In the last few years, Cyprus has become an increasingly popular destination for international entertainers. From globally recognised singers and popular DJs to stand-up comedians and other performers, the island continues to host a growing number of high-profile artists from around the world.
While this trend is a welcome development for the local entertainment sector, organisers should be mindful of the tax obligations that may arise when non-Cyprus tax resident artists perform in Cyprus.
What are the tax considerations when organising such events?
A 10% withholding tax applies on the gross income of a non-Cyprus tax resident who provides entertainment services to the public and the gross receipts of any theatrical or musical or other group of persons providing entertainment services to the public, arising from performances in Cyprus. In analysing whether Cyprus retains the right to tax the income of a non-Cyprus tax resident, one should also refer to the provisions of the relevant tax treaty (where available).
What about VAT?
In addition to income tax considerations, organisers should also be wary of relevant VAT obligations. For VAT purposes, any individual or legal entity planning to organise an artistic event should notify the Tax Commissioner of their intention by submitting a declaration. The declaration should include, among others, information on the expected income from and expenses relating to the event and must be submitted at least one month before the event. Based on the provided information, the Tax Commissioner would require the organizer to make a VAT prepayment for the specific event.
Have organisers been compliant?
The practical application of these rules has recently been scrutinised. In a special report issued last year, the Audit Office of the Republic of Cyprus found out that, in major entertainment venues, a large number of concerts performed by international artists had been organised without the corresponding withholding tax being withheld and paid. As a result, the Cyprus Tax Authorities are now in the process of issuing further guidance in relation to this matter.
Key takeaways for event organisers
As Cyprus continues to attract international performers and host large-scale entertainment events, tax compliance should remain a key consideration for organisers.
By Michael Michaelides, Partner, Business Tax, Deloitte Limited
