Free article section

You are reading a Free article. Apply for a subscription to access all the valuable information on the website Sports Law & Taxation

OECD Published Discussion Draft on Application of Article 17 of OECD Model Convention

On 23 April 2010 the OECD published a discussion draft on the application of Article 17 of the OECD Model Convention. The discussion draft deals with the following issues: - definition of sportsmen or entertainer - treatment of race prizes - personal activities of sportsmen or entertainer ?as such? - source and allocation rules - special types of payments Definition sportsmen or entertainer It is stipulated that amateurs and anyone who acts as entertainer or sportsmen is treated as such. This would e.g. also apply to a once-in-a lifetime actor in a movie. However, a visiting conference speaker (e.g. a former politician) would not be considered as an entertainer. Reporters of sports events are not treated as sportsmen, also not if they are former or injured sportsmen themselves. Treatment of race prizes Prize money received by the owner of a horse or race car is not covered by Article 17, except if the payment is received by that owner on behalf of the jockey or race car driver. Personal activities as such Clarifying which part of the income is derived by a sportsmen from acting ?as such?, is often not straightforward. The discussion draft on the one hand expands the scope of application of Article 17 by referring to income from indirectly related activities and salary related to time spent for training purposes, on the other hand it limits the application by e.g. excluding models and administrative and support staff. Source and allocation rules As general source principle it is stated that income that is directly linked with to specific activities exercised by the entertainer or sportsman in a country will be considered to be derived from the activities exercised in that country. There is no further definition of ?directly linked?. The mentioned allocation rules contain out of two examples: 1. a self employed concert singer should allocate a fixed fee by dividing that by the number of concerts given in the various countries, variable income e.g. based on ticket sales for a concert should be allocated to the country where the concert is held. 2. a cyclist employed by a team should allocate his fixed salary on the basis of the days spent (for travel, training, races, public appearances) and bonuses to the countries where the pertinent races took place. Special categories of income Prices or awards paid by national federations, association or leagues are also applicable to the rules of Article 17 of the OECD Model. Broadcasting rights and merchandising income should be covered by the rules of Article 17 if they are directly or indirectly linked to performances in a certain country. There is no definition of ?indirectly?, there only is an example re a tennis player wearing a sponsor?s logo, trade mark or trade name during a match. Broadcasting fees that are paid to third parties (e.g. the owner of the broadcasting rights such as the organiser of a football tournament) do not constitute income derived by a person as an entertainer or sportsmen as such, and are therefore not covered by Article 17. Image rights income for entertainers and sportsmen that is not connected with the entertainer?s or sportsman?s performance in a given state would generally not be covered by Article 17. Only if payments for image rights constitute in substance remuneration for activities of that entertainer or sportsman that are covered by Article 17, then Article 17 would also apply to these payments. Call for comments Comments may be send until 31 July 2010 to the OECD, to This email address is being protected from spambots. You need JavaScript enabled to view it.. See further: www.oecd.org/document/32/0,3343,en_2649_33747_45056800_1_1_1_37427,00.html COMMENT Providing clarity on the tax rules for entertainers and sportsmen is welcome. The amounts of money involved are significant and top entertainers and sportsmen earn big money in various ways. However, the number of top earners is not that substantial and also all other entertainers and sportsmen need to apply the rules. Without proper tax advice and running through time consuming and costly administrative procedures, high withholding taxes (sometime still based on the gross payment!) may still apply. The discussion draft appears to be not entirely consistent, and ambiguities still exist. For example: why exclude visiting former politicians and models and why tax once in a life time amateurs? There still is no clear definition of what is directly and what indirectly linked income is. Should it really depend on a single performance in a country to determine whether all other income potentially sourced in that income becomes subject to tax in that country? Force of attraction is excluded for permanent establishments, why should it be different for Article 17? Should salary earned during training days in a country where no performance is given really become taxable by the country? Commercially important international tournaments like the Olympic Games and the Football World Championship are generally not attributed to a country before a tax exemption for the income attached to the tournament has been provided for. Giving up chances to tax substantial amounts of money while going after the medium or low fee earners seems to be rather contradictory. A general de minimis exception could already reduce the number of affected persons considerably. It is hoped that the comments will result in a more balanced approach and clearer definitions. A reasoned opinion on the pros and cons of abolishing Article 17 by the OECD would also be welcome. In literature this abolishment has been suggested since many years by scholars such as Sandler, Grams and Molenaar.
The Journal

Global Sports Law and Taxation Reports feature: articles; comparative surveys; commentaries on topical sports legal and tax issues and documentation.

The unique feature of Global Sports Law and Taxation Reports is that this Journal combines for the first time up to-date valuable and must-have information on the legal and tax aspects of sport and their interrelationships.

TheĀ Editors

The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

The Editors

Managing editor
Dr. Rijkele Betten

Consulting editor
Prof. Dr. Ian S. Blackshaw

Editorial board

Prof. Guglielmo Maisto
Maisto e Associati, Milano

Dr. Dick Molenaar
All Arts Tax Advisors, Rotterdam

 

Mr. Kevin Offer
Hardwick & Morris LLP, London

Mr. Mario Tenore
Maisto e Associati, Milano

Address

Nolot BV
St. Jorisstraat 11
5211 HA  's-Hertogenosch
This email address is being protected from spambots. You need JavaScript enabled to view it.