No Article 17 for Sportpersons and Entertainers in the new Tax Treaty between Cyprus and the Netherlands

by Dick Molenaar and Teresa van Wanrooij, All Arts Tax Advisers, Rotterdam, the Netherlands

On 1 June 2021, a new tax treaty has been concluded between Cyprus and the Netherlands. Special about this tax treaty is that no Article 17 (sportspersons and entertainers) has been included (see downloads for the text of the tax treaty).

This result fits in the tax treaty policy of the Netherlands. Article 17 creates problems of double taxation and high administrative expenses for sportspersons and entertainers/artists, while the other articles of tax treaties, such as Article 7 (Business Profits) and Article 15 (Dependent Personal Services), are sufficient to counteract tax avoidance schemes. The Netherlands already removed in 2007 unilaterally its withholding tax on Dutch performance income for foreign sportspersons and entertainers/artists, if they come from a country with which a tax treaty has been concluded. But is also wants the same for Dutch sportspersons and entertainers/artists abroad and therefore prefers not to include an Article 17 in new tax treaties.

Until now, the Netherlands had only been successful in the tax treaties with Ethiopia (2011) and Iraq (2019). The new tax treaty with Cyprus without an Article 17 is a big step forward, because Cyprus is member of the EU and has an active sports and entertainment life.

Last year, Dutch parliament has discussed extensively the new tax treaty policy with the Dutch Secretary for Finance. Already since 2011, the treaty policy was not to include Article 17, but the results had been disappointing with only Ethiopia and Iraq. He proposed to return to the official OECD line with an Article 17 in tax treaties, although with restrictions, but members of parliament convinced him to keep trying to leave Article 17 out of new treaties. With this 2021 Cyprus tax treaty as a first positive result.

The tax treaty must still be approved by the parliaments in Cyprus and the Netherlands before it comes into force, probably at 1 January 2023.

The Dutch tax treaty policy for sportspersons and entertainers/artists has been discussed in an article in Sports Law and Taxation 2020/43, with a follow-up article in the next issue of the magazine.