King Charles awarded the singers of the Korean band Blackpink with the Orders of the British Empire, and soon we can expect their concerts in other parts of Europe, including Poland. Taylor Swift, after being named Time magazine’s Person of the Year 2023, is embarking on a major tour of Europe starting in the new year, including a visit to Poland at the end of August. Youssou N’Dour, one of the most famous African artists, whose fortune is estimated at EUR 150 million, gave concerts in Bielsko-Biała. Why do we cite these situations? To point out that (which I think everyone will take for granted) culture knows no borders. Currently, with the ubiquitous globalization, it is everyday to invite artists from different parts of the world to Polish. Often, however, such collaborations are organized through artistic agencies, which, while invoicing those financing concerts, also include their commission and other expenses on the invoice, often showing individual items collectively. What about withholding tax in such a situation?
At the outset, it should be pointed out that pursuant to Article 21 of the CIT Act and Article 29 of the PIT Act, income tax on revenues earned in Poland by non-residents for services provided in the field of spectacular, entertainment or sports activities conducting activities in the field of artistic, entertainment or sports events is set at 20% of revenues.
The above regulation should be applied together with taking into account specific double tax treaties (DTT). In principle, those agreements state that the profits of an undertaking of a Contracting State are taxable only in that State, unless the undertaking carries on its activities in the other Contracting State through a permanent establishment situated there. If an enterprise carries on its activities in this way, the profits of the enterprise may be taxed in the other State, but only to the extent that they are attributable to that establishment.
Further, with regard to the remuneration of the artists themselves, the double taxation treaties stipulate that income earned by a person residing in a Contracting State from an artistic activity, such as a stage artist or musician, from an activity personally carried out in that capacity in the other Contracting State, may be taxed in the latter State.
In other words, the regulations say that only income earned by artists on the territory of our country will be subject to taxation in Poland. At the same time, when such an artist presents a certificate of residence, in some situations a lower tax rate or exemption may be applied, which should be specified in a given DTT.
But what are the practical problems faced by festival and concert organizers cooperating with artistic agencies? Generally, it is not an exception when an artistic agency, when invoicing the organizer, indicates one item on the VAT invoice, which includes the remuneration of several artists without specifying what salary a particular artist is entitled to, or gives the total amount of the artist’s fee and its commission. In such a situation, it is reasonable to ask about the appropriate course of action to be adopted by the concert financier as a withholding tax payer.
In this regard, it is worth recalling the commentary to Article 17 of the Model Convention (taxation of artists and sportsmen), where it is pointed out that: “income earned by impresarios, agents, etc. does not fall within the scope of this article. for organizing performances by an artist or athlete, and any income earned on behalf of the artist or athlete shall be covered by this article.’
At the same time, the Director of the National Tax Information in individual interpretation of 28 March 2023 (file reference number 0114-KDIP2-1.4010.276.2022.5.OK) commented on this type of problem, stating that:
“Therefore, when you received an invoice from an art agency in the United Kingdom detailing the amount for the artist’s reservation and the remuneration (fee) of the foreign artist, but without dividing this remuneration among the individual artists, you correctly treated the remuneration paid as income of the art agency from the United Kingdom.
In the event that the Foundation is not able to determine what part of the remuneration for the performance of a concert paid to a particular artist is attributable to a particular artist, the entire remuneration should be treated as income of the Agency.”
In view of the above, it is necessary to distinguish between two factual situations where the invoice from the artistic agency:
- it is not possible to distinguish what specific part of the fee is due to a given artist (e.g. due to the total amount allocated to several artists or the total amount of the artist’s fee and the agency’s remuneration);
- It is possible to distinguish a specific fee for a given artist.
In the first case, as indicated in the above-mentioned interpretation, it is reasonable to conclude that the remuneration paid to the artistic agency should be treated as the agency’s income. Thus, it is for them that the IFT-2R information and the CIT-10Z declaration should be issued.
The situation will be different in the second case. If the invoice issued by the agency clearly indicates the amount of royalties due to a given artist, along with an indication of his or her data, then the IFT-1R information and the PIT-8AR declaration should be issued to the artist.
This is due to the fact that in such a case, there is no doubt as to the determination of the beneficial owner of a given benefit. This position was confirmed, for example, in the individual interpretation of the Director of the National Tax Information of 25 February 2022 (file reference number 0111-KDIB1-1.4010.594.2021.2.BK), where it was indicated that the actual recipient of the receivables (if known) should be indicated on the IFT information even if the direct payment is made to another entity.
By the way, it should be noted that it is also worth noting that most DTTs allow for the withholding tax not to be collected in a situation where the concerts organised are mostly financed from public funds. This is confirmed, for example, by the individual interpretation of the Director of the National Tax Information of 14 December 2017 (file reference number 0115-KDIT2-1.4011.279.2017.2.MN).
To sum up, in our opinion, in a situation where the invoice from the artistic agency for the performed concert directly indicates the amount of the fee assigned to a given artist, then the documentation in the form of IFT information and a tax return should be issued directly to the artist as a beneficiary of the benefit. Otherwise, when it is not possible to separate a specific amount of the artist’s fee, the IFT information and the tax return should be issued directly to the agency.
