Income taxation of foreign artists
What to consider for witholding tax
When working with foreign artists, Section 50a of the German Income Tax Act requires withholding tax. What and how high this is and what must be considered is explained below. Answers to questions about various scenarios and examples will provide further information.
Links
Income taxation of foreign artists:
Section 50a of the German Income Tax Act
Additional taxation of net amounts:
German Federal Central Tax Office [Bundeszentralamt für Steuern (BZSt)] percentage rates
Examples of separating performance and exploitation rights
German Federal Ministry of Finance circular of 25 November 2010 about Section 50a of the German Income Tax Act
Withholding tax under Section 50a of the German Income Tax Act for foreign artists
Withholding tax: Performances of foreign artists in Germany are subject to a special system of taxation: the income tax of the fee a foreign artist earns in Germany must be paid by the organiser.
- Withholding tax under Section 50a of the German Income Tax Act is charged for income from artistic or entertaining work.
- Performances must take place in Germany, but the residence or habitual residence of the artists must be in other country (tax object).
- Artistic work must be performed under self-employment.
- Income from the exploitation of performances of foreign artists and the granting of copyrights (rights of use) in Germany is taxed this way.
- These taxes must be paid by those who must pay the fees, e.g., the organiser (tax subject).
Not to be underestimated!
Organisers often neglect withholding taxes for foreign artists. The German Federal Central Tax Office regularly searches for events with foreign artists, e.g., on the internet, and demands unpaid withholding taxes from organisers!
The German Federal Central Tax Office is also notoriously slow to respond to inquiries. Replies may take up to 6 months!
Withholding tax rate
Withholding tax amounts to 15% of a fee (excluding VAT).
- If travel and meal costs are borne by the organiser, the actual travel and meal costs will be exempt from taxation for up to the standard subsistence allowance for foreign activity. Evidence of these costs must be provided.
- For artists from the EEA (EU, Liechtenstein, Iceland, Norway), organisers may alternatively use the fee minus operating expenses as the basis of assessment. However, this will raise the tax rate to 30%. Organisers must submit evidence of such artists’ operating or marketing expenses. These expenses must be related to the performance in Germany (e.g., costs of props or costumes).
- The tax rate for fees for granting rights of use is 15% for natural and 30% for legal persons.
Note: Rights of use include copyrights, performance rights, rights to choreographies, compositions, texts, set and costume design and recordings and for permission to use names and images in advertisement.
Tax allowance: EUR 250
Fees for performances and their exploitation are subject to a withholding tax allowance of up to EUR 250. There is no such tax allowance for fees for granting rights of use.
This EUR 250 allowance applies per performance and per artist. A theatre group with four performers who each earn EUR 1,000 does not have to pay withholding tax if the fee is divided evenly. The same applies if an artist is paid a total of EUR 1,000 for four performances. Division is also permitted in contracts with legal persons, such as foreign concert agencies or cultural associations.
Net or gross fees agreed?
If a gross fee is agreed, withholding tax of 15% and the solidarity surcharge of 5.5% may be retained. An example:
| Fee (gross, no VAT) | EUR 1,000 |
|---|---|
| 5.5 % solidarity surcharge | - EUR 55 |
| 15 % withholding tax | - EUR 150 |
| Amount paid | EUR 795 |
Net fees are also often agreed. In this case, the tax must be added by the organiser. The Federal Central Tax Office requires the following percentage rates: 17.82% (withholding tax) and 0.98% (solidarity surcharge):
| Amount paid | EUR 1,000 |
|---|---|
| 0.98 % solidarity surcharge | + EUR 9.80 |
| 17.82 % withholding tax | + EUR 178.20 |
| Honorar (brutto, ohne USt) | EUR 1,188 |
Distinguish: performance fees and licensing fees
Total fee for the
- Performance (on stage)
- Rights of use (CDs of the performance)
Separate for withholding tax!
Fees for performances or granting exploitation rights of foreign artists must be treated separately for withholding tax.
If the total fee is paid for both the performance and its subsequent exploitation on image and sound carriers, for example, it must be divided. If no division is agreed, 80% of the fee will be assigned to the artistic service and the remaining 20% to exploitation and, for creative artists, such as choreographers or set designers, 40% to the artistic service and 60% to exploitation. Fees for live broadcasts are considered fees for artistic services.
Further details and examples are provided in the German Federal Ministry of Finance circular of 25 November 2010 about Section 50a of the German Income Tax Act which also defines non-public performances without spectators and studio recordings as performances.
Granting rights may also require withholding tax if artists produce performances or online performances abroad that are then exploited by a client in Germany (Section 50a(1)(3) of the German Income Tax Act). However, this does not apply to performances only available online since the place of performance is not Germany.
As stated, fees for granting rights have no tax allowance of EUR 250.
Withholding tax exemption
Under certain requirements, withholding tax may be fully or partially waived in the public interest if:
- An internationally significant cultural event for which there was a tender is held in Germany
- The performance of a foreign cultural association in Germany receives public funding
- Provided by the double taxation agreement between the country of the artist and the Federal Republic of Germany
Important: Exemption must be requested from the competent tax office before the event.
Tip:
The withholding tax return form is available on Elster at -> Alle Formulare -> Sonstige Formulare -> ‘Anmeldung über den Steuerabzug nach § 50a EStG’
Withholding tax returns must be filed quarterly by the 10th day of the following month.
Questions and answers:
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Are accompanying persons, such as sound engineers, lighting technicians, production managers or producers also considered foreign artists?
Yes, if brought from another country by the foreign artist.
Yes, if brought from another country by the foreign artist.
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Can solo artists claim the withholding tax exemption for foreign cultural associations?
No, this exemption is only available to groups.
No, this exemption is only available to groups.
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Can withholding tax exemptions only be requested per performance or for whole periods, such as a year or for several guest performances?
No, withholding tax exemptions may only be requested per group or performance, but only have to be requested once for longer guest performances or tours of a group.
No, withholding tax exemptions may only be requested per group or performance, but only have to be requested once for longer guest performances or tours of a group.
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An artist in Slovenia and an artist in Germany did an online performance together. Was it necessary to pay withholding tax?
Since the artist was in Slovenia, the fee did not have to be taxed.
Since the artist was in Slovenia, the fee did not have to be taxed.
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Pre-production work is done abroad for a performance in Germany. Separate fees are paid.
Withholding tax is only required for the fee for the performance.
Withholding tax is only required for the fee for the performance.
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A tax number was issued for withholding tax, but there are no more performances with foreign artists. Does withholding tax have to be filed with Elster—for EUR 0?
No, if no fee is paid, no withholding tax has to be filed.
No, if no fee is paid, no withholding tax has to be filed.
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An artist in the Netherlands is paid for the concept, pre-production, production, and exploitation of a performance, but does not perform in Germany. Is withholding tax charged?
Depends on the contract. Withholding tax is only required for the payment for the exploitation rights—if the services can be and are clearly separated in the contract.
Depends on the contract. Withholding tax is only required for the payment for the exploitation rights—if the services can be and are clearly separated in the contract.
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Foreign artists are in Germany for 3 days: 1 day to set up, 1 day for the performance, 1 day for dismantling. Can separate fees be paid for setup and removal without withholding tax?
Setup and removal are directly related to the performance in Germany and therefore subject to withholding tax as secondary services.
Setup and removal are directly related to the performance in Germany and therefore subject to withholding tax as secondary services.
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Are there withholding tax exemptions for non-profit purposes?
No, the tax object is the artist’s fee. There are no special provisions for non-profit organisers.
No, the tax object is the artist’s fee. There are no special provisions for non-profit organisers.
Organisers’ duties
For performances in Germany with foreign artists, organisers must…
- Determine if withholding tax must be paid
- File this withholding tax via Elster
- Pay the tax
Organisers are also required to provide evidence: evidence of the completion and content of services must be submitted, e.g., in form of the contract.
Artists’ place of registration must also be verifiable: the residence or habitual residence of natural persons, the registered office of companies. This information must also be stated on the application.
Questions and answers:
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A non-profit and publicly funded association discovers that it should have paid withholding tax for several years, but failed to do so because it didn’t know. The association can’t afford a tax advisor or lawyer. What should the association do?
The association can always file amended returns. However, if larger sums are involved, consultation is recommended. It is always better to take action than to be reprimanded after an audit—which will require stricter sanctions.
The association can always file amended returns. However, if larger sums are involved, consultation is recommended. It is always better to take action than to be reprimanded after an audit—which will require stricter sanctions.
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If the organiser pays four artists EUR 1,000 as the total fee, can the EUR 250 tax allowance be applied even if the organiser doesn’t know if the group will split the fee evenly?
Unless specified otherwise by the agreement, each artist will be assumed to be paid EUR 250 and, therefore, stay within the limit. Only the number of artists (‘Anzahl der Mitglieder‘) must be stated when filing the fee via Elster.
Unless specified otherwise by the agreement, each artist will be assumed to be paid EUR 250 and, therefore, stay within the limit. Only the number of artists (‘Anzahl der Mitglieder‘) must be stated when filing the fee via Elster.
VAT
For performances of foreign artists in Germany, organisers also have to retain and pay VAT. VAT may be waived through certification from the state authority if requested in time. There is no small business entrepreneur provision for foreign artists.