When following the Masters in Augusta it occurred to us that golfers & musicians both share ‘common ground’.
All Irish tax residents working abroad must factor in ‘withholding tax’ on their winnings or live performance in most countries. Withholding tax is deducted at source from any payment to a non-resident individual.
Artistes & Athletes are twinned together in the Double Taxation Treaties and Ireland has these agreements with 74 other countries. The Treaty covers Income Tax, USC, Corporation Tax & Capital Gains Tax.
On the flip side in Ireland there is no withholding tax at source on this type of income for foreign entertainers and sports people performing here. However, they should be aware of any VAT obligations either they or their promoter may have in the Republic of Ireland.
Two countries that we regularly encounter are The United States & our nearest neighbours The U.K.
U.S.A./Ireland Double Taxation Treaty
In the United States when income is derived by a non-US resident, such as an entertainer (theatre, motion picture, radio, or T.V.), musician or sports person from their personal activities exercised in the U.S., this is taxed at source except where the amount of the gross income including expenses reimbursed to them or borne on their behalf, does not exceed $20,000.00 in the calendar year concerned. If the individual trades through a non-U.S. company the same withholding tax applies. A Form 1042 is required to declare withholding tax for a non-resident individual. Generally, every non-resident alien individual must file a U.S. Tax Return. However, no Tax Return is required by a non-resident if such a person was not engaged in a trade or business in the U.S. at any time during the tax year, and if the tax liability of such person was fully satisfied by the withholding tax at the source. Individuals who trade through a non-resident company have the same obligation and a Form 1120-F is required.
U.K./Ireland Double Taxation Treaty
Article 16 of the U.K./Irish Treaty covers withholding at source. A non-resident individual can apply for a reduced rate of withholding tax, but this needs to be done at least one month in advance of the performance or that golfing competition! The standard personal allowance in 2017/18 in the U.K. is £11,850 which is the amount of income you don’t pay tax on. If payments are more than the allowance, normally the promoter or venue will deduct tax in advance and pay to the HMRC (HM Revenue & Customs) who are obliged to deduct the basic rate of income tax in the U.K. (20%). This then becomes available as a credit against your final bill in the U.K. if relevant, or more importantly in Ireland against your Irish tax liability if you are a tax resident here.
To make a reduced payment application, you should apply by post using Form FEU8 at least 30 days before the payment is due. An application is needed for each tour or visit to the U.K. if playing sport. The application must include various documents, for example contracts, list of performers if a group, nationality, expenses, etc. Merchandising income is also under this umbrella. Following this procedure, the payor is notified by the Foreign Entertainer’s Unit (FEU) of the reduced rate of tax to be applied.
Have a question? Contact Frances Brennan.
Your comments are always welcome!