Couldn’t make Evershed’s MMF member seminar on the US Witholding Tax Law a few weeks back? Luckily the FAC’s Fiona was on hand to take notes – check out her overview of the event including key points raised by CWA expert Richard Stoller below or here in the Documents section.
USA WITHHOLDING TAX SEMINAR 21/3/12 @ EVERSHEDS OFFICE WOOD STREET, LONDON.
Written by Fiona McGugan
Prager & Fenton’s Richard Stoller flew over from the New York office to speak to MMF members about the Central Withholding Tax Agreement. The event was hosted by Eversheds and after introductions from Eric Longley (Prager & Fenton) and Neil Mohring (Eversheds), Richard opened the discussions by stating clearly that the CWA is NOT a tax, it is an agreement to prevent tax withholding.
In the US, the CWA exists in order to prevent venues from withholding 30% of gross income from artists whilst they are on tour. It is specifically for artists, athletes and entertainers who are visiting the USA independently from a US Entity. It is entirely voluntary but as Richard pointed out, the advantages are all preventative of long term headaches trying to claim money back from the IRS and streamline the administration involved.
The CWA involves three parties:
- The non-resident individual (artist/individual band member)
- The designated withholding agent
- An authorised representative from the IRS.
Prager & Fenton pride themselves on acting as Withholding Agents, supporting the CWA and therefore the artist. The Withholding agent must always be completely separate from the artist and their primary role is to collect and remit tax.
In terms of timings, the main points made by Richard are that the CWA covers the American tax year which is January to December, therefore if a tour stretches over from one tax year to the next, two agreements will be needed per person. The agreement must cover a specific tour with specific dates mentioned and all dates and venues must be accounted for. Questions arose as to the size of the venue and whether even the smallest venue will require a CWA to which Richard stated that ALL venues are aware of the CWA ( and more importantly the IRS ! ) and its simply not worth the risk to leave any undeclared income. All venues will withhold 30% of your income without a valid CWA.
Finally, important filing dates are submitting all contracts and paperwork 45 days before the tour commences and all expenses and post-tour documentation needs to be filed up to 45 days after the tour. There is absolutely no leniency on these points.
We all know that even the most organised tours do not always go to plan and amendments must be made. According to the CWA these are allowable if circumstances cannot be helped but notifying the IRS as soon as possible, i.e. while you are still on tour, is an absolute must.
Any previous visits made to the USA by any of the artists should be accounted for and all taxes must be up to date. The IRS will look into the past three years of any non-resident and if any paperwork has not been submitted or payments not made they can look a further three years back.
Basic information required by the CWA includes all contracts (including publishing and recording contracts), endorsements and sponsorships, tour support, merchandising deals and licensing deals. All income streams must be accounted for and financial information such as expected expenditure is also required. If you feel that you are being asked for anything unreasonable by the IRS agent then it is always possible to request liaison with their superior and ask your withholding agent for advice as well.
The main advantage of the CWA is that by liaising with the IRS and submitting accurate costing and expected accounts you are only charged income tax rates whilst on tour. Richard made the point that the IRS agents will look your artist up online and will know how big they are, who they’re signed to, where they are going on tour, etc. so there is very little point in withholding any truths for financial benefit.
In terms of crew members, the law has recently changed in the last year so that now tax details will be required of all members on the tour, not just the artist. However, if you are a ‘major company’ bringing employees providing labour and equipment, they will not need a separate CWA.
As mentioned, CWA’s are optional, however, without one, there is a good chance that the US government will look into your artist and audit all expenses which means hours of paperwork and filing. If you do not have one, you will need to file a tax return.
It is important to remember that the CWA law is constantly evolving. To keep up to date with changes please visit http://www.irs.gov/businesses/small/international/article/0,,id=106060,00.html