Taxation of Entertainers and

Sportspersons Performing Abroad

Taxation of income from image
rights, sponsorship and
advertising
Mario Tenore, Maisto e Associati (Milan)
Milan, 30 November 2015

Taxation of income from image rights,

sponsorship and advertising
Sponsoring and advertising
9 OECD Commentary
Special categories
of payments
Image rights
9.5 OECD Commentary

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Before 2014: direct/indirect link?

OECD Commentary, 9, 2nd p..: reference to direct link
[] other Articles would apply whenever there is no direct
link between the income and a public exhibition by the
performer in the country concerned

OECD Commentary, 9, 4th p.: additional reference to

indirect link for advertising/sponsorship income
Article 17 will apply to advertising or sponsorship income,
etc. which is directly related or indirectly related to
performances or appearances or appearances in a given
State
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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Direct/indirect link: meaning?

Use of specific equipments or wear specific clothing
during a perfomance

Endorsement of a specific line of products

(personal image)

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2010 OECD Discussion Draft

Scope of the proposed amendments
[] to clarify the treatment of these payments

Proposed change to 9, 4th p. OECD Commentary:

Limited: on-court endorsement
Article 17 will apply to advertising income or sponsorship
income which is directly or indireclty related to performances in
a given State (e.g. payments made to a tennis player for
wearing a sponsors logo, trade mark or trade name on his
tennis shirt during a a match)

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2014 Report
Issues related to Article 17 of the OECD MC
Scope of the changes:
[] Commentary included some confusing references to
payment that are directly or indirectly related to the
activities of an entertainer or sportsperson and decided to
use a more consistent terminology

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2014 Amendments
Changes to 9 OECD Commentary to Art. 17
OECD Commentary, 9, 6th p.: Article 17 OECD MC
[] Article 17 will apply to advertising or sponsorship
income, etc. which has a close connection with a
performance in a given State []
Switzerland ( 15.2 OECD Commentary)

However, limited terminological uncertainty still persists

(OECD Commentary, 8, 1st p.)
Paragraph 1 applies to income derived directly or
indirectly from a performance by an individual entertainer
or sportsperson

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2014 Amendments
Changes to 9 OECD Commentary to Art. 17
OECD Commentary, 9, 3rd p: general rule
Such a close connection will generally be found to exist where it
cannot be reasonably be considered that the income would
have been derived in the absence of the performance of
these activities

OECD Commentary, 9, 4th p.: Examples of connection

related
to the timing of the income-generating event (e.g. payment
received by a professional golfer for an interview given during a
tournament in which she participates)
to the nature of the consideration for the payment of the
income (e.g. a payment made to a star or tennis player for the
use of his picture on posters advertising a tournament in which he
will participate)
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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Close connection: off-court activities

Off-court activities can be covered under Art.17 OECD
MC but need to be closely connected

OECD Commentary, 9, 6th p. close connection may be evident

from contractual arrangements

Participation of the sportsperson in a television

commercial of the main sponsor?
Unclear, see 3, 4th p. the term entertainer clearly
includes (.a former sportsperson) in a television
commercial

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Art. 17 OECD MC
2014 amendments: Close connection
Golf or tennis player
Wearing the sponsors clothing and using
the sponsors equipment in a tournament
Promotional appearances on behalf of
the sponsor during tournament or even
immediately before or after its
conclusion

Art. 17 OECD

Art. 17 OECD

Participating in photo and filming days

that
coincide
with
the
players
tournament schedule

Art. 17 OECD

Promotional activity not connected with

the
sport
event
(television
commercials?)

Art. 7/15 OECD

Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

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2014 Amendments
Changes to 9 OECD Commentary to Art. 17
OECD Commentary, 9, 6th p.: unspecified events
Such a close connection may be evident from contractual
arrangements which relate to a participation in a named
events or a number of unspecified events; in the latter case,
a Contracting State in which one or more of these events
take place may tax a proportion of the relevant
advertising or sponsorhip income (as it would do, for
example, in the case of remuneration covering a number of
unspecified performances)

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Image rights: treaty qualification

2014 Amendments: new 9.5

Art. 17 OECD MC
Treaty qualification

Art. 12 OECD MC
Art. 7/15 OECD MC

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2014 Amendments
new 9.5 OECD Commentary to Art. 17
OECD Commentary, 9.5, 1st p. Art. 17 OECD MC
when [] uses of the entertainers or sportsmans image rights
are not connected to the entertainers or sportsmans
performance in a given State, the relevant payments would
generally not be covered by Article 17 (see paragraph 9
above)

However, OECD Commentary, 9, 5th p.: Art. 12 OECD MC

Royalties for intellectual property rights will normally be
covered by Article 12 rather than art. 17 (cfr. 18 of the
Commentary on Art. 12

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Image rights: treaty qualification

Art. 12/17 OECD MC: no general rule/exception
Conflicts of qualification if royalties are closely
connected to a performance: double taxation (Boulez)
Art. 17 OECD MC should prevail over Art. 12 (closely
connected income)
However, see OECD Commentary to Art. 12, 18:

Where, whether under the same contract or under a separate one,

the musical performance is recorded and the artist has stipulated that
he, on the basis of his copyright in the sound recording, be paid
royalties on the sale or public playing of the records, then so much
of the payment received [] falls to be treated under Article
12

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

2014 Amendments
new 9.5 OECD Commentary to Art. 17
2014 change to OECD Commentary: No solution

9.5, 2nd p. (added) There are cases, however, where

payments made to an entertainer or sportsman who is a
resident of a Contracting State, or to another person, for
the use of, or right to use, that entertainers or sportsmans
image rights constitute in substance remuneration for
activities of the entertainer or sportsman that are covered
by Article 17 and that take place in the other Contracting
State. In such cases, the provisions of paragraph 1 or
2, depending on the circumstances, will be applicable

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore

Image rights: valuation issues

Image rights are not a separate intangible

Zidane, Conseil d'tat, 20 mars 2013, n 351495

Image rights can be separate (intangible) from the

personal activity
Sergio Garcia v. Commissioner, US Tax Court 14 March
2013, 140 T.C. No. 6 (65%/35%)

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Taxation of Entertainers and Sportspersons Performing Abroad - Mario Tenore