Legal form neutrality and mitigation of double taxation of income earned by entertainers and sportspersons

My author journey with Peter Essers started in 1987. I met Peter when I became a board member of the ‘Foundation Tax Legal Assistance De Smeetskring’ of which he already was a board member representing the Fiscal Institute Tilburg (FIT). In 1991, Peter, knowing that I was eager to work in academia and to do a Ph.D. study, asked me to apply for a position as a lecturer/researcher at the FIT. Surprise: they hired me. Since then, Peter and I made together as entrepreneurial academics a lot of inspiring and challenging journeys, especially in the fields of European and international taxation.
Just to mention a few of them. We started together the ‘EUCOTAX Wintercourse’. Together with the always energetic, inspiring and out-of-the-box thinking Frans Vanistendael, we started the European Tax College (ETC), of which the Leuven ‘International and European Tax Moot Court’ is a part of the legacy. Whereas the ETC stopped, it was a source of inspiration for the current international Tilburg LLM ‘International Business Taxation’. We also internationalized the staff of the FIT. But for me, the most precious is not only that Peter is one of my closest colleagues, if not the closest, but also that we have become very good friends, and that is true for our spouses as well. Peter’s retirement will end our professional relationship, at least to a certain extent, but it will not stop our warm friendship.
As many people know, the academic Peter Essers has a wide range of interests. Just consult his very long list of publications. In those publications, I found inspiration for the topic of this chapter. Peter has published on legal form-neutral taxation. This was predominantly in the area of business taxation. But he also led a publication on taxation of top sportspersons. The combination of both topics triggered me because of a Dutch Supreme Court ruling in which an entertainer claimed for personal income tax (PIT) purposes an additional ordinary tax credit under tax treaties to the extent that his star company could not fully realize its ordinary tax credit, because of insufficient taxes due. The Supreme Court ruled that the entertainer and his star company could not be identified. Thus, the legal form matters, also regarding the mitigation of double taxation through a tax credit mechanism. In this case, it was even more complex than the regular issue of legal form-neutral taxation, i.e., performing activities as a natural person or by means of an entity, because in this case, the entertainer performed the activities both as a natural person and by means of an entity. Under tax treaties, entertainers, sportspersons and the relevant entities are normally covered by the same provision, i.e., a provision similar to Article 17 OECD Model Tax Convention (OM) 2017 (OM 2017). Therefore, this ruling can easily be connected with the two research fields of Peter to develop the research questions of this chapter:
Can mitigation of double taxation of income earned by entertainers and sportspersons by means of an ordinary tax credit be done in a legal form-neutral manner, and if not, how should legal form-
neutral mitigation of double taxation of this income be realized?
I think that this question is relevant from an academic point of view because, as far as I know, the mitigation of double taxation of income earned by entertainers and sportspersons has never been addressed before from the perspective of legal form neutrality. I also believe that it is of societal relevance because the answer to the question might prevent an excess tax credit which cannot be credited. This seems to be in the interest of entertainers and sportspersons. This might result in less tax costs. If so, this might also be in the interest of persons who contract an entertainer or a sportsperson because lower tax costs might enable them to buy the services at lower prices.
To answer the research questions, benchmarks have been developed (§32.2). In §32.3, the Supreme Court ruling is discussed. Research on alternative methods of legal form-neutral mitigation of double taxation, based on the benchmarks, is presented in §32.4. This chapter ends with the main conclusions (§32.5). The allowed number of words sets inevitable restrictions. Therefore, for example,
this chapter does not address which persons qualify or should qualify as entertainers or sportspersons. I do neither go into the question which income is or should be connected with an entertainer or a sportsperson nor will discuss whether a specific provision for entertainers and sportspersons is justified. The focus is on the method of mitigating double taxation of such income.
The applied research methodology is the traditional doctrinal legal methodology. This methodology makes it possible to acquire a more complete understanding of the mitigation of double taxation of income earned by entertainers and sportspersons. It also enables to assess, based on the developed benchmarks, whether positive law should be improved, and if so, how this should be done. Therefore, I think that the application of the doctrinal legal methodology is appropriate to discuss the legal form-neutral mitigation of double taxation of income earned by entertainers and sportspersons.