The specific type of activity performed by the artist also affects which country may tax the ensuing income. This classification has its practical reasons, because some countries levy business taxes on activities other than on corporate income. Since performing and visual artists are mostly freelancers rather than employees, their income is largely liable to personal income tax rather than to corporate income tax.
The distribution of taxation rights among countries mostly depends on the type of activity pursued. For example, when an artist performs abroad, under most double taxation agreements the royalties paid to actors and dancers are taxed in the country where the performance is held, while the right to tax the director’s, producer’s or scenographer’s remuneration is vested in the country where they have their tax residence. The reason for the difference is that actors and actresses as performing artists are awarded a different tax status and treatment than artists who create physical objects, including visual artists, directors and scenographers.
The situation is made even more complex by the very nature of double tax avoidance agreements. Such treaties are customarily bilateral, i.e. entered into between two countries. It is therefore necessary to check for each country which of the provisions apply in the particular circumstances.
For interdisciplinary companies, we would therefore recommend considering different taxation models in contract negotiations in order to accomplish the most convenient solution.
Under section 3 of the Income Taxes, personal income tax is charged on the different classes of income as follows:
- Income from dependent activities (section 6) – e.g. a theatre or a gallery employee,
- Income from independent activities (§ 7) – e.g. a self-employed (freelancing) executive producer,
- Income from capital assets (§ 8) – e.g. dividends,
- Income from leases (§ 9) – e.g. rent,
Other income (§ 10) – e.g. income from the sale of real property.