Recently, the Ghent Court of Appeal rendered a remarkable decision concerning the application of the treaty exemption for income derived by a sportsperson. The case in point concerns an internationally active cyclist residing in Belgium (Ghent, 25 February 2014, Fisc.Koer. 2014, 365).
Taking into account the actual circumstances of this case, the Court ruled that ‘the most appropriate way’ to determine the exempt part of the cyclist’s (fixed) salary, is to take into consideration the competition days only.
As a result, the exempt part of the cyclist’s income should be calculated by multiplying the total income by a fraction consisting of the number of competition days in the numerator and the total number of competition days in the denominator.
Although the Court explicitly recognizes that the cyclist’s salary is also related to the preparation and training in order to be able to participate in competitions, it is surprising that it did not take into account the number of training days – neither training days in Belgium nor training days abroad – when determining the tax exemption.
For the sake of completeness, it should be noted that the present decision is at odds with a recent Belgian circular (AFZ nr. 2/2012 d.d. 27.04.2012 (AFZ/2012-0288)), as well as with the most recent amendments (July 2014) of the OECD Model Tax Convention and its Commentary.
In this respect, the new paragraph 9.1 of the Commentary on Article 17 clarifies that Article 17 also applies to the part of the remuneration of a sportsperson that relates to preparation, such as rehearsal and training, and not only to the part of such remuneration that relates to actual performances. Furthermore, this would apply regardless of whether such rehearsal, training or similar preparation is related to specific public performances taking place in that State: for example, remuneration paid with respect to the participation in a pre-season training camp would be covered.
Prof Dr Ian Blackshaw adds the following footnote:
This court decision is typical of a number of judicial rulings that fail to understand the nature of sport and take account its special characteristics and dynamics (the so-called ‘specificity of sport’), which are recognized in the European Commission White Paper on Sport of 11 July 2007 and the so-called ‘Sport Article’ (Article 165) in the Lisbon Treaty (TFEU).