Taxation of actor & sportsperson in UAE.

 

The world of entertainment and sports has been abuzz lately with talk of the United Arab Emirates (UAE) corporate tax and its potential implications on the industry. The tax treaties between the UAE and other countries such as India or the UK have determined that the income derived by overseas-based entertainers - by performing in the UAE - is taxable in the country, regardless of whether it accrues to the entertainer or another person

While the scope of an entertainer is not limited to movie actors, it covers individuals working in the theatre, motion picture, radio or television, and music industries. Any individual in a similar profession in the UAE could find themselves impacted by corporate tax. Even a one-off performance in the UAE could attract corporate tax if the entertainer is not regularly present in the country.

The same tax position that applies to entertainers also applies to sportsmen exercising their activities in the UAE. The corporate tax could become an additional compliance point for the sports industry in the future, similar to the VAT implications that were discussed for cricketers playing in the UAE for the Indian Premier League in 2020.

It is important to note that corporate tax and VAT are distinct from each other. While VAT provides an alternative of reverse charge mechanism (RCM) on the UAE payer to settle the VAT liabilities of an overseas entertainer, the corporate tax laws do not have any direct alternative for such individuals. Withholding tax is a concept that applies to corporate tax laws but does not appear to be an alternative to the obligations of a taxpayer.

The taxation of entertainers and sportsmen is a global issue, and different countries have formulated comprehensive domestic policies to address the issue. For instance, in India, payments for such activities are subject to a withholding tax of 20%, and the entertainer/sportsman is not required to obtain separate tax registration. Specific exemptions have also been provided to non-residents for shooting movies in India.

Currently, the UAE corporate tax does not provide any exemptions to the entertainment or sports industry. However, as the UAE continues to grow as a hub for both industries, it is expected that the tax policy will comprehensively address the issue. The entire entertainment industry should take note of the UAE tax implications for activities performed in the country, especially since the cabinet decision on business activities undertaken by an individual could potentially impact them.