Spain | Taxation of non-resident artists and sportsmen

Artists (actors, singers) and sportsmen, non-residents in Spanish territory, who occasionally carry out their artistic or sporting activities in Spain, are usually unaware of their tax obligations before the Spanish Tax Authorities.

In this respect, we would like to point out that, in the last year, the inspection activity of the Spanish Tax Administration has increased considerably in relation to these taxpayers. This is a consequence of the fact that the Annual Tax and Customs Control Plan of the State Agency issued by the Spanish Tax Administration (AEAT) expressly included the intensification of the control of the income obtained by non-resident artists and sportsmen who act or develop an activity in Spain within the year 2020.

Spanish legislation, which regulates the Non-Resident Income Tax (IRNR), establishes literally that: it is considered income obtained in Spanish territory, among others, that which derives, directly or indirectly, from the personal performance in Spanish territory of artists and sportsmen, and that which derives from any other activity related to such performance, even if it is received by a person or entity other than the artist or sportsman.

This means that the artist or sportsman who performs an activity in Spain for which he or she obtains income, is subject to tax obligations and to the payment of taxes in Spain and must declare not only the income directly related to his or her performance but also other income linked to his or her professional performance, such as sponsorships, image rights, etc…

The above is understood regardless of whether the actual recipient of the income derived from the athlete’s or artist’s performance is the artist or athlete himself or herself, a company in which he or she has any interest, or a third individual or legal entity with no apparent connection to the athlete or artist.

Therefore, even if the company that pays such income is a non-resident in Spanish territory and the payment takes place physically outside such territory, any income obtained in Spain will be considered subject to tax (19% for EU residents and 24% for non-EU residents) when it is obtained on account of the artistic or sporting activity carried out in the Spanish territory.

Most of the double taxation international treaties that Spain has signed with other countries allow the country in which the activity of the artist or athlete takes place to tax the income generated from such activity. All these agreements also establish mechanisms to avoid double taxation, but this possibility is considerably complicated when, as in many cases, the artist or sportsman receives his income through a company incorporated in his country of residence or in a third country instead of receiving it directly as an individual.

Often the contracts signed by artists and sportsmen are signed by companies related to them -usually domiciled in their country of residence-, this situation is giving rise to serious difficulties for them to deduct in their country of residence (and within the scope of Corporate Income Tax) the tax paid in Spain as an individual.

We therefore want to highlight (i) the existence of important tax obligations that affects artists and sportsmen who are not resident in Spanish territory for the activities they carry out in Spain and, furthermore, (ii) the need for them to receive adequate prior advice on the tax consequences of their activity and, consequently, on the best vehicle to formalize their contracting.