Ireland Tax Guide For Sportspersons / Entertainers:
An Executive Summary
This is an introductory guide for Sportspersons and Entertainers,
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Business Formation: The government has a
fairly light touch in terms of statutory requirements. You
don't need anyone's permission to be a stand-up comic or to
play golf, although professional organizations and the club
system may constrain your choices in some cases. You won't
have to register or license your business unless you form
a limited company, or you are the Rolling Stones
and you need to take over Central Park for your gig, which
will certainly require a
special license. Many sportsmen and entertainers
operate very successfully as individuals. Limited companies
do have to be registered
of course, and have to report
annually. And remembering that the only two certainties
in life are death and taxes, inevitably you'll have to make
annual tax
returns, whether you're a limited company or not.
If you're really in a small way of business, you won't have
to bother with VAT,
which in any case doesn't apply to some types of sporting
and entertainment activity. Of course if you take on staff,
life becomes more complicated!
Domestic Taxation: The big issue is whether
to be taxed as an individual
or as a company.
At first sight it's a no-brainer, with individual taxes going
up to 41% plus the 6% special levy (the government has run
out of money!) while company profits are taxed at 12.5%. Needless
to say, it's more complicated than that, especially if you
are a director of your company. The special circumstances
of a sportsperson or an antertainer may also have a bearing
on the choice to be made; long-term streams of sponsorship
income, if you are successful, may dictate the use of a company.
Husbands
and wives can play some interesting variations,
and get the best of both worlds. Longer term, the holy grail
is to turn income into capital, something which is not straightforward
for sportspeople and entertainers, unless they can sell rights;
but it isn't easy - the Irish Revenue got there before you!
If you're not born and bred in Ireland, another goal is to
remain non-resident, which means not having a permanent
establishment (fixed place of business) so that
you get taxed only on Irish-source income. If there's one
aspect of your business on which you should consider taking
paid-for advice, it's probably the tax structure. It's so
important to get it right at the beginning!
International Taxation: Few sportspersons
or entertainers have a static location, although a marketing
company may be based in one particular spot. In fact it's
one of the advantages of this rather special way of life is
that you're not tied to one place, and you have the opportunity
to base yourself in a low-tax location. Getting performance
or royalty income without tax may be straightforward inside
the EU if you have a corporate set-up, although some countries
discriminate against low-tax locations, but it can be more
complicated if the foreign country takes a bite out of your
income, called withholding
tax. Then you have to turn to double
tax treaties to try to get the money back. It's
all a bit of a jungle. If you set up a marketing operation
in a foreign country, you need to try to avoid the 'permanent
establishment' trap, and you may get bogged down
in local VAT.
If you go to work in a foreign country for a longer period
of time, you need to think hard about your tax situation in
advance, both in respect of local income taxation and perhaps
because of withholding
tax.
Tax-Efficient Structures: With a corporate
tax rate of 12.5%, there appears to be not much need for exotic
structures to minimize tax; but if you are resident, things
are not so simple. Depending on the nature of your income
flows there may be a case to be made for locating the business
focus of your activities in a low-tax, 'offshore'
jurisdiction, especially if you are eventually
planning to retire somewhere out of Ireland. As yet, there
are no 'CFC'
rules in Ireland, so that profits made in such places can
stay there. Offshore structures are often useful for inheritance
tax and asset protection reasons as well, and anti-avoidance
law has not gone nearly so far in Ireland as in, for example,
the UK. Non-resident sportspersons and entertainers with activities
in Ireland can also use offshore structures, as long as they
avoid the 'permanent
establishment' trap.
Business Incentives: There is a wide variety,
almost a bewildering variety of support schemes operated by
various levels of government, some of them in association
with the European Union, ofering direct grants to support
employment, rebates on taxes, tax credits for investors in
small businesses, and R&D
tax credits. Although not many of these will be relevant to
artistic creators, it could be worth investigating what's
on offer. However, the saying: 'He who sups with the devil
needs a long spoon' comes to mind. The schemes are well-intentioned,
no doubt, but they can be intensely bureaucratic, with very
intrusive qualification procedures, and a long 'tail' of reporting
requirements.
Employing People: Many experienced employers
will just tell you: 'Don't do it'. 'Marry in haste; repent
at leisure', they say, and it was never so true than when
it comes to employment. Don't kid yourself that employees
will feel that they owe you anything. Today's workers, encouraged
by a slew of anti-business legislation from Brussels, and
the general nannying attitude of government, often feel that
the world owes them a living. Many employers of course bring
problems on themselves by treating employees as little better
than slaves. Despite stories about rock stars who take entire
floors of Claridges, most sportspersons and entertainers run
quite skinny operations, but if you do need staff try as hard
as you can to use contractors (ie self-employed people) rather
than employees. The
Revenue has plenty to say about that, of course,
so if you are left with no choice, realize that you will have
to operate 'PAYE', provide various statutory social benefits,
and that it is extremely hard to dismiss
an unsatisfactory employee once
you have taken them on. Of course, there are plenty of exceptions
to these rather sweeping generalizations. Lucky you if you
find some!
Welfare And Lifestyle: Meaning, for the
sportsperson or entertainer herself. Obviously, state
social welfare schemes apply to sportspeople and
entertainers as much as to anyone else, although there may
be problems if you operate across national borders. Many people
will want to have improved (meaning private) health
benefits, and almost all will want to find tax-efficient
ways of making provision for their pensions.
It's important to separate these from your business itself,
in case of failure. If you have it in mind to retire
to somewhere warmer and less highly taxed, then the time to
start is now, in terms of building
up a pension away from the grasp of the Revenue.
International Aspects: Perhaps you plan
to live out your life as a respected and contented member
of your local community. The salt of the earth, one might
say, if that's not patronising. But some people, and perhaps
especially sportspersons and entertainers, will find themselves
drawn inevitably into an international existence, working
and/or living in other countries. There are many challenges:
apart from the difficulty of arranging your tax affairs satisfactorily,
there are the problems that go along with property
ownership, education
of your children, international removals, health
care and pension
provision, just to take some of the more obvious issues. Of
course no one can predict the future with any certainty, but
there are all too many stories of people who have trapped
themselves in the wrong investment in the wrong currency in
the wrong place, with multiple taxmen on their backs. Most
such problems are avoidable, with forethought.
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