General information about income tax for internationally mobile artists and creatives
Every working person pays income tax on his/her income. This applies virtually worldwide. The question is on what exactly does one pay income tax and how much – and to whom, if one works not only in one's country of residence but also in other countries.
Similar principles apply worldwide. It starts with identifying in what country one spends the greater part of the year, i.e. what one’s place of habitual residence is, because the country in which one lives (country of residence) has a much more extensive right of taxation than a country in which one merely gives a guest performance or participates in an exhibition.
The country in which an actor/actress merely gave a guest performance, however, only has access to the specific income generated in that instance. The artist is subject to limited tax liability for the particular guest performance.
Legally, two countries may tax income generated from a guest performance. To prevent the same taxpayer from being repeatedly taxed on the same income, certain countries have entered into agreements designed to prevent this, so-called double taxation agreements (DTAs). The individual DTAs that exist between Germany and other countries can be found on the website of the Federal Ministry of Finance, www.bundesfinanzministerium.de (chart in German only, yet the DTA exist in the national languages of both contract partners).
International and national tax laws also distinguish between different types of income: income arising from dependent employment or from self-employment; performing art or creative work resulting in tangible objects; income from a business or from the management of rights. Only some of the many distinctions are relevant for artists and creatives, but the classification has considerable implications for the taxation and distribution of the taxation rights between countries.
Income of a self-employed actor/actress arising from a guest performance abroad is taxable in the country in which the performance takes place. Income generated from the granting of recording and broadcasting rights of the same performance is taxable in the country of residence of the actor/actress.
This example shows that the activities performed (guest performance abroad, management of rights) is essential for the clarification of legal issues.
Artists and creatives should not expect simplified rules for their specific area of activity; however, the main features of the tax law become quite clear if one invests some time and attention into individual relevant cases.
Artists or creatives who organize themselves in collectives, companies, orchestras etc. in legal forms such as in partnerships, an association, or a limited liability company are subject to additional taxes:
The specific aspects of the taxation of international artistic or creative activities (among others) are somewhat simply called “Ausländersteuer” (English: foreigner tax). This term does not pertain to the taxation of foreigners but to the taxation of income generated in two or more countries. The correct name would be “beschränkte Steuerpflicht" (English: limited tax liability) because only the country of residence may tax the worldwide income of its residents, i.e. its access is “unlimited.” The other country in which an actor/actress gives a performance, for example, may only tax the income earned within its borders – its access is thus “limited.”
The basic question for artists and creatives is the following: What country may tax their income if they are working in a country other than their home country?
In summary, internationally mobile artists and creatives must consider three aspects when they want to answer this question: