The Organisation for Economic Co-Operation and Development ("OECD") Issues Discussion Draft on Athletes and Entertainers Under OECD Model Treaty
The United States has entered into approximately 50 income tax treaties with various countries, including most of all the economically developed countries. Most tax treaties or tax conventions are negotiated using as a guide patterns established by a model treaty promulgated by the Organisation for Economic Cooperation and Development (OECD) , an organization of the developed countries of the world. The United States has its own model treaty which is used in general as a starting place for negotiations but the U.S. Model generally follows the OECD Model. Special provision is contained in the OECD Model as in most tax treaties for the treatment of nonresident income of athletes and entertainers. See OECD Model Treaty, Article 17.
The OECD Committee on Fiscal Affairs published a discussion draft on April 23, 2010 on the present uncertainty as to whether certain persons should be treated as entertainers or athletes (“artistes and sportsmen”) for purposes of Article 17 and is proposing a clarification by adding a ¶9.1 to the official Commentary on Article 17.
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Under Article 17, the country in which a nonresident entertainer or sportsman performs may tax the income from these activities. This special rule varies from that applied to the treatment of services rendered by non-residents in general. Thus, whether the personal services or activities of an entertainer or sportsman are involved must be determined and then the source and and allocation rules for activities performed in one or more countries of non-residence. The April draft proposal would clarify that contained within the definition of an entertainer or sportsman is anyone who acts as one, even for a single event, which of course is a very broad and somewhat all encompassing approach. Thus, one hockey game played in Canada by a U.S. citizen who resides in the U.S. would be sufficient or, as applied to entertainers, a U.K. actress permanently resident in England who receives a one-time fee for making a cameo appearance in a movie which was filmed in Spain. Activities covered under Article 17 also include income from advertising or interviews derived by an entertainer or sportsman in the other state that are directly or indirectly related to an entertainment or sports event. The draft provides as an exception to the wide net set under the draft is for reporting or commenting on an entertainment or sports event where the reporter does not participate. In such instance the draft provides that such activity is not that of an entertainer or sportsman and is not covered under Article 17. Presumably coaching is not the same as reporting or commentating and presumably is within the scope of Article 17. The draft also addressed the source and allocation rules for activities performed in various countries as well as special categories of payments.
