In our factsheet “You are hiring an artist or a professional sportsman or sportswoman” We explain how the performers’ scheme works. The scheme is based on a notional employment relationship between the performer and the person or organisation on whose behalf the performance is given. On this basis, the client must deduct payroll taxes from the fee paid to the performer.
A recent ruling by the Gelderland District Court. This case arose following an audit carried out by the Tax and Customs Administration at a foundation. The tax and social security contributions calculated are substantial!
Additional tax assessment under the artists’ scheme
This case concerned a foundation which pursues its objective by organising events in the fields of music, dance and cabaret. In connection with the performances taking place during these events, the foundation makes payments to individuals without keeping a payroll record. The Tax and Customs Administration has imposed additional tax assessments on the foundation, applying the artists’ scheme.
In this context, payroll taxes are calculated using the grossed-up anonymous rate (108%) and the tax and social security contributions are increased by administrative fines (of 25% (of the additional tax assessed) and tax interest. Between 2008 and 2010 inclusive, the foundation paid a total of €6,400 to the artists. The total additional tax assessed for these years amounts to no less than €11,488!
Artist
In its defence against the additional tax assessments, the foundation argues, amongst other things, that the person to whom the payments were made is not an artist within the meaning of the Artists’ Scheme. This cabaret artist is merely willing to perform on a voluntary basis at the foundation’s request. The Court ruled that the Artists’ Scheme makes no distinction between professional performers and amateurs.
Volunteer scheme
As the allowances paid exceed €1,500, the voluntary workers’ scheme cannot be applied. Nor has the foundation demonstrated that the comedians were paid solely expense allowances, which are exempt from tax under the performers’ scheme. According to the Court, the size of the payments suggests rather the opposite.
Model Agreement
The amount of the additional tax assessed might have been limited. For example, grossing up could have been avoided by recovering the tax from the artist. It is possible that the artist has already declared the amounts received as income in his income tax returns. The application of the anonymous rate could have been avoided by correctly identifying the artist.
It would have been far better to ensure, before the fee was paid out, that it remained exempt from payroll tax. This can be achieved by entering into (or referring to) the agreement approved by the Tax and Customs Administration for performers model agreement. Naturally, work must therefore be carried out in accordance with this agreement. During the period in which the case heard by the Gelderland District Court took place (2008 to 2011), these approved model agreements were not in use; instead, the artist could request the Tax and Customs Administration to issue a Declaration of Employment Relationship (VAR).