Cross Border Taxation of Entertainers and … border taxation of entertainers and sportsmen national...
Transcript of Cross Border Taxation of Entertainers and … border taxation of entertainers and sportsmen national...
CROSS BORDER TAXATION OF
ENTERTAINERS AND SPORTSMEN
NATIONAL WORKSHOP ON MEDIA
AND ENTERTAINMENT BY AND ENTERTAINMENT BY
COMMITTEE FOR MEMBERS IN
INDUSTRY OF ICAI, WIRC
MUMBAI
2 JUNE 2012
Isha Sekhri
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� Taxation of Resident
Entertainers and
Sportsmen outside India
Road Map
Cross Border Taxation of Entertainers and Sportsmen
� Taxation of Non-Resident
Entertainers and
Sportsmen in India
Resident Entertainers and Sportsmen
Performance outside India3
Cross Border Taxation of Entertainers and Sportsmen
Resident Entertainers and Sportsmen
performing outside India
� A large number of Bollywood and Tollywood Films are shot outside India
� Live concerts by Resident Entertainers outside India (recently Indian Singer, Sonu
Nigam, performed at Sydney)
� Sports - Cricket, Football, Hockey matches played around the globe
� Earlier, ‘Artist’ was used to denote Performers (does not include Painters, Sculptors)
Term “Entertainer” different from “Artiste” - Not defined in the Act
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� Term “Entertainer” different from “Artiste” - Not defined in the Act
� New Genre of Individuals, “Entertainers”, who may or may not act
� Common parlance, “Entertainer” means:
� One who amuses people, such as a singer, dancer, comedian, magician, etc., especially
one who does so as a profession
� One who entertains; a host
� Entertain - To engage the attention of agreeably; to amuse with that which makes the time
pass pleasantly; to divert; as, to entertain friends with conversation, etc
� Article 17 and amendment to Section 115BBA as “Entertainers” in India
Cross Border Taxation of Entertainers and Sportsmen
Judicial Precedents on Section 80RR -
Artist, Actor, Entertainer
� Amitabh Bachchan vs DCIT (106 TTJ 925) - In the context of erstwhile Section
80RR, ( which provided a deduction to income of artists, actors etc earned in
foreign exchange), on whether Mr. Amitabh Bachchan’s performance in KBC
was as an “Actor” - Held “Yes” by Mumbai Tribunal, stating:“The various meanings assigned to the term ‘artist’ by different standard dictionaries clearly show
that the term "artist" is a term which has a wide meaning not merely restricted to the meaning of
fine arts but encompasses within its scope, a skilled performer.”
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fine arts but encompasses within its scope, a skilled performer.”
� Similar issue, Mr. Sachin Tendulkar’s argument upheld that he was an “Actor”
while appearing in commercials (2011-TIOL-327-ITAT-MUM).
� CIT vs Tarun R Tahiliani (2010-TIOL-446-HC-MUM-IT) : A Designer was held to
be an “Artist”
� Harsha Bhogle vs ITO (2003-TIOL-46-ITAT-MUM) : A presenter, commentator
and programme compere of sports on television was held to be not an “artist”
Cross Border Taxation of Entertainers and Sportsmen
Judicial Precedents - Artist, Actor,
Entertainer
� Canadian Case Law - Cheek vs the Queen: The Court has provided detailed reasoning why a
radio broadcaster cannot be considered as a ‘radio artiste’ as per 1980 US-Canada Tax
Treaty stating:
“…It is obvious that athletes and sportsmen "perform" in their chosen athletic avocation; and their
performance is inherently entertaining. The fans who turn on the radio to hear a particular
Baseball game want to know how the team is performing on the field. While he may be able to
hold the attention and interest of the fans with his "down time" commentary but he is not the
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hold the attention and interest of the fans with his "down time" commentary but he is not the
reason why the fan turns on the radio.”
� Pilcom vs Income-tax Officer (2003-TII-86-ITAT-KOL-INTL) : Held that the players of the
cricket associations of the participating countries in the World Cup Cricket Tournament,
1996, should be considered as Entertainers.
� Issue : Whether the IPL can be considered has having more entertainment value than actually
being a sport? Artificially crafted teams and not all the players of Mumbai Indians are
actually from Mumbai? Rajasthan Royals? CSK?
� Article 17 of OECD Model Convention, various tax treaties and Section115BBA of the Act
apply in equal measure to both Sportspersons and Entertainers
Cross Border Taxation of Entertainers and Sportsmen
Taxability of Resident Entertainers and
Sportsmen performing outside India
� Article 17 of Tax Treaties and OECD Model Tax Convention
� Main reason for this special treatment is that top artistes and sportsmen are very mobile and
can easily move their residency to a tax havens, which levies no income tax. The OECD
believes that without Art. 17 (and the taxing right for the source country) these top artistes
and sportsmen would escape from taxation under Art. 7
“1. Notwithstanding the provisions of Articles 7 and 15, income derived by a resident of a
Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste,
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Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste,
or a musician, or as a sportsman, from his personal activities as such exercised in the other
Contracting State, may be taxed in that other State.
2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his
capacity as such accrues not to the entertainer or sportsman himself but to another person, that
income may, notwithstanding the provisions of Articles 7 and 15, be taxed in the Contracting
State in which the activities of the entertainer or sportsman are exercised.”
� Discussion draft on Article 17 Revised Commentary(issued for public comments in April 2010)
(changes proposed in red) - Recommended to substitute the term “Artiste” with the term
“Entertainer” and the term “Appearances” with “Performances”
Cross Border Taxation of Entertainers and Sportsmen
Preliminary Conditions
� Income derived from personal activities would be taxable in Country of
Performance (‘Country P’) irrespective of number of days stay in Country P.
Conditions for applicability:
� Resident of one of the contracting states (‘Country R’);
� From Performance of Personal Activities in Country P.
� As per the thesis of Mr. Milan Matijevic, set of criteria:
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� As per the thesis of Mr. Milan Matijevic, set of criteria:
� Must be a performance;
� Performance should be in public, i.e. directly before an audience or recorded and
later reproduced for an audience;
� Predominant element of the performance must be artistic and entertaining (level is
irrelevant);
� Performer by himself / herself should be the direct or indirect reason why the
audience is listening to or watching the performance.
Cross Border Taxation of Entertainers and Sportsmen
Meaning of Artiste and Sportsmen
� No precise definition of “artiste” - Theatre, motion picture, radio or television artiste, or
musician, stage performer, film actor, former sportsman in TV commercial
� Who acts as such even for a single event
� One time appearance in a movie or a Amatuer winning a Sports Prize
� Does not include:
� Visiting conference speaker : former politician as a Speaker, a model presenting clothes
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� Visiting conference speaker : former politician as a Speaker, a model presenting clothes
during a fashion show, support staff
� Cameramen, producers, film directors, choreographers, technical staff, road crew
� No precise definition of “sportsmen”
� Not restricted to traditional athletic events (e.g. runners, jumpers, swimmers)
� Also covers, golfers, jockeys, footballers, cricketers, tennis players, racing drivers
� Income from certain other activities of an entertainment character
� Billiards and snooker, chess and bridge tournaments
� Merely reporting of an event is not covered
Cross Border Taxation of Entertainers and Sportsmen
Income covered by Article 17
Income covered by Article 17 Income covered by other Articles
Directly or indirectly related to performance,
irrespective of the payer
No direct link between the income and the
performance of activities
Income of agent received on behalf of Individual Income of agent arranging appearance
Sponsorship and Advertising fees, if related to
performance (Wearing Logo during Match)
Sponsorship and Advertising fees, if not related to
performance
Income from image rights ie name, signature or Income from image rights ie name, signature or Income from image rights ie name, signature or
personal image, if related to performance
Income from image rights ie name, signature or
personal image, if not related to performance
Income from Merchandising, if related to
performance
Merchandising income derived from sales not related
to performances- Article 12 or Article 7
Income from preparation and training, regardless of
whether or not related to performance
Payments received in the event of the cancellation
of a performance - Article 7
Payments for simultaneous broadcast of
performance, benefiting Entertainer / Sportsman
Income from restrictive covenants, (an agreement, a
legal obligation imposed) to do or not to do
something - Article 7
Having Entertainment character, even if activities
are of political, religious or charitable nature
Cross Border Taxation of Entertainers and Sportsmen
Other provisions
� Dual Role : Mr. Subhash Ghai - appearance in most of his movies
� Actual nature of activities
� Activities predominantly of performing nature, apply to all resulting income
� Performing element is a negligible part, whole income will fall outside the Article
� In other cases ,an apportionment should be necessary
� Applicable regardless of the Payer
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� Applicable regardless of the Payer
� Performance as an Employee of the Company, receiving annual salary
� Country P entitled to tax proportionate salary corresponding to the performance
� Member of orchestra paid salary and not payment for each separate performance
� Tax proportion of musician's salary which corresponds to performance
� Employed by one person company, Country P may tax proportionate remuneration
� Domestic laws “look through” entities and treat income accruing to individual: Country P
can tax income accruing in the entity for individual's benefit, even if not actually paid
as remuneration to the individual (eg Brad Pitt’s company receiving income for his benefit)
Cross Border Taxation of Entertainers and Sportsmen
Examples
� A cyclist employed by a Team, required to travel with the team, appear in public press
conferences , participate in training activities and races in different countries. Paid
fixed annual salary plus bonuses based on race results.
� Allocate the salary based on number of working days during which he is present in each State
performing employment-related activities (e.g. travel, training, races, public appearances)
and allocate bonuses to where the relevant races took place.
Organiser of a football tournament holds all IPR in the event and receives payments
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� Organiser of a football tournament holds all IPR in the event and receives payments
for broadcasting rights - Article 17 is not applicable to income and also to any share
of these payments distributed to participating teams. Depending on legal nature, may
constitute royalties covered by Article 12.
� Indian Cricket Team goes to Australia to play a series and fly in 3 weeks in
advance to practice on the ground- Taxability of income from practice sessions?
� It will be appropriate to allocate that salary or remuneration on the basis of the
working days spent in each State in which the entertainer or sportsman has been
required, under his employment contract, to perform these activities
Cross Border Taxation of Entertainers and Sportsmen
Computation of Income
� Computation of Income under Article 17
� Article does not provide for Computation of income
� Country P’s domestic law - deductions for expenses
� Domestic laws differ - Taxation at source, gross based taxation, low rate
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Cross Border Taxation of Entertainers and Sportsmen
Income accruing to other persons
� Income accrues to another person and Country P does not look through the person
receiving the income to tax it as income of the Individual, as per Paragraph 2,
portion of income which cannot be taxed in the hands of the Individual, may be
taxed in the hands of the other person receiving it
� Business Income may be taxable even in the absence of a PE in Country P
� Three situations:
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� Management company receives income for appearance of a group (not constituted as a
legal entity)
� Team, team, troupe, orchestra, etc., constituted as a legal entity
� Income for performances may be paid to entity
� Individual members liable to tax under Paragraph 1
� Profit element of legal entity under Paragraph 2
� Entertainer / Sportsman Company (Neither as personal activities or business income)
� Taxable under Paragraph 2 (Individual and Star Company may be residents of different States)
� If Country P Looks Through, taxable under Paragraph 1
Cross Border Taxation of Entertainers and Sportsmen
Article 17(2)
� Article 17(2) not applicable :
� Prize money of owner of horse or race car since not related to personal activities of the
jockey or race car driver
� Income of enterprises involved in production of entertainment or sports events.
� Income of independent promoter of concert from sale of tickets and allocation of advertising space
� Same income should not be taxed twice through application of these two paragraphs
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Same income should not be taxed twice through application of these two paragraphs
� Paragraph 2 : Star-company on payment with respect to activities performed by the
Individual; and
� Paragraph 1 : Part of remuneration paid by Company to the Individual, attributed to
activities.
� Depending on domestic law of Country P, tax only the company or Individual on the whole
income attributable to activities or tax each of them on part of the income, e.g. by taxing the
income received by the company but allowing a deduction for the relevant part of the
remuneration paid to the Individual and taxing that part in the hands of the Individual
Cross Border Taxation of Entertainers and Sportsmen
Article 17 - Paragraph 2
� Profit element accruing from a performance to legal entity liable to tax
� Example 1 : I Co pays Brad Pitt’s Company USD 10 Million for
performance in India; Company pays Brad Pitt USD 9.50 Million - amount
taxable in under Article 17?
� USD 9.5 Million in the hands of the Entertainer
USD 0.50 Million in the hands of the Company
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� USD 0.50 Million in the hands of the Company
� Example 2 : American Sports Company sends group of eight sportsmen to
India for playing at a football tournament
� Sports Company receives USD 10 million from I Co and pays USD 8 million to
the sportsmen as remuneration
� Expenses of Sport Company in relation to football tournament USD 0.50 Million
� Profit of the Sports Company USD 1.50 Million - Taxable under Article 17(2)
Cross Border Taxation of Entertainers and Sportsmen
Article 17(2)
� Peculiar India-Australia Treaty
� Australian Cricketer’s Management Company receives the income on his behalf
� Article 17(2) gives the impression that Management Companies of only
Entertainers are covered ie Management Companies of Sportsmen may not
covered by Article 17(2) and hence not taxable
“ARTICLE XVII - Entertainers - 1. Notwithstanding the provisions of Articles 14 and 15,
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“ARTICLE XVII - Entertainers - 1. Notwithstanding the provisions of Articles 14 and 15,
income derived by residents of one of the Contracting States as entertainers, such as
theatre, motion picture, radio or television artists, musicians and athletes, from their
personal activities as such exercised in the other Contracting State, may be taxed in
that other State.
2. Where income in respect of the personal activities of an entertainer as such accrues
not to that entertainer but to another person, that income may, notwithstanding the
provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the
activities of the entertainer are exercised
Cross Border Taxation of Entertainers and Sportsmen
Non-Resident Entertainers and Sportsmen
Performance in India18
Cross Border Taxation of Entertainers and Sportsmen
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Residential status - Period of stay in India (not only shooting, including promotion and practice sessions)
Taxation of Non-Resident Entertainers
and Sportsmen in India
Rate of tax not provided in the treaty - Taxable at rates under the Act
Cross Border Taxation of Entertainers and Sportsmen
Rates of withholding taxes
Section 115BBA r.w. Section 194E
Taxation in India – Amendment in Section
115BBA by Budget 201220
� Income of :
� Sportsman, Non-Resident and not a Citizen of India, includes any income from:
� Participation in India in any game (other than lotteries, puzzles, gambling) or sport;
� Advertisement;
� Contribution to Articles relating to any game or sport in India
� Non-Resident Sports Association or Institution, includes:
Cross Border Taxation of Entertainers and Sportsmen
� Any amount guaranteed in relation to any Game or sport played in India
� An Entertainer, NR not a Citizen of India, includes any income from:
� Performance in India
� Income-tax payable at the rate of 20% (Gross Based Taxation)
� No deduction of expenses
� Not necessary to file return of income in India, if:
� No other income in India other than Section 115BBA; and
� Appropriate taxes withheld at source
Amendment Impact
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� Does not cover cases of when income accrues to a person other than the
Entertainer / Sportsman as per Article 17(2)
� Continue to be taxed as per normal income tax provisions
� Withholding taxes - Section 194E
� With respect to Income specified in Section 115BBA, taxes to be withheld at the rate
of 20%
Cross Border Taxation of Entertainers and Sportsmen
of 20%
� Section 115BBA applicable from 1 April 2012
� Section 194E applicable from 1 July 2012
� Withholding taxes in the interim for one month
� Better view at the rate of 20%
Circular 787 dated 10.02.2000
Scenario Taxability
i. If the artist performs in India gratuitously, without any
consideration, or performs in India to promote sale of his records
but no consideration is paid for the performances by anyone.
ii. Consideration received by artist for live performance and/or
simultaneous live telecast or broadcast in India.
iii. Consideration received to acquire copyrights of performance in
No Tax
Taxable in India / Article
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iii. Consideration received to acquire copyrights of performance in
India for subsequent sale abroad (of records, CDs etc) or
consideration to acquire license for broadcast or telecast
overseas.
iv. Consideration to acquire copyright of performance in India for
subsequent sale in India or consideration to acquire license for
broadcast or telecast in India.
v. Endorsement fees which relates to artist’s performance in India.
Not taxable in India u/s.
9(1)(vi)
Taxable in India u/s. 9(1)(vi)
/ Article 12 - Royalties
Taxable in India u/s. 5 /
Article 17
Cross Border Taxation of Entertainers and Sportsmen
Sportsmen
� Foreign players who become residents during the year?
� If two series are played in India, possibility that players may become tax
residents of India
� Section 115BBA not applicable since only applicable to NR sportsmen
� Section 194J applicable
Required to file return of income
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� Required to file return of income
� Taxable as per normal Income-tax provisions
� Can claim deduction for expenses
� Payments already made under Section 115BBA for part of the year?
� Rate of different under both Section 115BBA and Section 194J
� In case the Deductor is aware that the Sportsman would become resident during
the year, should taxes be withheld under Section 194J?
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 1
� Akon, an American singer visited India for live stage performances, hosted in 3 cities
in a span of 15 days, organised by a Foreign Management Company (‘F Co’) and
in India by Indian Event management Company (‘I Co’)
� Remuneration - Rs. 2 crores paid by I Co
� I Co released a compilation of audio and video CDs / DVDs the Concert, released
globally by an XYZ Music Company, an Indian Company and remuneration paid
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globally by an XYZ Music Company, an Indian Company and remuneration paid
was Rs 1 crore on acquiring rights by XYZ Music
� Guest Appearance on Indian Idol, remuneration of Rs 50 lakhs
� Payment of Commission to F Co - Rs 20 lakhs
� Taxability if I Co directly made the entire payment to F Co
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 1
� Remuneration for performance
� Section 115BBA
� Acquiring rights by XYZ Music
� Circular 787 - Subsequent Sale abroad not taxable and subsequent Sale in
India taxable
XYZ Music Company to release it globally
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� XYZ Music Company to release it globally
� Rs 1 crore to be apportioned between India and other than India
� Guest Appearance on Indian Idol, remuneration of Rs 50 lakhs
� Section 115BBA
� F Co’s income not taxable in India (Wizcraft decision)
� If I Co made the entire payment to F Co:
� F Co could be taxable on portion of Akon’s remuneration in India under Article
17 and not covered by Section 115BBA
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 2
� Mr. Micheal Barboza (Brazil Resident), contracted by UK Club to play in IPL in India,
Sri lanka and China
� Play-off matches in India, Sri Lanka and China (to be played over 3 weeks) and
final match in India, with two matches played in a week, training only in India
� Income of the Club - Prize money for winning IFL- Rs. 50 lakhs (50% to be
distributed among players)
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distributed among players)
� Income of Mr. Micheal Barbosa
� Monthly compensation - Rs.2 lakhs (including time spent in training)
� Player of the Series - Rs.10 lakhs
� Share of Prize money for winning IFL (50%) Rs 25 lakhs
� Nike promotion fees for wearing gear:
� Rs. 2 lakhs: during matches
� Rs. 5 lakhs: during public appearances
� Rs. 25 lakhs for guest appearance in a Bollywood movie
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 2
� Income of Mr. Micheal Barbosa
� Monthly compensation - Rs.2 lakhs
� Attributable to India activity taxable u/s 115BBA at the rate of 20% on gross basis
� Player of the Series - Rs.10 lakhs
� Since player of the Series, Portion of the Player of the Series award attributable to India,
taxable u/s 115BBA at the rate of 20% on gross basis
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taxable u/s 115BBA at the rate of 20% on gross basis
� Share of Prize money for winning IPL
� Whether merely because Final match played in India is won by the Club, entire amount can
be taxable in India?
� Whether amount attributable to India fits within “income earned by way of participation in
any game” u/s 115BBA?
� Rs. 25 lakhs for guest appearance in a Bollywood movie
� Taxable under Section 115BBA as an Entertainer
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 2
� Income of Mr. Micheal Barbosa
� Nike promotion fees for wearing gear:
� Rs. 2 lakhs: during matches
� Directly related to performance and hence taxable under Section 115BBA
� Rs. 5 lakhs: during public appearances
� Taxable as Income from Advertisement under Section 115BBA
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Taxable as Income from Advertisement under Section 115BBA
� Income of Club
� Prize money attributable to Players would be taxable under Article 17(2)
� Prize of the Club (50%) Rs 25 lakhs payment under Article 7
� The Club is not a Sports Association, prize money not covered u/s 115BBA
� Taxable in India on net basis under normal provisions
� Other views?
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 3
� Mr. LB, a South African cricketer
� During FY 2011-12, played matches in Indian Premier League 2012
� Participating in FY 2012-13, as a fielding coach
� Dashing Sports Ltd - a US Company, acquires world-wide rights from LB to
use his face, name and character in “Indian Premier Gaming League 2012”
animation game
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animation game
� LB has advertisement agreement with I Co.
� Advertisement would be for Indian products
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 3
� Taxability of Income from IPL
� Same as per principles outlined in Case Study 2
� Income as a player covered under Art. 17
� Income as a coach
� Covered under Art. 14
May not be taxable if threshold period not crossed
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� May not be taxable if threshold period not crossed
� Taxability of Advertisement Income
� Section 115BBA
� Taxability of Gaming Rights
� Whether celebrity rights covered under IPR?
� Whether taxable under Article 17 or 12?
� Applicability of Section 115BBA
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 4
� I Co engaged in entertainment event management and marketing
� Organised events/performances of renowned foreign artists/groups in India
� For performances of international artists in India, I Co entered into agreement
with UK agent, also acting as agent for various event management companies
� As per agreement, I Co granted limited authority to UK agent
To act on its behalf; enter into contract with artists; and ancillary acts required to be
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� To act on its behalf; enter into contract with artists; and ancillary acts required to be
performed outside India
� Apart from payment of fees to artists, I Co paid commission to UK agent and
reimbursed expenses incurred in connection with performances of artists in India
� Fee paid to artist - I Co deducted tax under Article 18 of India-UK DTAA
� Reimbursement of artist’s expenses - I Co did not deduct tax
� Commission and reimbursement to UK Agent – I Co did not deduct any tax since
UK agent had rendered services outside India and it did not have PE in India
Cross Border Taxation of Entertainers and Sportsmen
Case Study - 4
� Commission paid to the UK agent was not for services of entertainers/artists.
� The UK agent had not taken any part in the events, nor performed any activities in India.
Hence, it was not covered by Article 18 of India-UK DTAA.
� The UK agent did not have any PE in India [Carborandum Co. v. CIT, (1977)
108 ITR 335 (SC) and CBDT Circular Nos. 17 (XXXVII) dated 17.07.1953 and
786 dated 07.02.2000], commission paid to the UK agent was not taxable in
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786 dated 07.02.2000], commission paid to the UK agent was not taxable in
India and no obligation on ICo to deduct tax at source
� Reimbursement of expenses - The law is well settled that reimbursement of
expense not chargeable to tax and hence, no obligation to deduct tax at
source [DIT (IT) Vs. Krupp UDHE Gmbh (2010) 38 DTR (Bom) 251 following own
decision in CIT Vs. Siemens Aktiongesellschaft 220 CTR (Bom) 425]
� ACIT vs Wizcraft International Entertainment Pvt Ltd I.T.A.No. 3208/Mum/2003
� Reliance placed on Circular No. 786 dated 7 February 2000, which is
withdrawn on 22 October 2009 - Implications?
Cross Border Taxation of Entertainers and Sportsmen
Case Study - Marathon
� Every year Mumbai Marathon - Matter of pride to run the Marathon
� Celebrities, industrialists running for a cause
� Almost a social event
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Cross Border Taxation of Entertainers and Sportsmen
Marathon
� Winner of Mumbai Marathon 2012?
Laban Moiben, from Kenya
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� Not an Indian
Laban Moiben, from Kenya
Cross Border Taxation of Entertainers and Sportsmen
Marathon
� Africans come to India to run the Marathon
� Invited by the sponsors to run the Marathon, three situations:
� Directly - Payment made directly to the Athletes
� Through a sports association
� Through a management company� Through a management company
� Income of the athletes in India
� Participation fees
� Prize money
� Advertisement, if any
� Contribution to articles, if any
� Reimbursement of expenses
Cross Border Taxation of Entertainers and Sportsmen
Taxability in India
� Directly by Organisers
� Section 115BBA at the rate of 20 percent (plus surcharge and cess)
� Reimbursement of expenses - Discussed in Wizcraft
� Through a Sports Association
� If amount is not guaranteed?
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� If amount is not guaranteed?
� Covered by Section 115BBA?
� Through a Management Company
� Two situations:
� Own Company ie Star-Company; and
� Sports Companies
Cross Border Taxation of Entertainers and Sportsmen
Marathon
� Through a Star company
� Star company charges Organiser consolidated amount
� Makes the payment to the athlete on its own account
� One agreement between Organiser and Star Company
� Taxability
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� Star company not covered under Section 115BBA
� However, covered under Article 17(2)
� Article 17 does not provide computation or rate of taxation
� Reference to domestic law
� Payment to Star Company taxable as per domestic law in India
� No special rate or method provided, taxable as per normal provisions
� Taxability of athlete in India?
� Can a view be taken that since ultimate beneficiary is the athlete, Section
115BBA should be applicable?
Cross Border Taxation of Entertainers and Sportsmen
Marathon - Through a Sports management
company (‘SMC’)
� Model 1 - Mechanics
� SMC charges commission and makes payment to the athlete
� Agreement on Principal-Principal basis
� Taxability
� Athlete’s remuneration - SMC covered under Article 17(2) and not under Section 115BBA,
taxable as per normal income tax provisions
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taxable as per normal income tax provisions
� Commission taxable as business income - No PE, not taxable
� Model 2 - Mechanics
� SMC charges Organiser commission and receives payment on behalf of the Athlete
� Agreement on Principal-Agent Basis
� Taxability
� Commission taxable as business income - No PE, not taxable
� Can a view be taken that since ultimate beneficiary is the athlete, Article 17(1) r.w. Section
115BBA applicable?
Cross Border Taxation of Entertainers and Sportsmen
Way Forward
� Need of a single code for Taxation of Entertainers and Sportsmen
� Section 115BBA and Circular 787
� Article 17 changes proposed in discussion draft could be
incorporated
� Radical Changes to Article 17
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� Radical Changes to Article 17
Cross Border Taxation of Entertainers and Sportsmen