Employing foreign entertainers: A tax risk for event organisers
25 June 2014
Posted by: Author: Lesedi Seforo
Author: Lesedi Seforo (SAIT Tax Technical)
attractiveness to foreign entertainers
South Africa has become not only a popular destination for
tourists, but foreign artists have also taken a keen interest in the country.
The yearly line-up at the Cape Town International Jazz Festival, coupled with
recent tours from the likes of U2, Bruce Springsteen and Justin Bieber prove
just how far South Africa has come in attracting top foreign musical talent. A
closer look at the events management industry will reveal that in addition to
the big stars, many lesser known foreign entertainers have also "come to the
party”, performing at smaller venues ranging from clubs to awards ceremonies.
Don’t forget tax
The organisers of such events are not always larger
companies like Big Concerts, but entrepreneurial individuals with companies
falling into the SMME category. Since the best tax advice tends to follow the
big bucks, smaller events management companies, like other SMMEs, tend to find
themselves being ignorantly non-compliant with the tax laws.
A potential pitfall is with regards to the aforementioned
foreign entertainers. Local events organisers utilising the services of such
entertainers need to be aware of their tax obligations to the South African
Revenue Services (SARS). Our government is very aware that we cannot have
foreign performers earning considerable amounts of money (tax-free) over very
short periods of time.
To remedy this, Treasury amended the tax laws a number of years
ago. In addition, SARS established the ‘Foreign Entertainers and Sportspersons
The withholdings tax
on foreign entertainers
short, the tax law states that a foreign entertainer who receives any amount in
respect of entertainment activities performed in South Africa is subject to a
15% tax on that amount. A foreign entertainer includes any person who performs
any activity as a theatre, motion picture, radio or television artiste or a
musician. It also includes persons who take part in any other entertainment type
How SARS collects the
To overcome the arduous task of attempting to collect tax
from an entertainer who has returned to his home country, SARS collects the tax
by using the South African resident (whether an organisation or an individual)
who must pay the foreign entertainer for the services rendered. The resident is
required to withhold 15% of the entertainer’s fee and pay it over to SARS
before the end of the month following the month during which payment to the
entertainer was made. Failure to do this will result in the resident being
personally liable for the 15% tax. The payment to SARS must be accompanied by a
To use an illustration, let us assume that ‘Fun Times’ Pty
(Ltd), a local events and promotions company, hires a Mr. John Jazzy to perform
at an awards function for R100 000 on the 29th of January.
According to the agreement between both parties, payment to Mr. John Jazzy must
be made on the 3rd of February.
In order to be tax compliant, Fun Times must pay John Jazzy
R85 000 (R100 000 minus the 15% tax on the R100 000). The
R15 000 tax which was withheld from John Jazzy’s fee must be paid to SARS
before the end of March.
Should Fun Times not withhold that R15 000 tax and pay
it over to SARS, they will become personally liable for the tax.
Notification to SARS
of the entertainer’s performance
Once the local events organiser has concluded the agreement
with the foreign entertainer to perform in South Africa, SARS must be notified
of various details pertaining to the performance, such as the date and
location. This is done via a specific form which must be filled in by the local
event organiser. The form must be accompanied by supporting documents such as
copies of the contract between the organiser and the foreign entertainer and
the latter’s passport. This must be sent to SARS not later than 14 days after the
agreement between the organiser and the entertainer has been concluded.
SARS is as vigilant as ever, always looking to collect as
much tax as is legally possible. If they were to conduct industry-wide audits of
events organisers, would your organisation be found to be personally liable for
the 15% tax on foreign entertainers? Consult your SAIT tax professional if
you’re an events organiser who regularly deals with foreign entertainers.