BELGIUM: Case law regarding foreign artist companies

The Lower Court of Hasselt (Belgium) reportedly decided on 11 February 2004 a case regarding the taxation of foreign artist companies. In the case at hand a Cultural Centre in Belgium, had during a period of 6 years concluded contracts with various foreign artist companies regarding performances in Belgium. Following a book inspection, the Belgian tax authorities imposed an assessment on the Cultural Centre with respect to these payments. The Cultural Centre did not accept the assessment and went into appeal.

The Court of Hasselt annulled the assessment, because the tax authorities had not distinguished to whom the payments had been made, and had not investigated whether Belgium was under the applicable tax treaties entitled to tax the payment to the foreign artist company. The Court held that the burden of proof in this respect rested with the tax authorities, and not with the taxpayers.

Under Belgian law a withholding tax of 18% needs to be withheld on payments to artists in connection with public performances in Belgium. Under domestic law, the withholding obligation also applies if the payment is made to another person than the artist. Older tax treaties concluded by Belgium contain provisions, which are in line with Article 17 of the 1963 OECD Draft Tax Treaty. Newer treaties tend to contain a provision that is in line with Article 17 of the 1977 OECD Model Convention. Only the latter treaties do contain a provision similar to Article 17(2) of the 1977 and following OECD Model Conventions.

In the case at hand, inter alia the 1980 tax treaty with the Netherlands was at issue, which contained a provision like Art. 17 of the 1963 OECD Model. Other treaties with a provision like Article 17(2) of the OECD Model conventions were those concluded with Austria, Denmark and Germany. The Court of Hasselt also annulled the assessment in as far as it related to artists from countries with which Belgium had concluded a tax treaty that contained a provision like Article 17(2) of the OECD Model Convention. The reason for the annulment was that the tax authorities had made misuse of their arbitrary powers in not splitting out the assessment over the various countries where the artists originated.