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SOUTH AFRICA: Appearance fee paid to non-resident professional golfer held to be taxable

In 1999 a UK resident golf professional participated in the Nedbank Million Dollar Golf Challenge that was held in Sun City in South Africa. The golfer granted to the organiser of the tournament the right to ?exploit the golfer?s intellectual; property in order to enable [the organiser] to promote the tournament?. The organiser paid an amount of 100.000 USD, and labelled this as a royalty. The amount was fixed and did not depend on the position achieved by the golfer in the results of the tournament. The South African tax authorities assessed the golfer on the amount, the golfer objected and went into appeal. The Court dismissed the appeal and held that the money was earned on revenue account (Decision of 4 March 2002, Case 10866, Gauteng Special Court). The appellant used the following main grounds to object the assessment: - the payment was a capital receipt; - the payment constituted a royalty and was not taxable under the 1968 South African ? United Kingdom tax treaty. The Court held that the receipt did not have a capital nature, because it cannot be said that the receipt of the money was purely fortuitous and because the taxpayer did not dispose of any asset. Regarding the application of the 1968 South African UK tax treaty the Court first cited the provisions dealing with royalties (Article 11), professional services (Article 13), artists and sportsmen (Article 15) and other income (Article 20). The Court held that for the application of the tax treaty the payment did not constitute a royalty because the golfers name, likeness etc did not fall within the SA definition of patents, trademark and copyrights and because the taxpayer did not provide evidence that he was subject to tax in the United Kingdom. [The last fact was a condition contained in Article 11 for an exemption in the source state, RB.] The taxpayer also argued that the payment was for professional services, which South Africa could only tax if the golfer maintained a fixed base in South Africa. The Court held that the golfers activities did not constitute professional services. The tax authorities apparently argued that the treaty article on artists and sportsmen applied to the taxpayer. The taxpayer held that he was not an athlete, referring to the definition of athlete in the Oxford dictionary as ?a competitor or skilled performer in physical exercise?. The tax authorities referred to a definition of Klaus Vogel: ?an athlete is generally considered to be an individual who engages in some physical activity which is exercised as an end in itself, usually in line with certain rules. (?)? The Court agreed with the tax authorities that the golfer was correctly taxed under Article 15 of the treaty. And then finally the Court held that the other income article was not applicable because the taxpayer did not provide evidence that he was subjected to tax in the United Kingdom. [Here the Court appears to have (mis)read a subject to tax condition in the other income provision, which was however not included. In this respect the other income article differed from the tax treaty provision dealing with royalties. RB]
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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

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