Daudzas mākslas iniciatīvas saskaras ar birokrātiskiem šķēršļiem, kas kavē mākslinieku piekļuvi nodokļu atvieglojumiem. Evelīza Karvalo Ribas (Evelyse Carvalho Ribas) sniedz salīdzinošu pārskatu no dažādu jurisdikciju viedokļa par diviem no tiem, t.i. “profesionāla mākslinieka” statusu un pilsonības personiskajiem kritērijiem
Raksts tiek publicēts oriģinālvalodā
Evelyse Carvalho Ribas**
ARTISTS ON THE MOVE:
evealing the Hidden Barriers in Tax Incentives
The impact of tax incentives on artists' engagemnt is an increasingly compelling topic. As artists aspire to allocate their services and goods on a worldwide scale, financial resources become paramount. In this context, tax incentives with a global reach emerge as potential lifelines, providing the necessary funding. However, navigating the intricate conditions and requirements associated with these incentives presents its own set of challenges.
Ironically, the same governments that offer indirect public funding through tax incentives also impose personal and geographical conditions, acting as gatekeepers for specific categories of taxpayers dealing with peculiar products in unequivocal locations. The complexities of tax laws and the identification of eligibility criteria in multiple countries can be overwhelming. Artists, who may not possess an in-depth understanding of tax regulations, find themselves grappling with intricacies they may not be equipped to navigate. Likewise, tax advisers face the arduous task of grappling with the lack of consistency and coherence with international law, further complicating matters.
This article is dedicated to the identification of tax barriers that impede artists in their pursuit of allocating their arts-related projects worldwide through tax incentives. It serves as a catalyst, setting the stage for subsequent articles that will propose innovative and forward-thinking legal solutions to overcome these barriers.
To accomplish this objective, the article delves into the practical realm of national tax incentives, accompanied by a series of thought-provoking examples designed to illuminate the hurdles faced by applicants when seeking tax incentives on an international scale. The first section delves into the nationality criterion, with a specific focus on its implications within the visual and audiovisual sectors. Subsequently, the article explores the criterion of professional artist status, shedding light on its complexities and implications.
In essence, this article serves as a beacon, illuminating the tax barriers that artists encounter and underscoring their profound impact on international cultural and creative endeavors. By identifying and understanding these barriers, artists can make informed decisions and fully capitalize on the opportunities presented by tax incentives with a global scope. The insights provided herein are invaluable, catering to the needs of artists, art operators, cultural and creative ecosystems, policymakers, and tax authorities alike.
II. THE NATIONALITY CRITERION
- The Nationality-Condition for Audiovisual Productions
Suppose there is a country, let's call it country-M, that provides tax rebates for audiovisual productions, specifically for film and TV productions, conditioned upon cultural tests. To pass the cultural test, a producer needs to demonstrate that the production will be set in country-M, the film or TV program is based on country-M subject matter, the original dialogue is recorded in country-M's official language, the director and star actors are nationals of country-M, and a proportion of key staff such as cameramen, sound engineers, production and costume designers, includes not more than a specific percentage of people that do not have country-M citizenship or residence. If all these criteria are met, the producer of the film or TV is eligible for a tax rebate.
Although hypothetical, this case matches frequent requirements for tax incentives for film and TV productions. Linking the 'cultural tests' and the status of 'national film' by combining, cumulatively, conditions relating to the nationality of individuals and the nationality of costs is a common practice. The requirements set out in those tests must be met to qualify the applicants for the specific tax measure.
This article does not aim to evaluate the justifications for tax incentives targeting the nationality-condition, but recognizes that the nationality-condition in different sectors and the related requirements are severe obstacles to allocating arts-related worldwide through tax incentives.
The Australia Producer Offset, for example, is a refundable tax offset (a rebate) calculated on qualifying Australian production expenditure (QAPE) on films and media. The cultural policy objective of the measure is to support the production of Significant Australian Content (SAC). To claim the Producer Offset from the Australian Tax Office (ATO), the applicant must obtain a final certificate from Screen Australia that will issue a final certificate for a project which it determines meets the requirements set out in the SAC test and the Income Tax Assessment Act 1997 (ITAA). However, the measure, per si, does not make clear the nationality criterion, and its meaning must be determined by other national rules such as the Producer Offset Guidelines (PO Guidelines). Section 2.2 of the PO Guidelines clarifies that a project must have SAC and meet the SAC test to be eligible for the Producer Offset. To meet the SAC test, Australians will need to be the key creative contributors responsible for the project's core origination, and Australians will need to be significant involvement in the project's creative development. Additionally, in deciding whether or not a project meets the SAC test, the Australian examiners must have regard to each of the elements set out in section 376-70(1) of the ITAA, including the subject matter of the film, the place where the film was made, the nationalities and places of residence of the persons who took part in the making of the film, the production expenditure incurred in respect of the film, and any other matters that the Australian examiners consider to be relevant. According to the PO Guidelines, the SAC test is holistic, and no single element is determinative. This means the projects will not necessarily meet the SAC test merely because they are undertaking pre-production, production and post-production in Australia, and the crew and below-the-line cast are Australian nationals. It is worth reviewing how the Australian examiners assess the three elements of the SAC test.
The first element of the SAC test is the film's subject matter, which refers to what the project is about. The examiners assess the film's subject matter by answering questions that explore the project's creative connection with Australia, whether the 'look and feel' of the project is Australian, whether the project originated in Australia or was developed by Australians, whether the project is under Australian control, whether Australian citizens or residents were involved in the project's development, whether the project is based on an Australian story, whether the project is about Australian characters, whether the project is set in Australia, and whether the project reflects a cultural background particular to Australia or Australians. To pass this first element, the applicant must demonstrate meaningful and substantial Australian involvement in the core origination and development of the project. The second element of the SAC test is the place where the film is made, which is linked with the nationality of costs, also known as country-expenditure. The third element assesses the nationalities and places of residence of the persons who took part in the making of the film. In this case, the Australian authorities examine their proportion and their roles. The number of Australian citizens and residents involved in the project influences the decision – "(a) The higher the proportion of Australian citizens and residents involved in the project, the stronger the applicant's claim will be against this element". Then, it is not enough to have Australian players involved in the project, yet their proportion has to be significant. But it is not just the number of Australians that is a decisive factor; their role in the project also is important. The Australian examiners split the Australian citizens and residents in categories considering their level of relevance for the project, as follows: "(b)(…) particularly important are the executive producer, producer, writer and director; the proportion of Australian actors in lead roles is generally expected to be material. We will look at other equivalent roles in certain genres (such as narrator, presenter, and interviewees) as appropriate; key creative heads of department: for example, the director of photography, production designer, editor, costume designer, sound designer and composer; and other casts, crew and service providers: for example, post-production houses". Therefore, residence, citizenship, their proportion and roles are decisive when assessing the personal criteria for the Australia Producer Offset.
In Mexico, the Fiscal Stimulus for Filmmakers – EFICINE, is a permanent tax measure given in an annual public call for the film sector, designed specifically to support scriptwriting and promote the creation of film projects at their development stage. The scheme is available to both individuals and legal entities such as production and distribution companies. The EFICINE combine, cumulatively, conditions relating to the 'cultural tests' and the status of 'national film' (nationality of individuals and the nationality of costs). The eligible projects must be those films with cultural, artistic and cinematographic merits, and more than 70% of production costs and staff, including actors and technical staff must be realized in Mexico. Moreover, the majority of the staff, actors and technical must be Mexican citizens.
In Russia, the Law on State Support for Cinematography in the Russian Federation 1996 is a permanent tax incentive explicitly designed for cinematographic works of Russian nationality. This measure stresses that the status of 'national film' is met if combined, cumulatively, with conditions relating to the nationality of individuals and the nationality of costs. This 'national film' criterion involves diverse elements that must be met. The film producer must be a Russian Federation citizen or a legal person duly registered on the territory of the Russian Federation. Additionally, the majority of film's authors must be citizens of the Russian Federation, and the film crew (directors, cameramen, sound engineers, production and costume designers, editors and leading actors) must include no more than 30% of people without Russian Federation citizenship. The film must be shot in Russian and must also have no less than 50% of the film's estimated cost of film production, distribution and exhibition done by film companies duly registered in the Russian Federation. Foreign investment in film production should not exceed 50% of the film estimated budget. The status of the national film can also be applied to a film produced under international agreements of the Russian Federation on co-production in collaboration with producers that are foreign citizens, people without citizenship or a foreign legal person. Through these provisions, Russia explicitly links requirements relating to individuals' nationality and the nationality of costs.
Australia, Mexico and Russia are examples of governments where the measure exclude projects that do not involve a minimum number of nationals in specific roles. This requirement has been a topic of debate due to its questionable effectiveness and potential bias in decision-making. The process of making a film or TV program is quite linear, involving pre-production, production and post-production phases. Each phase requires diverse individuals assuming different roles. These roles may include the director, screenwriter, composers, designers, costume designer, actors, camera operators, make-up artist, production manager, sound engineer, and others directly or indirectly involved in the project.
Australia, for example, examines the proportion of Australian citizens involved and their roles in the production. Although examiners evaluate the nationals who took part in the project under these two perspectives – proportion and functions – they still have a margin to include elements that they consider relevant. This approach attempts to balance the promotion of local cultures and economies with the need to ensure high-quality productions. Nevertheless, a lack of objectivity in this process could result in biased decision-making, leading to considerable uncertainty in international taxation. It is problematic when the scheme does not clearly distinguish between the diverse roles of the individuals who took part in the project or does not provide any guidance to identify the eligible lead characters or participants.
The United Kingdom Finance Act/2006 provides a permanent tax measure with the aim of encouraging and supporting the development of the British audiovisual industry. To qualify for the tax relief, a film must meet specific criteria, including passing the revised Schedule 1 to the Films Act 1985, which establishes a cultural test for British films. In addition, the film must be made by a UK film production company, intended for theatrical release, administered by the UK Film Council, or made under one of the UK's film co-production treaties. Finally, the film must have at least 25% of its budget incurred on UK expenditure. To pass the cultural test, a film-maker needs to demonstrate that the project will have 'British qualities' across four categories: cultural content (setting, characters), cultural contribution (heritage, diversity), cultural hubs (photography, post-production), and cultural practitioners (director, actors).
The film is eligible for tax relief if all these criteria are met. Under the Act, a character is a British or another EEA state character or participant if they are British citizens, citizens of another EEA state, or residents in the UK or another EEA state. According to Schedule 1 to the Films Act 1985, the number of British or EEA citizens or residents lead characters or participants determines whether the cultural practitioners' category is met. Therefore, under the UK's cultural practitioners criterion, both nationals and residents are eligible, as the UK includes the residence of the practitioners who participated in the project. In contrast, other countries such as Australia, Mexico and Russia consider only nationalities exclusively, making only nationals eligible for tax incentive. In deciding whether or not a project meets the nationality-condition test, the citizenship requirement excludes residents who are not nationals. Thus, an applicant cannot meet the criterion even if they are a resident without being a citizen.
Therefore, the United Kingdom Finance Act/2006 has established a comprehensive set of criteria to support the British film industry. The 'cultural practitioners criterion' includes both nationals and residents, while some other countries exclusively consider only nationalities. The residency requirement provides a more inclusive framework for tax relief eligibility in the United Kingdom, which recognizes the contributions of both nationals and residents to the British film industry.
- The nationality-condition for visual arts
The nationality-condition is a factor observed in various sectors and sub-sectors, including the visual arts industry. Governments frequently provide tax incentives for national artists or condition measures on products produced by national artists.
Source: AI-generated by Evelyse Carvalho Ribas, via MidJourney
In Canada, the so-called Capital Cost Allowance (CCA) applies to works of art purchased by individuals or corporations engaged in business operations. The Canada's Income Tax Act, taxpayers may claim a deduction from depreciation and loss of value for certain capital assets held by individuals or corporations. Under the Income Tax Regulation (ITR), artworks are classified into similar assets classes, and each class is assigned a prescribed deduction rate. Notably, paragraph 1102(1)(e) of the ITR stipulates that artworks acquired by a taxpayer may qualify as CCA-eligible assets if specific conditions are satisfied, including the artwork is obtained to gain or produce income, the artwork is not described in the taxpayer's inventory, the artwork’s cost which should be at least $200, and the nationality of the creator, who must be Canadian. Thus, this tax incentive explicitly targets artworks produced by Canadian national artists. In this case, even if the artist is a resident, without being a Canadian artist, the measure would not apply.
France applies a similar scheme to support the promotion of national artists through the Patronage Act. This permanent measure offers companies a tax deduction on taxable earnings for the purchase of a contemporary work of art created by a living French artist, provided that the artwork is exhibited. The company must permanently display the artwork at a publicly accessible location such as a museum or the company's lobby or entrance foyer accessible to the general public or its employees. It is worth noting that the employees’ offices are not eligible display locations. The Patronage Act targets the artwork as a good, the French living artist as the producer of the good, and imposes an obligation on the benefiting companies to display the artwork permanently. These three specific requirements outlined in the Patronage Act limit the eligibility criteria, particularly the 'French-living-artist-condition', which excludes non-French artists and presents a potential barrier to participation.
The primary objective of this section was to review some national provisions related to the nationality criterion, which often give rise to tax barriers hindering artists in their pursuit of global allocation through tax incentives. The analysis revealed a prevalent practice among governments to utilize tax incentives as a means to stimulate growth within the audiovisual industry. However, these incentives are frequently contingent upon meeting specific "cultural tests" and satisfying the criteria of being a "national film”. Such conditions create substantial obstacles for artists seeking to access incentives, as they necessitate the involvement of a minimum number of nationals in designated roles or require the inclusion of a country-production partner. Consequently, projects failing to meet these requirements are excluded, even if they involve national participants. Compliance with the nationality-condition hinges on meeting specific citizenship quotas in each category or in tandem, depending on the particular measure at hand.
Governments may also introduce schemes conditioned upon a minimum number of nationals performing specific roles in different stages of the project. While this differentiation serves a purpose in the context of tax incentives, it can pose complications if governments fail to establish clear legal or fiscal definitions for each category.
The nationality-condition further exacerbates the challenge by precluding non-national residents from eligibility. Consequently, even if a resident artist fulfills all other criteria, they cannot meet the nationality-condition without citizenship. It is worth noting that the nationality-condition extends beyond the audiovisual industry, permeating into sectors such as visual arts, where tax incentives exclusively target national artists or conditioned upon products made by national artists.
Undoubtedly, the nationality-condition constitutes a deeply personal criterion and acts as a significant barrier impeding artists' endeavors to allocate their arts-related projects globally through tax incentives. Additionally, the coherence of this condition with international law raises legitimate concerns that warrant careful examination and consideration.
Furthermore, the personal requirements for accessing arts-related incentives may also be conditioned upon an applicant's status as a professional artist. This aspect of the debate will be explored further in subsequent section.
III. THE ARTIST’S STATUS AS A PROFESSIONAL ARTIST
This section examines the implications of the artist's status as a professional artist in the context of tax incentives.
To illustrate, let us consider a hypothetical case where a country, called country-M, offers a tax incentive for artists who have tax debts with the revenue to pay their tax liabilities with their own artworks through donations to institutions targeted by the government under an acceptance in lieu scheme. However, the government may limit the incentive to specific categories of visual arts, such as paintings and sculptures, and the item must be of national interest. Moreover, the applicant must be a national artist and a high-calibre professional to access the incentive.
Source: AI-generated by Evelyse Carvalho Ribas, via MidJourney
This case exemplifies common requirements for tax incentives targeting professional artists, particularly under lieu schemes. Notably, this incentive scheme includes at least four conditions and the professional status criterion. The sectorial requirement pertains to visual arts, specifically paintings and sculptures, which exclude other sub-sectors. Additionally, the national interest criterion may add subjectivity to the decision if the rules or the Guidelines do not clarify its meaning. The nationality-condition is another severe restriction, which excludes all other resident artists who are not nationals. It means that non-citizens of country-M cannot qualify for this incentive. Furthermore, anonymity may not be ensured under this scheme, leading to embarrassment for artists with tax debts who are reluctant to expose their financial situation.
However, the most significant barrier under this section is the one that targets high-calibre professional artists. In this scenario, unknown or financially struggling artists may not claim the relief they are entitled to because they would feel disconcerted by not being considered relevant at a national or local level. It is even more problematic when the rule does not clarify the criteria to decide whether the applicant is recognized as a high calibre professional nor provide guidelines to explain, despite having a specific tax incentive to deal with them. Moreover, a lack of transparency regarding the margin of discretion the administration enjoys when exercising its powers raises concerns regarding potential biases in decision-making. Therefore, to avoid subjective criteria and resulting biases, a clear distinction between professional and hobbyist artists is necessary for tax incentive purposes. In the light of these issues, this section addresses some competing frameworks which can lead to different classifications.
The UNESCO 2005 Convention brings a broad philosophical Recommendation concerning the status of the artist, as follows: "artist is taken to mean any person who creates or gives creative expressions to, or re-creates works of art, who considers his artistic creation to be an essential part of his life, who contributes in this way to the development of art and culture and who is or asks to be recognized as an artist, whether or not he is bound by any relations of employment or association." This is a standard-setting instrument, which aims to "strengthen policies and measures around the professional, social and economic status of artists." However, the UNESCO definition serves all artists: hobbyists and professionals. Then, the UNESCO Recommendation does not solve the problem of clearly defining the 'professional artist' status.
From national perspectives, based on their instruments and covering different scopes, countries have applied various criteria to define artists as a 'professional artist'. Examples of status of the artists’ laws include:
Status of the Artist Act (Canada), Law on the Rights of Independent Artists and Promotion of Cultural and Artistic Creativity (Croatia), Law on the Status of Creative Persons and Professional Creative Organizations (Latvia), Law on social measures for the benefit of independent professional artists and intermittent performers, and the promotion of artistic creation (Luxembourg), Law of the Artist and Performer (Peru), Artist Work and Income Act (Netherlands), Status of the Artist and Related Trade Law (Uruguay). In Peru, the Law of the Artist and Performer was recently extended to provide an exhaustive list of professions that qualify as 'artist', some of which had previously escaped categorization. This has clarified who is subsequently entitled to labour, moral and financial rights.
Heikkinen has identified five common national approaches to characterize this category: membership of a recognised artist association, association with artistic output, a committee of experts or artists' peers, nature of arts activity, and taxation authority. These five common approaches are worth reviewing to understand how governments may connect 'professional artists' status with lieu schemes.
First: definition through membership of a recognised artist association. In this case, professional bodies are used to identify and certify a person's status as an artist. Under the Canada Status of the Artist Act 1992, one consideration for determining professionality is whether an independent contractor is a member of an artists' association. In Croatia, under the law on the Rights of Independent Artists and Promotion of Cultural and Artistic Creativity, decisions are made by a panel comprised of a member of the Ministry of Culture and four other Association members, including an artist working in the field of activity of the applicant. Although administratively simple, this approach still raises the question of which artist associations should be officially recognised; or which qualifications the peer-artist should have. In this context, it still needs to adopt different membership criteria to ensure comparable definitions across the various art forms.
Second: definition by association with artistic output. In this case, the definition of an artist derives from the definition of creative output; e.g., an artist is someone who produces art (artworks, copyrighted materials and so on). This definition is used in France, the Republic of Ireland, and England and Wales. The British Acceptance in Lieu Scheme, for example, allows a person (including artists) who is liable to pay inheritance tax, capital transfer tax or estate duty to settle part, or all of the debt, by disposing of a work of art or other objects to the Board of Inland Revenue for public ownership. Individuals offering objects under the Acceptance in Lieu Scheme have a legal right to remain anonymous. The scheme is managed on behalf of the government by the Museums, Libraries and Archives Council (MLA).
Third: definition by a committee. In this case, the artistic status is determined by a committee (e.g. committee of experts or artistic peers). In the Netherlands, an independent advisory body determines the professional status of artists applying for eligibility under the Income Provision for Artists Act. In Mexico, a committee of art experts determines and ranks artists under the Pago en Especie scheme. It is a permanent measure allowing artists to pay federal income taxes with their own artwork instead of cash. The measure is specifically for Mexican artists from design (graphic) and visual arts. Only painters, sculptors, and graphic artists can participate, though program administrators are currently considering whether to include performing art as an acceptable means of payment. A committee of artists and curators oversees the donations process to ensure that the art received meets specific quality standards. If the art is of an exceptionally high calibre, it becomes part of the national-heritage collection, displayed in a permanent exhibit in Mexico City. All other pieces are divided and shipped across the country to fill public museums and administrative buildings. Certain pieces are also sent abroad as part of exhibitions coordinated with museums worldwide.
Fourth: definition by nature of arts activity. In this case, artists are deemed professional if their artwork is undertaken in a business-like manner, specifically, the financial intention of the artist. This definition is significant for retail sales tax systems, such as Value Added Tax (VAT) and Goods and Services Tax (GST). Characteristics common to artwork pose several problems for deciding on the nature of arts activity. It is not always evident from a financial perspective whether someone is undertaking arts work as a professional artist or a hobbyist. In this context, the examiners' decision may be questionable when the authorities do not apply the same criterion to other applicants in similar circumstances.
Fifth: definition by the taxation authority. In this case, the taxing authority determines the eligibility. In Australia, a determination is made by the Commissioner of Taxation on a case-by-case basis, considering whether the artwork is performed to make a profit, the frequency of artwork and the person's education and experience. In Canada, the Canadian Council for the Arts highlights that the concept of profit is critical in determining whether a taxpayer's artistic activity or literary undertaking constitutes the carrying on of a business or is merely the furtherance of a hobby or interest. But Canada takes a dual approach as both the tax authorities and the tribunal can determine the status as a professional artist. On the one hand, the Canadian tax authority decides is based on several factors linking the fields of practice to applicant profiles, including the amount of time devoted to artwork; the extent of public exhibition or publication of art output; professional representation by an agent; the individual's profit/loss track record; past profit variability; and others. On the other hand, under the Canadian Status of the Artist Act (1992), a tribunal determines who is and who is not a professional artist for actions under the tribunal's jurisdiction. In this context, the classification taken by the tax authorities can conflict with the decision taken by the tribunal.
In Ireland, under the Taxes Consolidation Act 1997, Ireland's acclaimed artists are eligible to submit a claim to the Revenue Commissioners' Office. While the Office makes the final decision, it can consult externally in making its decision. The Revenue Commissioners' Office determines whether an original and creative work is generally recognised as having cultural or artistic merit. In this approach, many of the problems of defining an artist are merely substituted with issues of defining art (or art products). In the United States of America, the Internal Revenue Service has nine criteria to determine the status of the artists, including whether the activity is carried out in a business-like manner; the amount of time and effort devoted to the activity; the profit track record; and the level of business acumen.
These are the five most common approaches to defining an artist as a 'professional artist'. However, common does not mean standard. Administrative guidelines, rulings or circulars that provide for interpretation of tax rules are relevant because they provide legal certainty and predictability for enforcing tax provisions, but they are not standard. And it is possible to raise weakness in any of those tools outlined above as follows: definition by membership could result in a lack of fairness as it may prevent those less financially capable artists from joining the target associations; definition by association with artistic output could result in lack of objectivity as this concept is constantly evolving; definition by a committee of experts, or artists' peers, or still by a tax authority could result in bias in decision making; definition by nature of arts activity could also result in lack of objectivity as it may be problematic to identify the financial intention of the artist. Particularly difficult for artists without formal qualifications or with low incomes, making tax barriers even harder for those artists.
The abovementioned provisions give a flavour of how governments may link 'professional artists' status with lieu schemes. However, the lack of a single international standard for the set of a 'professional artist' remains. Depending on the definitions of the measure and its guidelines, or how the examiners assess the classifications of 'professional artist', it can be problematic.
Some national provisions do not clarify the criteria to decide whether the applicant is recognized as a professional artist or a 'high-calibre' professional; others may exclude unknown or less financially capable artists; others may use questionable subjective criteria resulting in a bias in decision-making.
The aim here is not to point out the right or wrong approach, but to highlight that a lack of shared understanding to determine the concepts of one category – professional artist – between governments can undermine the eligibility criteria and give considerable uncertainty in international taxation. It is because lack of consistence or coherence in interpretation and application of similar rules may result in an artist being a qualified 'professional artist' in one country and not meeting the conditions to become an eligible 'professional artist' in another country.
The personal criteria of nationality and status as a 'professional artist' stand as formidable barriers impeding artists' access to tax incentives. These limitations have been brought to light through this article, showcasing their profound impact on the cultural and creative ecosystems.
The nationality criterion, often imposed by national provisions, acts as a restrictive force, confining eligibility for tax incentives solely to citizens of the country offering the benefit. This exclusion of non-national residents severely limits access to the advantages and may even clash with principles upheld by international law. Simultaneously, the second criterion, centered around the status of being a 'professional artist,' presents its own set of challenges. Artists, despite their undeniable talent and dedication, are deemed ineligible if they fail to fulfill the often elusive and ambiguous criteria set forth by the tax incentive. The absence of a standardized definition for 'professional artist' and the divergent interpretations across national tax laws only further compound the difficulties faced by artists striving to access these benefits.
The cumulative effect of these personal criteria is the emergence of severe tax barriers obstructing artists' pathways to tax incentives with a global scope. The lack of harmonization and coherence in the application of the nationality criterion and the inconsistent definitions of 'professional artist' imposed by various countries create an intricate web of challenges and obstacles. Moreover, the discretionary power wielded by public administrations in administering the tax incentives can introduce further unpredictability and arbitrariness into the equation. It is evident that a unified international standard, offering clear and unequivocal definitions for fundamental concepts, is the optimal solution to ensure efficient operation and legal certainty.
In summary, the personal criteria of nationality and status as a 'professional artist' pose substantial hurdles for artists seeking access to tax incentives. The diverging approaches employed by different countries, coupled with the absence of a cohesive international standard, engender inconsistencies and impede taxpayers. By establishing precise definitions and implementing a single international standard, we can pave the way for a more equitable and effective allocation of arts-related worldwide through tax incentives. It is through these proactive measures that we can foster an environment conducive to the flourishing of cultural and creative endeavors, promoting cultural diversity, and unleash the full potential of artists on a global scale.
Books, Journals and Articles
Budak T, James S, 'The Level of Tax Complexity: A Comparative Analysis between the UK and Turkey Based on the OTS Index', (International Tax Journal 2018)
Cliché D, 'Status of the Artist or of Arts Organizations?: A Brief Discussion on the Canadian Status of the Artist Act' (Canadian Journal of Communications, vol 21:2, 1996)
Duelund P, 'Profession Artist: Report on the Social and Fiscal Status of Artists' (Part three Denmark, in Alain Keseman, DG XXII, Direction A, Unity 3, Bruxelles)
Heikkinen M, Karttunen S, 'Defining Art and Artists as a Methodological Problem and a Political Issue' (Art Council of Finland, Research and Information Unit, 1995)
James S, Sawyer A, Budak T (eds.), The Complexity of Tax Simplification: Experiences from Around the World, (Basingstoke and New York: Palgrave Macmillan, Basingstoke and New York 2016)
Král P, 'Status of the Artist: Working Document for a General International Debate' (Slovak Coalition for Cultural Diversity 2013)
Micheau C, State Aid, Subsidy and Tax Incentives under EU and WTO Law (Wolters Kluwer Law & Business, vol 45, 2014)
Snijders J, Clarke M, Van der Graaf A, Stefano V, Kimenai F, Tajtáková M, 'The status and working conditions of artists and cultural and creative professionals' (Panteia Research to Progress, European Expert Network on Culture and Audiovisual (EENCA), Funded by the Creative Europe Programme of the European Union)
Producer Offset Rules 2018: PO Guidelines, Explanatory Statement,
Income Tax Assessment Act 1997 (the Act), subsections 376-265(1)(2), 376-70(1)
Types of Especial Professionals (Australian Taxation Office)
Capital Cost Allowance (CCA)
Income Tax Act
Income Tax Regulation (ITR), Paragraph 1102(1)(e) of the ITR
Status of the Artist Act 1992
Council for the Arts
Law on the Rights of Independent Artists and Promotion of Cultural and Artistic Creativity
England and Wales
Acceptance in Lieu Scheme 1947
Patronage Act (Loi n 2003-709 du ler aout 2203 relative au mecenat, aux associations et aux foundations)
Code général des impôts (Section 238 bis AB CGI)
France Syndicat National des Sculpteurs et Plasticiens, La branche des Arts Graphiques et Plastiques
Taxes Consolidation Act 1997
Law on the Status of Creative Persons and Professional Creative Organizations
Law on social measures for the benefit of independent professional artists and intermittent performers, and the promotion of artistic creation
Fiscal Stimulus for Filmmakers – EFICINE
Law del Impuesto sobre la Renta (LISR), Article 189
Pago en Especie (Decreto - DOF 31/10/1994)
Artist Work and Income Act
Income Provision for Artist Act (2004)
Law of the Artist and Performer
Republic of Ireland
Revenue Commissioners' Office, Ireland's artists exemption scheme (2001)
Law on State Support for Cinematography in the Russian Federation 1996 (Federal Law of August 22, 1996 n.126-FZ)
Films Act 1985
Film & TV Production Restart Scheme
Status of the Artist and Related Trade Law
National tax administrations on www.on-the-move.org
OECD, UN and USA Tax Models
OECD, 'Supporting the Development of More Effective Tax Systems', A Report to the G-20 Development Working Group by the IMF, OECD, UN and World Bank (2011)
European Union (EU)
Annex IX to the VAT Directive
Council Regulation (EEC) n 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff
Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (2016/C 262/01, Official Journal of the European Union, Notices from European Union Institutions, Bodies, Offices and Agencies, European Commission, points 124-125 of the Commission Notice)
United Nations (UN) UNESCO 2005 Convention
UNESCO, Recommendation Concerning the Status of the Artist (1980)
World Customs Organization (WCO)
Harmonized System Nomenclature (HSN) run by the World Customs Organization, specially the Chapter 97 of the CN – 'Works of art. Collectors' pieces, antiques'
Court of Justice of European Union, CJEU 15 May 1985, Case 155/84, Reinhard Onnasch v Hauptzollamt Berlin – Packhof
Court of Justice of European Union, CJEU 8 November 1990, Case C-231/89, Krystyna Gmurzynska-Bscher, Galerie Gmurzynska v Oberfinanzdirektion Koln
Court of Justice of European Union, CJEU 18 September 1990, Case C-228/89, Farfalla Flemming and Partner v Hauptzollamt Munchen West
 The nationality of costs, also known as country-expenditure, is explored in my article, “Tax Barriers for Audiovisual Producers Allocating Productions Worldwide through Tax Incentives: Personal and Geographical Criteria and the Margin of Discretion”.
 For a better understanding of the Australian Producer Offset Rules 2018, see the PO Guidelines; the Explanatory Statement; and the subsections 376-265(1)(2), 376-70(1) of the Income Tax Assessment Act 1997 (the Act).
 As guides to assess their roles, the Australian examiners use the general rules of the Australian film and television production industry, the Screen Producers Association of Australia, Australian Writers’ Guild and Australian Directors’ Guild.
 For a better understanding of the Mexican Fiscal Stimulus for Filmmakers – EFICINE, see the Article 189 of Law del Impuesto sobre la Renta (LISR); the EFICINE beneficiary requirements for production; and the EFICINE beneficiary requirements for distribution.
 Russia: Law on State Support for Cinematography in the Russian Federation 1996 (Federal Law of August 22, 1996 n.126-FZ).
 For a better understanding of the UK Finance Act/2006, see the Films Act 1985; the UK cultural test for films, television and video games; the guideline Film & TV Production Restart Scheme; the Film & TV Production Restart Scheme – Scheme Rules.
 For discussion around the endless definition of ‘artworks’ and its diverse categories, see: Annex IX to the VAT Directive; Council Regulation (EEC) n 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff; Harmonized System Nomenclature (HSN) run by the World Customs Organization, specially the Chapter 97 of the CN – ‘Works of art. Collectors’ pieces, antiques’; European Court of Justice, ECJ 15 May 1985, Case 155/84, Reinhard Onnasch v Hauptzollamt Berlin – Packhof; ECJ 8 November 1990, Case C-231/89, Krystyna Gmurzynska-Bscher, Galerie Gmurzynska v Oberfinanzdirektion Koln; ECJ 18 September 1990, Case C-228/89, Farfalla Flemming and Partner v Hauptzollamt Munchen West.
 France: Patronage Act (Loi n 2003-709 du ler aout 2203 relative au mecenat, aux associations et aux foundations).
 France: Code général des impôts (Section 238 bis AB CGI).
 Claire Micheau, State Aid, Subsidy and Tax Incentives under EU and WTO Law (Wolters Kluwer Law & Business, vol 45, 2014) 233.
 UNESCO, Recommendation Concerning the Status of the Artist (1980).
 Peter Duelund, ‘Profession Artist: Report on the Social and Fiscal Status of Artists’ (Part three Denmark, in Alain Keseman, DG XXII, Direction A, Unity 3, Bruxelles).
 Merja Heikkinen and Sari Karttunen, ‘Defining Art and Artists as a Methodological Problem and a Political Issue’ (Art Council of Finland, Research and Information Unit, 1995) 4.
 Canada’s Status of the Artist Act 1992, paragraph 6(2)(b), paragraph 18(b)iii.
 Heikkinen and Karttunen (n 41) 4.
 France: France Syndicat National des Sculpteurs et Plasticiens, La branche des Arts Graphiques et Plastiques.
 Republic of Ireland: Revenue Commissioners’ Office, Ireland’s artists exemption scheme (2001).
 England and Wales: Acceptance in Lieu Scheme 1947.
 Netherlands: Income Provision for Artist Act (2004).
 Mexico: Pago en Especie (Decreto - DOF 31/10/1994).
 Jacqueline Snijders, Martin Clarke, Amber van der Graaf, Valerio de Stefano, Frank Kimenai, Mária Tajtáková, ‘The status and working conditions of artists and cultural and creative professionals’ (Panteia Research to Progress, European Expert Network on Culture and Audiovisual (EENCA), Funded by the Creative Europe Programme of the European Union) 45.
 Ibid (n 49) 45-47.
 Australia: Types of Especial Professionals (Australian Taxation Office).
 Canada: Council for the Arts.
 Canada: Status of the Artist Act 1992, paragraph 6(2)(b), paragraph 18(b); Canada Customs and Revenue Agency; Danielle Cliche, ‘Status of the Artist or of Arts Organizations?: A Brief Discussion on the Canadian Status of the Artist Act’ [1996 ] Canadian Journal of Communications, vol 21:2.
 Ireland: Guidelines drawn up under Section 195 (12) of the Taxes Consolidation Act 1997.
 USA: Internal Revenue Service – Art Appraisal Service.
 Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union (2016/C 262/01, Official Journal of the European Union, Notices from European Union Institutions, Bodies, Offices and Agencies, European Commission, points 124-125 of the Commission Notice).
 For further discussion on the status of professional artists, see Pavol Král, ‘Status of the Artist: Working Document for a General International Debate’ (Slovak Coalition for Cultural Diversity 2013).
**Information on the author:
Evelyse Carvalho Ribas | practical experience in diverse jurisdictions | consultancy and disputes | expertise in legal & tax aspects of cultural and creative ecosystems including digital assets | PhD Researcher at University of Leeds/UK
[email protected] https://www.linkedin.com/in/evelyse-carvalho-ribas
Image on preview: AI-generated by Evelyse Carvalho Ribas, via MidJourney