Limits to Tax Planning

S. 401 1. Introduction

Artistes and sportsmen are often in the spotlight for being able to earn extraordinary amounts of income from diverse sources (both the type of income and from a geographic point of view, i.e. income from public performances, advertisement, image rights, copyrights, etc arising in different jurisdictions). In addition, it seems that artistes and sportsmen tend to be perceived as taxpayers who may easily escape or play around taxation both in the state of source (or also referred as the state of performance) and in their state of residence.

So-called star companies are entities normally set up by the artiste or sportsman in low tax jurisdictions (or in its broad sense elsewhere, as long as it is set up by the artiste or sportsman) with the aim of avoiding taxation in the source state, in the absence of a fixed place of business. Star companies can be abusive or genuine depending on their main purposes.

The complication arising from any attempt to mitigate the opportunities for abusive tax constructions is that the enforcement of anti-abuse provisions can lead to double taxation (i.e. double taxation may arise from different methods of taxation applied by the residence ...