N.B. this post is the last of a two-part article.

Foreign social security issues for the unprepared

Like withholding tax, foreign social security is also a vital consideration in certain territories. Social security and withholding tax are often grouped together mistakenly as “tax”, when the legislative mechanisms for relieving the two costs are quite separate, so take care.

In practical terms, social security is currently only relevant in France and Italy (as relates to mitigation); however, the social security deduction and potential costs for the unwary can be significant here. Furthermore, the deduction cannot be offset against any UK tax. To reduce or eliminate the deduction, it is necessary to obtain a document from the individual artist, band and crew’s host jurisdictions. Commonly known as a certificate of continuing liability or certificate of coverage, this document effectively confirms that they pay social security on all earnings where they are tax resident. The application process to obtain this documentation can be very lengthy, particularly when dealing with public offices. I cannot stress enough that if this documentation is needed, then it is vital to start applications early to ensure that everything runs smoothly with the local promoter.

Band & crew aspects

Unlike artists, any hired band (technically all stage performers) are generally untouched by withholding tax. However, there are exceptions as the USA, Australia, Canada, France and the UK (for visiting artists) will seek to tax payments made to any hired band for the relevant performance, as well as the main visiting artist. As a result, contracts with these hired personnel should allow for any foreign tax deduction, with those affected requiring appropriate documentation for their home tax return filing.

It is essential to remember that when touring the USA, the whole party (including the band and crew) will need USA Tax IDs (effectively IRS registration). As you may imagine, this can be a logistical nightmare, but is essential for making the advance withholding applications that are vital to a successful USA tour. Lastly, it is worth re-emphasising that for social security purposes, the relevant documentation for France and Italy usually extends to the whole tour party.

What to do after the relevant shows

This is sometimes overlooked, but after each show/tour, it is vital to ensure you hold all relevant documentation required to support withholding tax claims back home. Taking the UK for example, whilst HMRC acknowledge that obtaining certificates from local tax jurisdictions is not always possible, they may require other evidence that demonstrates withholding tax deductions.

Despite mitigating withholding taxes at the time of the shows (or in advance), some jurisdictions will usually still require a subsequent tax return filing by the stage performer/s, such as the USA, Australia and France. Indeed, the ability to file advance withholding applications in the USA requires your performers to have been compliant in their USA tax affairs and filing end of year tax returns for prior tours.

Think ahead! Tour planning tips for withholding tax

• Engage with those preparing tour budgets and cash flow forecasts at an early stage, unless that is yourself!
• Start a dialogue with the local show promoters well in advance; they will have a wealth of knowledge on how to mitigate withholding tax at a local level effectively, but do not be afraid to question it. This can subsequently feed into your strategy and inform your contract wording.
• Be sure to understand exactly what is required and what you can/cannot do.
• Where direct invoicing will be needed, speak to production suppliers about your requirements in advance. It is unlikely to go down well if you ask them to do something for the first time on the eve of a show.
• If you need documents from an artist’s or artists’ tax authority (such as a certificate of tax residence or social security documentation), remember that public offices will not care how urgent it is. It is best practice to make the request as far in advance as possible. To this end, pinning down your finalised band and crew early on is also advisable.
• If local advisors are necessary to file applications (the USA and Australia, for example) engage with them well in advance of the show to obtain quotes for their services and relevant timelines. Be prepared that they will require relevant documents, accurate accounting records and contracts earlier than you may anticipate.
• Follow through the planning and ensure it stays on track.
• Do not forget to gather all relevant documentation and ensure any subsequent tax filings are submitted on time.

Whilst it is always useful to understand the basics, it is advisable for artists and managers to engage a withholding tax specialist, given the complexities and that every tour is unique. The key is to start early and have an open dialogue with promoters and the artist representatives, and be ready for the inevitable curve ball, which you can always expect with international touring!

For further information about withholding tax or any of the issues raised, please contact Steve Wren.

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About Steve

Steve Wren is a tax partner at SRLV, one of the UK’s top three accountancy and business advisors to the music industry. Voted as one of Billboard magazine’s Top Business Managers in 2023, he has specialised in the taxation of entertainment industry clients since 1992 and advised touring artists, from independents to household names, on a regular basis for more than 15 years.

Alongside UK musicians and international acts, Steve and his team regularly advise promoters and agents across a range of tax matters, including more specialist areas, such as withholding tax.

 

This material is published for the information of clients and contacts. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or SRLV LLP.