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The Netherlands have a special tax regime for foreign artists and sportsman who visit the Netherlands, for instance to give a concert or to participate in a sport tournament.
Although this special tax regime is technically part of the wage tax levy, in practice it works as a (final) withholding tax for foreign artists and sportsmen.
For non-residents the tax rate is 20%. See also below under The withholding tax rate. The 20% is due over the gross revenues, but under certain conditions deduction of costs can be taken into account upon withholding. See also below under Exclusions and The deduction of expenses.
Who qualifies for the special regime
In order to qualify for the special regime it is required that the artist is not a Dutch tax resident. For Dutch residents special rules apply.
An artist is any individual who performs in public (on stage, television, etc.) on the basis of a artistic quality. This typically includes singers, dancers, entertainers, musicians, etc. This typically excludes, lecturers, teachers, but also band technicians, back stage personnel, etc.
Individual treatment or group treatment
If the artist is the member of a group (band), special rules can apply for group treatment. These rules will only apply if at least 70% of the group members (artists) consist of non-residents.
The rules for group treatment basically provide the same regime as for individual artists, but simplified procedures apply with regard to deduction of expenses (see also below under The deduction of expenses) and other formalities to be fulfilled (see below under Other formalities).
One of the conditions to apply the special artist tax regime is that the engagement is based on an agreement of temporary duration. There is no legal definition of temporary duration, but from government publications it can be learned that this means no longer than three months.
If the engagement requires a stay in the Netherlands which exceeds this period the special tax regime may not be applicable. Instead, the normal Dutch tax rules for non-residents would apply.
It does not really matter whether or not the artist is engaged as an individual or as a company. The decisive criterion is the qualification as artist who performs in the Netherlands.
The withholding can relate to more than one concert.
In certain specific cases the special tax regime does not apply. This includes:
If the special tax regime does not apply, the normal taxation rules for non-residents apply.
Who has the withholding obligation
The withholding obligation rests with the party with whom the agreement for performance of the artist is concluded. It most cases this will be a Dutch party, such as the promoter for a concert, but it can also be a foreign party. It is emphasized that also a foreign based party can have the withholding obligation.
In case there is no agreement of temporary duration, in principle the artist himself or the band has the withholding obligation.
The withholding tax rate is 20% (2004). In exceptional cases the Dutch government may through special Decree allow a reduced rate (minimum of 15%) for a specific event or number of events.
It is noted that if certain formalities are not fulfilled or the Dutch withholding agent is provided with inaccurate or insufficient information or documentation, the withholding tax rate may increase to 52% (2004). This is the rate which usually needs to be applied to anonymous employees.
The taxable basis for the withholding tax is the total remuneration (artist fee), including costs reimbursements and benefits in kind.
However, only income which relates to the Dutch performance needs to be included. Income without a direct link to the Dutch performance (such as royalties for recordings, general sponsor contributions) are excluded from the taxable basis.
The taxable basis may first be reduced with specified exclusions. The remaining taxable basis can be reduced with qualifying expenses which are allocable to the Dutch performance.
For effectuating the deduction of expenses upon withholding (advance) approval from the tax authorities is required (see below under The cost deduction ruling).
The taxable basis does not need to include:
These reductions can be applied by the promoter without advance clearance from the tax authorities. The band has the obligation to administer expenses and provide the promoter with evidence of the expenses, like original tickets, invoices, etc.
Every artist will make expenses in connection with the performance in the Netherlands. To the extent these expenses are business like (so expenses with a predominantly private element are excluded) deduction is allowed upon withholding.
There are two alternative ways to effectuate the relief for expenses. The first way is to apply for the "small artist deduction" ( "Kleinevergoedingsregeling" or "KVR"). The other way is to apply for a "cost deduction ruling" ("kostenvergoedingbeschikking" or "KVB").
The small artist deduction will be applied automatically unless the cost deduction ruling is applied for.
The small artist deduction (KVR)
In essence every artist subject to withholding is entitled to deduction of lump sum amount. The amount of is € 136 per performance per person (2004). This is a lump sum deduction which can be applied without prior clearance from the authorities. Considering the relatively low amount of the deduction, this deduction is called the small artist deduction. ("Kleinevergoedingsregeling" or "KVR").
The cost deduction ruling (KVB)
As an alternative for the KVR, the artist or band can claim deduction of expenses which the artist had to incur for a proper performance during the concerts. This deduction requires (advance) approval from the tax inspector of the real expenses incurred (expenses already made), and expenses which can reasonable be expected (expenses to be made).
The request for the KVB can be filed with the tax authorities in advance on the basis of estimated figures. It can be filed by the artist, the leader or representative of the band, or the withholding agent (usually the promoter).
As an alternative, the request can be filed after the concert (on the basis of real figures), but then only by the withholding agent (usually the promoter) who has to file the request within one month after the concert.
The request should include personal details of the person who files the request, the members of the band, the concerts, total fee to be received, expenses already made and expenses expected to be made and an explanation of the expenses.
The application for the KVB ruling should be filed using a standard form.
The tax inspector reviews the information provided. If the tax inspector agrees he issues a ruling. This ruling should then be provided to the promoter, who is then allowed to reduce the aggregate amount of expenses from the taxable basis for the 20% withholding.
The tax inspector is allowed to revoke a ruling issued or replace an existing ruling by a new ruling either on his own initiative, or upon request of the party who filed the request for the ruling in the first place. If after the concert the real expenses appear to be higher than the budgeted expenses reported in the ruling, it is recommendable to for a second ruling. Please note that this ruling request can only be filed by the withholding agent.
In order to apply the special tax regime certain formalities need to be fulfilled. This includes:
In case the rules for group treatment apply the "Gageverklaring" does not need to specify the income of each separate group member but only the total remuneration and total amount of expense deduction. Please note that if no allocation income and expense is given in the "gageverklaring", the income/ expenses will be pro-rata allocated to the group members for the purpose of the withholding tax. This may be adjusted later on by filing a tax return (see below under The obligation to file a Dutch tax return).
If the rules for group treatment apply, the identity documents to be provided to the withholding agent can be limited to 50% of the group members. Please note however that all members of the group have the legal obligation to carry a valid identity document with them during there stay in the Netherlands.
It is noted that (1) a failure to provide the aforementioned form and documentation to the promoter and (2) the providing of incorrect or incomplete information to the withholding agent can result in a increased withholding rate of 52% (2004).
The obligation to file a Dutch tax return
The 20% tax is in principle a final tax. The artist has however the option to file a Dutch tax return after the closing of the tax year. Obviously he/she will only do this, if on the basis of the tax return a tax refund can be expected.
In the tax return the income must be computed as total income (including reimbursements and benefits in kind) reduced with qualifying expenses. The mechanism to calculate net income is comparable to the mechanism to calculate the profits of an enterprise. The tax rate is progressive and starts with 8% over the first bracket of income (2004).
For an overview of income tax rates for 2004 we refer to the page Dutch income tax rates - 2004. In particular due to the relatively low rates in the first brackets of income, it is very well possible that the artist is entitled to a tax refund.
Filing a tax return can normally speaking result in a tax refund if:
In practice it is usually worthwhile to consider the filing of a tax return, if for some reason the ruling for the deduction of expenses could not be timely obtained or if the rules for group treatment were applied, and the individual artist has a lower net income than the pro-rata share of the reported total net income of the group.
In practice the group treatment tends be favourable to the leading artist (i.e. no tax refund on the basis of an individual tax return), whilst the other band members pay relatively speaking to much tax and are in may cases able to claim a tax refund via a personal tax refund procedure.
When the artist has decided to file a tax return he/she can request the issuance of tax return form. A tax refund should be applied for within three years after the end of the tax year. The Dutch tax year equals the calendar year, unless there is a different company book year.
The Netherlands has concluded tax treaties with approximately seventy countries worldwide. These treaties usually (but not in all cases) contain a special paragraph for the tax treatment of the income of artists and sportsmen.
In most cases the foreign artist or sportsman which qualifies for the special tax regime (in particular a stay in the Netherlands of less than three months) is not subject to the Dutch social insurance system.
Foreign artists or sportsman visiting the Netherlands can be confronted with other Dutch taxes. This may in particular relate to the levy of VAT (value added tax) and the levy of corporate tax.
The VAT issues surrounding a concert or sport event are multiple and basically every party involved will somehow be confronted with it. In particular relevant for foreign based artists is that in general they are entitled to a refund of the input VAT.
The corporate tax levy, will basically only occur if one of the parties involved is a Dutch tax resident or if it concerns a foreign based party who has a taxable presence in the Netherlands. The latter does usually not occur if the Dutch activities have a very limited time frame and frequency.
For having a taxable presence a foreign company should have a permanent establishment in the Netherlands, being a fixed place of business through which the business of the company is wholly or partly carried on. Based on Dutch jurisprudence (case law with respect to a travelling circus) a permanent establishment can only be recognized when the Dutch activities (in the case at hand the concerts) have a certain frequency and duration, so that it can be said that the activities in The Netherlands are more then of an incidental nature (i.e. the permanent nature of the Dutch presence counts). Frequent in the case of the circus was explained as a having a location available for at least three months per year, which constitutes a more than incidental presence.
A permanent establishment can furthermore be recognized when the foreign company uses Dutch representatives/agents/employees on a frequent basis who have the authority to conclude contracts with promoters on behalf of the company. Again the frequency is an important factor; no frequency is considered when it concerns for example a ‘one time’ or only incidental involvement of the Dutch representative.
| Clarify the Dutch tax position of the artist or the band |
| Clarify the Dutch tax position of other involved parties such as the producer or de agent |
| Handle the procedure for the KVB ruling |
| Advise on tax planning opportunities |
| Preparation and filing of individual tax returns |
| Preparation and filing of VAT refund applications |