events , Taxation / January 2016

TAXATION / PLANNING Live events sector   The UK festival industry has been given more time to prepare its case on how business rates are assessed against agricultural land that hosts music events. Music Weeek reports that a Live Nation led coalition of 720 interested parties, including the Association Of Independent Festivals (AIF), UK Music, The Agents’ Association, The Concert Promoters Association and The Association Of Festival Organisers, has called for an immediate halt to the rating of festival sites for business rates by the Valuation Office Agency until a clear policy is established. “We do not consider that festivals and events sites should now be rateable as they are essentially temporary and ancillary uses of agricultural land,” it said in a letter to MPs.  The proposed changes including backdating the rate bill for five years, and could put the future of some festivals at risk as rural landowners take stick of financial risks. Last week’s Spending Review by Chancellor George Osborne did not include an announcement on the Business Rates Review, which will now revert to March 2016. AIF general manager Paul Reed said events and festival organisers are hoping the Government will use the extra time to take action on business…

Burning Man laments Nevada’s new entertainment tax
Live Events , Taxation / January 2016

TAXATION Live events sector   Organizers of the Burning Man festival are challenging a Nevada state tax which they say could cost them nearly $3 million if enforced. The 25-year-old annual arts festival now attracts  80,000 participants to the Black Rock Desert 100 miles north of Reno.   The Reno Gazette-Journal reports ( that Burning Man  have written to the state Department of Taxation on Friday saying that the festival should be exempt from the recently amended tax on live entertainment. Burning Man attorney Ray Allen said the 9 percent tax would translate into a tax bill of about $2.8 million. He said the tax is known by some as the “Burning Man tax” and the festival’s website says “Some seem to view Burning Man as the ‘golden goose’ they can turn to when they want money for other projects.”   In June, the Legislature approved a revised version of the live entertainment tax, which originally came into law in 2004 as a way for the state to gain revenue from Las Vegas’s robust live entertainment industry. The revised version became effective on October 1st. Business Insider reports that certain events — including school, sporting, racing and nonprofit events attended…

Adele snub prompts New Jersey tax rethink
Live Events , Taxation / January 2016

TAXATION Live events sector     A New Jersey state lawmaker has used that the fact Adele is snubbing of New Jersey as a reason to pass his proposal to “give tax breaks to A-list stars”. Senate Republican Leader Tom Kean says the fact that the singer’s upcoming tour bypasses New Jersey in favor of New York and Philadelphia proves the need for the state legislature to pass his bill. It would exempt performers who play at least four nights in Atlantic City from having to pay state income taxes on all shows in New Jersey that year. If enacted the Bill would exempt artists from state taxes not only on their Atlantic City performances but also on shows at New Jersey venues including arenas in Camden, Trenton, Holmdel and Newark.   Adele is scheduled to stage six performances in New York City and two in Philadelphia.   Nicknamed the “Britney bill” for Kean’s references to multi-night engagements that pop star Britney Spears has done in Las Vegas, the bill has yet to pass through the Legislature. Senator Kean said “New Jersey gets nothing from Adele performing eight shows in neighbouring New York and Pennsylvania” adding “New Jersey will continue…

Tax boost for Broadway
Live Events , Taxation / January 2016

TAXATION Live events sector     Under wider tax legislation that has now passed through the House and Senate, Broadway and live theater productions can now benefit from the same advantages that have long been afforded to TV and film productions. Live theater and concert productions can now get up to $15 million in tax credits if they spend at least 75 percent of their budgets in the U.S. The new rule would apply for productions starting after Dec. 31st 2015. The change has been championed by U.S. Senator Charles Schumer, Senator Roy Blunt of Missour and and stars including Neil Patrick Harris and Bryan Cranston. Schumer, who has been working on the tax break for four years, said the change would create “thousands and thousands” more jobs for actors and backstage workers, and produce more shows nationwide, helping hotel, restaurant and taxi industries. He noted that other countries also grant live theater similar breaks, especially in London, which has been luring away American production.   The tax law change, part of a bill that President Obama is expected to sign, would provide an incentive for investors in live theatrical productions by accelerating deductions and by ending the practice of requiring…

Texas Music chief calls again for tax incentives for live music
Licensing , Live Events , Taxation / February 2015

LICENSING / TAXATION Live events sector   The outgoing head of the Texas Music Office, Casey Monahan, has said that his successor should continue pushing for a bill similar to the move proposed in 2013 by then-Rep Mark Strama to lower taxes on bars and clubs that heavily feature live music. Strama’s bill was intended as a way to offer incentives for bar owners to feature live music. But it died because of concerns over its potential cost and how the new law would be administered. “The passage of that (bill) would be a huge boost to the live music economy in the state,” said Monahan, who confirmed earlier this week that he will replaced after 25 years of service. “Recorded music hasn’t really recovered since 2000 and we’ve got to do something to provide an incentive for people to hire live musicians, because that’s the only real way to earn an income now.” Monahan said as Austin grows that his successor and other stakeholders in the music industry have to stay vocal about their place in the local economy and cultural scene. “It’s so important for people in the industry to assert themselves in the public arena,” he said…

UK tax relief for orchestras moves a step closer
Live Events , Taxation / February 2015

TAXATION Live events sector   The UK Government is to introduce new tax relief for orchestras from April 2016, following a public consultation. Chancellor George Osborne first announced the move, which mirrors similar reliefs in theatre, film, videogames and animation, in his autumn statement last year, and now has issued a consultation document outlining proposals and calls from input in their implementation. Director of the Association of British Orchestras Mark Pemberton said: “We welcome the launch of the consultation. Tax relief will make a big difference to our members’ resilience in these challenging times, helping them to continue to offer the very best in British music-making to audiences both here in the UK and abroad.

Business rate demands for festival sites set to be challenged
Licensing , Live Events , Taxation / January 2015

LICENSING / TAXATION Live events sector   Festival magazine reports that festival organisers and landowners who host festivals have reacted angrily to recent demands from local authorities for business rates on lane formerly classified as agricultural – with some demands being back dated to 2010. In Valuation Office Agency has said that it was “reviewing unassessed festival sites to ensure that all are correctly rated. This treats all businesses equally and ensures they pay their fair share of the overall rates bill. Local authorities have a discretion to reduce the rate by up to 100% on events that benefit the local economy. The Association of Independent Festivals (AIF) and the Association of Festival Organisers (AFO) are set to challenge the new approach with festival organisers pointing out that land use is sometimes for just a few days a year, and services and amenities that a town centre music venue might receive as part of is business rates – such as refuse collection, street lighting and recyling services – are not available to festival sites,   Festival Magazine December 2014 (Audience)

NCP politician asks for Goan festival tax
Licensing , Taxation / January 2015

LICENSING / TAXATION Live events sector   An Indian politician has questioned the “arbitrary fee” of 1 crore levied by the BJP-led government on the organizers of an electronic dance music (EDM) festivals in the state, of Goa. NCP leader Trajano D’Mello asked the government to propose a new law taxation for music festivals saying “If you are levying a fee, it should be permitted by law. There should be proper classification of taxation. ” Pointing out that if the government was not providing any correlated service, even though it was charging a fee, D’Mello said the license fee amounts to a tax. “If a tax is being levied, then there has to be authorization by law. Admittedly in this case there is no authorization by law, there is no legislation authorizing the government to permit hosting of music festivals in the state of Goa,” added Rohit Bras de Sa, an advocate, who was also at a December press conference staged as two EDM events got underway at Candolim and Vagator. De Sa and D’Mello also suggested that the government conduct random blood tests at the music festivals to see whether drugs are being consumed. They also suggested that the…

UK close VAT loophole on downloads
Music Publishing , Taxation / April 2014

TAXATION Recorded music, retail   Having closed the loophole physical product, George Osborne’s latest budget has closed a quirky UK tax loophole that meant consumers were paying VAT at very low foreign rates on online purchases of books, music and apps. The UK’s Chancellor will bring in new laws in 2015 making sure that internet downloads are taxed in the country where they are purchased, meaning web firms such as Amazon and Apple will have to charge the UK’s 20% rate of VAT. At the moment they are allowed to sell digital downloads through countries such as Luxembourg, where the tax rate is as low as 3%. The budget document said: “As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue” .

Valuing Michael Jackson – a taxing issue
Artists , Taxation / March 2014

TAXATION Artistes   More on Michael Jackson and this time it’s a claim brought by the Inland Revenue service (IRS) in the UD against the Estate of Michael Jackson for a gross underpayment of tax – the IRS claim the Jackson estate was significantly undervalued – in particular his image rights and the value of the Beatles songs catalogue Jackson owned and which are administered by music publisher Sony ATV. Neil Wilkof on the IPKat explains: Based on filings with the U.S. Tax Court, the Jackson Estate claimed a value of a little more than $7 million, while the Internal Revenue Service (IRS) gave a valuation of $1.125 billion. The discrepancy between the two valuations is not a typographical error. Indeed, the IRS sought to apply a seldom-used provision, known as the “gross valuation misstatement penalty”, to assess twice the usual amount of the penalty for underpayment (50%). Drilling down further, it appears that the dispute centres on two main assets. The first is the value of Jackson’s image, which the estate valued at only $2,105, while the IRS assigned a value of slightly more than $434 million. In addition, there is a dispute over the value of certain Jackson…

Money, money, money – Abba admit to fashion choices for tax
Artists , Taxation / March 2014

TAXATION Artists   Abba’s Bjorn Ulvaeus has admitted that the glittering hot pants, sequined jump suits and platform shoes the band wore were as much to save tax as they were to stand out from the crowd. Writing in a new book, Abba The Official Photo Book, Ulvaeus said “In my honest opinion we looked like nuts in those days. Nobody can have been as badly dressed on stage as we were” but explains that the Swedish Tax Code allowed costumes to be deducted against tax – provided they were so outrageous that they could not be worn on the street – worn as ‘daily wear’. The UK tax code has similar provisions: The case of Mallalieu v Drummond [1983] 57 TC 330 established that no deduction is available from trading profits for the costs of clothing which forms part of an ‘everyday’ wardrobe. This remains so even where the taxpayer can show that they only wear such clothing in the course of their profession. It is irrelevant that the person chooses not to wear the clothing in question on non-business occasions, the only question is whether the clothing might suitably be worn as part of a hypothetical person’s ‘everyday’ wardrobe. The…

DJ Moyles ‘used car salesman’ tax ploy fails
Artists , Taxation / March 2014

TAXATION Artists   The former Radio 1 DJ Chris Moyles had claimed to be a second-hand car dealer in a bid to save £400,000 tax, a British Tax Tribunal has found. The court named Moyles and two other men as having taking part in a scheme called “Working Wheels” which counted “450 fund managers, celebrities and other high earners between 2006 and 2008” as members and allowed members to assert  they had incurred large losses while working in the second-hand car trade . A published judgment from Judge Colin Bishopp, President of the Tax Chamber of the First-tier Tribunal, said Moyles’s self-assessment tax return for the financial year ending on April 5, 2008, when he was presenting Radio One’s Breakfast Show, said he “had engaged in self-employment as a used car trader”. The scheme was set up by NT Advisers, whose initials stand for “no tax”, in 2007. The DJ had appealed against an earlier HMRC ruling and claimed that Moyles had made a loss of £1 million selling £3,731 worth of used cars. Moyles paid £95,000 to enter the scheme Moyles did not give evidence directly to the tribunal but did submit “a brief witness statement”. Judge Bishopp, described…

Ticket tout sentenced for tax evasion
Taxation / December 2013

TAXATION Live events sector   A London ticket tout had been handed a suspended prison sentence after failing to pay nearly £200,000 in tax. Donald Tiffin, of Park Road, Hampton Wick, had deposits of more than £915,000 in his own bank account and a further £656,000 had been paid into his girlfriend’s account.  The 63-year-old earned the cash by selling a range of tickets and packages to events including Wimbledon, the Champions League and the 2009 British Lions tour of South Africa and HM Revenue & Customs said the 63 year old failed to pay a total of £193,000 in income tax and VAT. Tiffin had admitted two counts of cheating the public revenue. He was sentenced to two years’ imprisonment, suspended for two years, for failing to pay income tax, and to 18 months, also suspended for two years, for failing to pay VAT. He was ordered to complete 200 hours of unpaid community work and a compensation order in the sum of £193,000 was issued when he appeared at the Old Bailey.

Indie woe as more VAT loopholes spring up

TAXATION Recorded music, retail   It seems the UK government’s plans to stem the sale of VAT free CDs and DVDs in the UK faces a new challenge. With the Low Value Consignment Relief (LVCR) tax dodge loophole used by online retailers based in the Channel Islands having been closed, the Guardian revealed that The Hut was now using a warehouse in Chicago, seemingly to benefit from the tax relief that occurs when low-cost goods are sold from outside the EU into the UK. It means The Hut does not need to charge VAT on CDs or DVDs, giving it a 20% advantage over mainland sellers. One of the lobby groups that campaigned against LVCR abuse has now said that some operators are finding other ways of avoiding paying tax, but predicted that most alternative methods would be stopped by the authorities in due course too.  Independent retailers argue that the exploitation of LVCR by a small number of big mail-order firms, plus HMV and the supermarkets, helped contribute to the demise of many indie record sellers, who couldn’t compete on the high street, or transform their brands into successful mail-order businesses, because their offshore competitors had such a big…

Louisiana allows tax breaks for Superfest
Live Events , Taxation / July 2012

TAXATION Live events industry   Louisiana has passed a law to allow the Baton Rouge city-parish to be able to provide a local tax break to keep the Bayou Country Superfest at Louisiana State University’s Tiger Stadium for years to come. The authorization came as Gov. Bobby Jindal signed Senate Bill 475 into law –  passed during the just-ended 2012 legislative session. Bayou Country Superfest promoters would be able to get a tax rebate that amounts to about a $300,000 loss in local sales tax revenue for entertainment events that take place in a large venue, for which only LSU’s Tiger Stadium fits the definition. The tax break would be performance-based where average attendance at events has to be at least 25,000. The rebate would be on ticket sales and parking charges associated with the event. Tickets for the recent Memorial Day weekend event ranged from $50 to $250 a day. City-parish officials originally sought a state tax break too but that provision got stripped during the legislative process. SB475 sponsor state Sen. Yvonne Dorsey-Colomb, D-Baton Rouge, said the concerts have been profitable for LSU and bring thousands of country music fans to the area where they spend money. During…

UK tax avoidance scandal reaches Take That
Artists , Taxation / July 2012

TAXATION Artistes   TAKE THAT became the latest celebrities caught up in the UK’s tax avoidance scandal after PM David Cameron said yesterday he would look into a £480million investment scheme used by some band members. The Prime Minister also lashed out at comedian Jimmy Carr, branding his tax avoidance “morally wrong”. Carr has subsequently apologised for investing in the contentious scheme known as K2 after it was revealed that he had paid £3.3million a year into a Jersey-based fund which cut his tax bill to just 1per cent by loaning him money back. Now an investigation has found that Take That stars Gary Barlow, Howard Donald, Mark Owen and their manager Jonathan Wild ploughed £26 million into a music investment partnership run by Icebreaker Management which enables them to cut their tax liability dramatically. Over 1000 people contributed £480m to 62 music industry partnerships that Her Majesty’s Revenue and Customs (HMRC) claim act as tax shelters. Some commentators have called for Gary Barlow to be stripped of his recently awarded OBE if the claims are true. Lily Allen reportedly said “how are tax avoiders the moral equivalent of benefit cheats? Surely they’re a hundred times worse”

Channel Isles to fight on over VAT reforms
Taxation / April 2012

TAXATION Retail CMU Daily reports that the long running campaign to close the VAT loophole that gave mail-order CD sellers based on the Channel Islands an unfair advantage over mainland retailers is facing its final hurdle as legal representatives for Jersey and Guernsey try to fight the UK government’s plan to end the tax arrangement through the courts. Highlight the fact that any such move would radically increase the admittedly low unemployment rate on the islands and that back-end providers such as Indigo Starfish (who service Amazon) and will simply move to other tax free havens, the first attempt has already failed in the High Court. The relevant taxation exception, the Low Value Consignment Relief (LVCR), meant that companies could sell products under £18 (or more recently £15) by mail-order from outside the EU into the UK without charging Value Added Tax. The tax dodge was originally set up because the quantity of such sales was so low, and the cost of administering the collection of the VAT was relatively high, meaning HMRC would potentially lose revenues. High Street retailers such as HMV have long campaigned against the Relief. An appeal against Mitting J’s decision is being considered.

Exotic dancers fees are dramatic performances for tax purposes
Artists , Licensing , Taxation / April 2009

LICENSING / TAXATION Artists ARTICLE LINK:  A US judge has held that pole dancing does constitute a dramatic or artistic performance and thus cover charges imposed by an Albany-area strip club are not subject to state sales taxes. Administrative Law Judge Catherine M. Bennett determined that Nite Moves in Latham, N.Y., qualifies for the “dramatic arts” sales tax exemption under state Tax law 1105(f)(1) after reviewing DVDs of exotic dancers, including material taken from the Internet site, and hearing testimony from a University of Maryland dance scholar. The article in full can be found at

FKP Scorpio Konzertproduction Gmbh v Finanzamt Hamburg-Eimsbüttel ECJ C290-04
Artists , Live Events , Taxation / November 2006

TAXATION Artists, Live Music Industry In May 2006 Advocate General Leger expressed his opinion in the case of FKP Scorpio Konzertproduktion. Scorpio, a German concert promoter, contracted with a Dutch tour promoter in 1993 for performances by American and European artists in Germany. Scorpio did not pay any German withholding tax and the tax authorities raised a massive tax assessments because of breach of of the German Einkommensteuergesetz (Income Tax Law). The Bundesfinanzhofraised four questions to the ECJ: (1) is it correct that non-residents fall under a withholding tax, and residents not; (2) does the withholding tax at source need to be reduced because of the expenses of the non-residents, because residents only pay tax on their net income after the deduction of expenses;(3) can an exemption provided for in a tax treaty be used without the explicit approval of the domestic tax authority; (4) do the answers to these questions also apply to artists and sportsmen living outside the EU? The Scorpio case attacks the artist tax system more explicitly than theGerritse case and the German tax authorities have already allowed organisers of performances to postpone the payment of the withholding tax for non-resident artists AG Leger opined that neither the procedure of deducting tax…

Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften ECJ C386-04
Live Events , Taxation / November 2006

TAXATION Live Event Industry This case concerns an Italian non-commercial foundation which provides education for classical music students. The institution is exempt from the Italian l’imposta sul reddito delle persone giuridiche (Corporation Tax) and comparable German institutions would be exempt from the German Körperschaftssteuergesetz (Corporation Tax Law). The Centro di Musicologia Walter Stauffer had rental income in Germany which was taxed under a of the German KStG but could not make use of the exemption for cultural institutions, because it was not based in Germany. The German Bundesfinanzhofhas raised the question to the ECJ, whether this exclusion for non-resident institutions is correct under the EC Treaty as an Italian institution would suffer tax on income whereas as comparable German institution would not. The European Court of Justice (Third Chamber A. Rosas, President of the Chamber, J. Malenovský, S. von Bahr, A. Borg Barthet and U. Lõhmus (Rapporteur), Judges) decided that the fact that the tax exemption for rental income applies only to charitable foundations that are resident in Germany places charitable foundations resident in other Member States at a disadvantage and may constitute an obstacle to the free movement on capital. Thus in principle the legislation constitutes a prohibited restriction on the free movement of capital. Accordingly, the ECJ decided…

Centro Equestro de Leziria Grande Lda ECJ C345-04
Live Events , Taxation / November 2006

TAXATION Live Event Industry The case of Centro Equestro de Leziria Grande Lda concerns German Einkommensteuergesetz (Income Tax Law) and the very strict application of tax refunds for non-resident artists. The German tax authorities have created theVereinfachtes Erstattungsverfahren (Simplified Tax Refund Procedure), but only expenses that are directly connected with the performances are taken into account and these expenses need to be more than 50% of the earnings. Applications are only considered when the original invoices are attached. The procedures are somewhat complex and not widely used. The Portugese company Centro Equestro de Leziria Grande wanted to make use of the procedure because it had paid 29% withholding tax on the fees for its 11 horse shows in 1996 in Germany and had calculated post-tour that the total expenses (both direct and indirect) had been higher than the gross earnings. One of the horses had died during the German tour, giving an additional depreciation for the book value of the animal. The German Bundesamt für Finanzen (Tax Office) rejected the application for a full tax refund because the indirect expenses were not accepted. The Bundesfinanzhof raised the question to the ECJ, whether this strict procedure is correct under the EC Treaty, because German resident artists and sportsmen are taxed…

US tightens up on non-resident taxation
Artists , Live Events , Taxation / November 2006

TAXATION Arists, Live Music Industry Audience (issue 80, October 2006) reports that the US Internal Revenue Service may ask bands to withhold thirty percent of tax on tour personnel as well as on their own artist earnings. This comes at a time when venues and promoters are being told they may be held liable for taxation if a non-resident artist has not filed a Central Withholding Agreement (CWA). The IRS has published a new guidance, Non-resident alien US income and payroll tax responsibilitieswhich now provides for a direct responsibility to withhold 30% of tax on tour personnel. Whether or not this offends international bi-lateral tax treaties may have to be tested in the US courts but the IRS maintain that without a CWA tour personnel may have a US tax liability and the withholding tax is in place to collect this. Tour personnel could then apply for a tax refund under the US system utilizing relevant double taxation treaties. Audience (issue 80, October 2006)

UK opera house wins major tax victory
Live Events , Taxation / November 2006

TAXATION Live Music Industry Despite having a Government that professes to support the creative industries in the UK, the Treasury doesn’t seem to have read the script – and have been up to their necks in somewhat over zealous taxation activities. The Court of Appeal has now found that UK Customs & Revenue were completely wrong to strip the Gloucestershire based Longborough Festival Opera of its cultural purposes exemption – from VAT on ticket sales. Why were the Revenue so adamant that the Opera Company should be stripped of its exemption? Well – because it was because founding trustee, Martin Graham , unilaterally agreed to underwrite any losses from staging Wagner’s Ring Cycle in 2002 and 2003. This, according to the Revenue, meant that the Company was no longer run ‘voluntarily’ . To benefit from the exemption the orchestra needed to be managed and administered on a voluntary basis by persons who had no direct or indirect financial interest in its activities. The Revenue said that Mr Graham did have a financial interest – even though he was only prepared to cover losses – and didn’t want a share of any profits. The Court, thankfully, said that the Revenue were wrong. The Times 7th October 2006. 

Bournemouth Symphony Orchestra v Revenue and Customs Commissioners (2006) EWCA Civ 1281
Live Events , Taxation / November 2006

TAXATION Live event industry However, it wasn’t all doom and gloom for the Revenue – in another case they managed to get the Court of Appeal to agree that the Bournemouth Symphony Orchestra should be stripped of its cultural exemption for VAT on ticket sales – because a salaried MD sat on the board of trustees – an a wholly negative and unsatisfactory decision for the cultural and creative industries and indeed the live music industry in the UK. The Court held that as the affairs of orchestra were managed by a managing director who was paid a salary to administer the affairs of the Orchestra and was a member of the Board of Directors: this meant that the orchestra’s business was not managed and administered on a voluntary basis for the purposes of Note 2 to items 1 and 2 inGroup 13 of Schedule 9 to the Value Added Tax Act 1994. Lloyd LJ said that managing director’s remuneration and participation in decision making process of the orchestra made it impossible to say that the management and administration of the orchestra was conducted on an essentially voluntary basis. The Independent 19 October 2006.  

Dutch taxation of nonresident artists & athletes to end
Artists , Live Events , Taxation / November 2006

TAXATION Artists, live industry ARTICLE: by Dick Molenaar, All Arts Tax Advisors The Dutch government has decided to abolish the taxation of non-resident artistes and sportsmen per 1 January 2007. This radical change attracts special attention, because the Netherlands has the right to levy a source tax from non-resident artistes and sportsmen under 74 of its 78 bilateral tax treaties, in which it follows Art. 17 of the OECD Model closely. But the government believes that the tax revenue from this special group of taxpayers is too low and the administrative burden is too high to justify a source taxation. The Netherlands prefers that only the residence country levies tax from their international performing artistes and sportsmen. This is an important deviation from the recommendation by the OECD in Art. 17 of the Model Treaty, in which the primary taxing right has been allocated to the country of performance. Earlier change in 2001 In 2001 the Netherlands already changed its taxation from non-resident artistes and sportsmen by allowing the deduction of expenses prior to performances and accepting normal income tax returns after the year. The Netherlands did not want to follow the recommendation of § 10 of the Commentary on…

UK ’s Special Commissioner extends relief for agent’s fees
Artists , Taxation / July 2006

TAXATION Artists In the United Kingdom the Inland Revenue has traditionally allowed tax relief for agents fees up to 17.5% of annual income for actors, musicians, singers, dancersand theatrical performers. But the Revenue argued that relief did not extend to television presenters who did not fall into any of the categories allowed. Channel 4 husband and wife presenters Richard Madeley and Judy Finnegan claimed this was wrong and the Special Commissioner agreed with them as he felt that they were theatrical performers. However the decision has left a rather large grey area over vwho is and who isn’t an entertainer – Chris Tarrant, presenter of Who Wants To be A Millionaire is said to be ‘borderline’ as he merely reads out questions and gives answers – perhaps he is not ‘entertaining enough’ – whereas Anne Robinson, acerbic presenter of the Weakest Link is ‘theatrical’ (and so can claim relief’) as can Jeremy Paxman when presentingUniversity Challenge. However the extent of the relief on the cost of agents for those not named as ‘actors, musicians, singers, dancers and theatrical performers’ in an employed situation (which could include DJs and sportsmen and women) is still unclear. The Times June 10 th 2006

US composers to get tax relief on catalogue sales
Artists , Taxation / July 2006

TAXATION Artists. Composers Starting next year, composers will be able to claim capital-gains treatment when they sell a catalogue of their work. Current tax law treats such a sale as income and therefore liable to ordinary income-tax rates. This brings writers and composers into line with producers who already had the more favoured tax treatment. Originally called the Songwriters Capital Gains Tax Equity Act, later dovetailed into the Tax Reconciliation Act, the bill was passed after unusual lobbying from musicians who would take their guitars to Washington and sing songs to members of Congress and the US Senate. Buyers of catalogues are also now able to write off the song more quickly. The Bill is expected only to cost US $33 million over ten years. Tax on royalty payments remains unchanged by the new Act.

Agassi: Game, set and match to the Revenue by Euan Lawson, solicitor
Artists , Taxation / June 2006

TAXATION Artists ARTICLE André Agassi lost his long-running legal battle with the Revenue yesterday.  By a 4 to 1 majority, the House of Lords overturned the earlier Court of Appeal decision and ruled against Agassi in his contention that he had no personal liability to UK income tax in respect of certain endorsement income relating to appearances at tennis tournaments (including Wimbledon) in the UK. Agassi, who is neither resident nor domiciled in the UK, traded through a personal services company, Agassi Enterprises Inc., a company controlled by himself and incorporated in the USA.  It received endorsement payments from Nike Inc. and Head Sports AG (neither of which had a tax presence in the UK). Agassi had argued that, even though a portion of the endorsement payments could be directly connected with his performance at tennis tournaments in the UK, he had no tax liability because the relevant legislation provided that his liability to tax was contingent on the payers being subject to a UK withholding obligation.  Since the payers had no tax presence in the UK, they could have no withholding obligation because of the so-called “territoriality principle” which states that, unless the contrary is either expressly stated or…

New book looks at the taxation of international performing artists
Live Events , Taxation / March 2006

TAXATION Live Music Industry A new book, Taxation of International Performing Artists by Dick Molenaar, investigates the taxation of international performing artists in Europe. Published by the International Bureau for Fiscal Documentation, the book makes it clear that the tax rules for international performing artistes are very different from normal tax rules. For instance, taxation occurs in the country of performance, regardless of whether an artiste is self-employed or an employee. The book considers the problems regarding, for example, the determination of taxable income and the non-deductibility of expenses and tax credits in the country of residence, and gives current examples of excessive taxation. Recent cases before the European Court of Justice have led to awareness of some fairly dubious practices promulgated by fiscal authorities and the author is active in campaigning against restrictive (and often illegal) taxes on the music industry in European Union member states such as Germany. Published by IBFD Publications BV. See Music Law Updates News Archive December 2004 for details of three recent cases at the European Court of Justice: FKP Scorpio Konzertproduktion (C-290/04), Centro Equestro de Leziria Grande Lda. (C-345/04) and Centro di Musicologia Walter Stauffer (C-386/04) . Also see IQ magazine

Does European decision herald true pan-European tax accounting?
Artists , Live Events , Taxation / May 2005

TAXATION Artists, Live Concert Industry Marks & Spencer Plc v Halsey (Inspector of Taxes) European Court of Justice C446-03- The Advocate General of the European Court of Justice had held that UK tax law, which allows group tax relief for losses in the UK only and does not allow a firm to deduct the losses of foreign subsidiaries, is in breach of EU law. Miguel Poiares Maduro, recommended that Marks and Spencer be allowed to offset losses made at its foreign subsidiaries against its tax burden in Britain. He said British tax law was in breach of EU law by refusing to allow companies to offset tax losses from overseas subsidiaries against British profits. “The principle of territoriality cannot justify the current restriction” he said adding that a blanket restriction on this practice far exceeds what is necessary to protect the cohesion of the British tax system. The advocate general said the only condition should be that losses from foreign units would not also receive fiscal benefits in the states abroad. Germany, France, the Netherland, Greece, Finland and Sweden all backed the UK Government’s position fearing they will have to repay billions of Euros if the court finds in favour of Marks &…

EU Council of Ministers recognises withholding tax problems
Artists , Live Events , Taxation / April 2005

TAXATION Artists, Live Industry The EU Council of Culture Ministers has decided to “solve the obstacles caused by the taxation of mobile artists”. They have included this item as Paragraph 5 of their Work Plan for 2005-2006. Dick Molennar, a Dutch tax advisor with All Arts Tax Advisors commented that “this is an important step forward, because the EU now recognizes officially the issue of taxation of international artists as a problem to be solved. The Dutch Ministry of Culture has been very active during the Dutch presidency of the European Union (July – December 2004) to push this decision through. We hope that the English presidency of the EU (July – December 2005) can develop this subject further.” German Tax expert Dr Harald Grams and Mr Molennar chaired a EU conference in Rotterdam in October 2004, that made the recommendation for the EU Council of Culture Ministers to progress in this manner and both are members of the International Live Music Conference (ILMC) Tax Working Group.

Three new tax cases are to be heard by the European Court of Justice
Artists , Taxation / February 2005

TAXATION Artists After a success for the live music industry in the case of the 2003 Arnoud Gerriste in Germany there are now three new tax cases pending before the European Court of Justice (ECJ) regarding the taxation of non-resident artists. The industry has long argued that German withholding tax laws are unfair to non-resident touring and performing artists, particularly where these artists are EC citizens. In all three cases, the German Bundesfinanzhof (Federal Fiscal Court) has raised preliminary questions to the ECJ as to whether German taxation of non-resident artists is in accordance with the EC Treaty. The Geriste case held that Article 49 and 50 of the EC Treaty (previously articles 59 and 60) precluded a national provision which, as a general rule, taxed non-residents on gross income without allowing for the deduction of business expenses whilst allowing residents to deduct such expenses before a tax on net income. The case also held that a fixed rate of 25% was allowable on non-residents provided this would not be a different taxation rate to residents taxed on a progressive scale but on net income. However the decision has only been partially applied by Germany in its legislation while other countries, such as France, Spain, Italy,…

Court of Appeal hold no taxation without residence Agassi v Robinson (Inspector of Taxes) (2004)
Artists , Taxation / January 2005

TAXATION Artists, Sponsorship The Court of Appeal has held that income tax was not chargeable on a proportion of Andre Aggasi’s sponsorship payments made by a non-resident company to the sportsman’s own company which had no UK tax presence. In overturning the decision of Lightman J the Court of Appeal applied the decision of the House of Lords in Clark v Oceanic Contractors Inc (1983) 2AC 130 that there was a general presumption in UK law that a taxing statute did not have an extra territorial effect. The Court of Appeal acknowledged that Mr Agassi visited the UK each year to play tennis tournaments and that his company received payments from sponsors which derived in part from his playing at those tournaments. The Court held that whilst at first look two sections of the Income and Corporation Taxes Act 1988 might apply to Mr Agassi in fact neither did. Section 18 which imposed a charge irrespective of the recipients residence but could not apply as the payments were made not to the recipient but his company. Sections 555 and 556 of the Act (when taken together with the Regulation 7(2) of the Income Tax (Entertainers and Sportsmen) Regulations 1987) provided that any activity, however transient, would…

Tennis Star’s Court of Appeal hearing will have important ramifications for the international live tour business
Taxation / December 2004

TAXATION All Areas Andre Agassi has launched an appeal against the Inland Revenue in the United Kingdom in a case which will have implications across the sporting and entertainments worlds. The tennis star is fighting an Inland Revenue decision to allocate a taxable charge against some of his sponsorship income even though he is a foriegn national and the monies were paid to him outside of the UK by a non resident sponsor. The Inland Revenue deemed that some of the income from the sponsorship must be attributable to tournaments and public appearances made in the United Kingdom. The High Court (Mr Justice Lightman) has already rejected his challenge against the assessment of a tax payable of 250 (E40,000 approx) in respect of payments from Nike and Head even though neither company had a tax presence in the UK. The High Court ruled that the payments, made in the 1998/99 tax year, fell within the provisions of the Income and Corporation Taxes Act 1988 and supported the Inland Revenue assessment on the basis that at least part of the payment was derived from time Agassi spent at tournaments in the UK including the Wimbledon grand slam event. The Court of Appeal…

New Pension Law Revisions in Italy Challenged by Ballet Stars
Artists , Taxation / December 2004

TAXATION Artists Italian ballet stars have threatened to strike if proposed reforms to pension laws mean they have to keep working until normal retirement age. Italian dancers escaped reforms eight years ago when new pension laws designed to harmonise retirement ages excused ballet dancers allowing retirement at age 45 for women and 52 for men. The new rules would mean ballet dancers would not be eligible for pensions until at least 60 years of age post 2008. Deputies in the Italian parliament are lobbying the Parliamentary Budget Commission for amended legislation allowing ballet dancers to retire between the ages of 47 and 49. The new legislation covers dancers employed by Italy’s opera and ballet companies including dancers at La Scala and the Rome Opera House. Source: The Times 5th November 2004

Artists , Taxation / August 2003

TAXATION Artists Arnoud Gerriste Case C-234/01 12 June 2003 The European Court of Justice has paved the way for the harmonisation of EU taxation of touring artists by radically overhauling the German system of taxation of foreign entertainments. The system had long been derided by artists and their advisors and the International Live Music Conference (ILMC) has campaigned for root and branch reform of the system. The Fifth Chamber’s decision of 12 June held that with respect to foreign artist taxation in Germany: (1) foreign artists must have the right to deduct expenses prior to a performance profit being taxed (2) when profitable, foreign artists must have the right to be taxed at the normal, progressive tax rates applicable in Germany (or indeed any member state) and (3) the free taxable amount [for example a personal allowance which can be earned free of tax] is not applicable to foreigner entertainers when calculating the tax payable. The court ruled that ‘Article 49 of the EC Treaty and Article 50 of the EC Treaty preclude a national provision which, as a general rule, takes into account gross income when taxing non-residents, without deducting business expenses, whereas residents are taxed on their net income, after…

Artists , Live Events , Taxation / May 2003

TAXATION Live Concert Industry, Artists The ECJ (European Court of Justice) held on appeal that the meaning of ‘cultural bodies’ in the context of the supply of cultural services in the concert industry could extend to individual performers who would not need to charge VAT for their services. This case arose out of an appeal from the Federal Court of Justice in Germany (Bundesgerichtshof) by a German promoter against a criminal conviction for failing to account for VAT in respect of soloists engaged by him for a concert tour. The commercial nature of the activities did not preclude the services and their providers from being exempt from VAT in Germany. Reference: Criminal proceedings against Hoffman ECJ Case C-144/00