Taxation of Artists

Irish Taxation of Artists

© Frank McGivney 22 November 2013

Ireland was once regarded as the land of saints and scholars, this also encompassed artists of all types. We have always had a rich history of artistic endeavour among our people. In Kells for instance we have one of the finest examples of Irish creativity, with the world famous, Book of Kells (located in Trinity College). This heritage has enriched the lives of our nation over the course of history and has helped to define our national identity. Irish people in all areas of the arts are recognized world wide as the best in their fields.

In 1969 the then finance minister Charles J Haughey introduced. in the Finance Bill, the artist’s exemption. This provided for qualifying artists to be exempt from income tax. This was a unique relief that applies to visual artists, composers of music and writers. It was seen as an extremely progressive measure especially in the context of that time in history.

The artist’s exemption has to be seen in the context of the type of work that is involved. Most artists in Ireland earn very little from their artistic works. In fact they would be below the poverty line and therefore most have to supplement their income with “normal” nine to five jobs in order to pursue their dreams of creating masterpieces. Works of art are created individually not like most other items, which are created in multiples. Therefore the amount of time that it can take to produce a book or paint a landscape is a lot longer than it would be to produce a set of iron gates or a mobile phone. The artist may in fact have to produce several versions of any one individual item in order to reach the level of perfection that he/she seeks. As a result the eventual income from the sale of  art may have no real bearing to the actual length of time it took to create the piece, also income can be very erratic as the time between works of art been sold is dependent on the creative process not on simple production runs and normal economics. This means realistically that if a nation wants to encourage an artistic heritage for future generations to appreciate then it has to give some help to artists.

The scheme has been modified over the years, currently it only applies to the first Euro40,000 of profit from creative works of art. If your income is substantial then you have to take account of the fact that any reliefs you claim will be also restricted by the high earnings restrictions.

The €40,000 limit was introduced in the tax year 2011.
Guidelines have been drawn up by the Arts Council and Minister for Arts Sport and Tourism, with the consent of the Minister for Finance, for determining for the purposes of Section 195 whether a work is an original and creative work and whether it has, or is generally recognized has having cultural or artistic merit. The Revenue Commissioners may consult with a person or body of persons, such as The Arts Council, which may be of assistance to them in reaching decisions in relation to Artists Exemption.
The scheme provides that the Revenue Commissioners can make determinations in respect of artistic works in the following categories only:

1. a book or other writing
2. a play
3. a musical composition
4. a painting or other like picture
5. a sculpture

You have to be resident or ordinarily resident and domiciled in Ireland in order to avail of the relief. For foreign artists who intent to become ordinarily resident in Ireland in order to avail of the relief, they can fill out an application form to get advance approval from the Revenue.

You have to apply for the relief in the year that you earn the income, this is vital, if you apply after the year end then you won’t be approved for the previous year. If you are paid an advance royalty then you still have to meet these criteria and get your application into the revenue in that year.

Claims for Artists Exemption should be made on Claim form Artist 2 (PDF, 356KB). A determination granted on the basis of this claim form will cover the particular work or works submitted with the claim as well as all future qualifying works in the same category, provided they fall within the guidelines.
Depending on the category in which artist’s exemption is being claimed the following items should be submitted in support of a claim

1. a book or other writing - 3 published copies of the book
2. a play - a copy of the script along with a signed production contract
3. a musical composition - CDs or cassettes on which claimant must be accredited
4. a painting or other like picture - 8-10 good quality photographs of work together with evidence of sale i.e invoices and a brief CV of artistic career to date
5. a sculpture - as at (d) above.

The exemption only applies from income from the creative aspect of the work. Any other income is taxable. So for instance the income from the sale of your musical cd may be exempt but the income from concerts would be taxable.

Other taxes:

The exemption only applies to income tax. Your income is still liable for PRSI and Universal Service Charge. Also if your supply of goods exceeds 75000 or your supply services exceeds Euro37500 in a continuous 12 month period then you also will have to register for VAT. The vat on the sales of Paintings, sculptures, etc is 23% and the vat on work performed on land or building in Ireland is 13.5%.

Determinations of approval for Scheme:

2. Section 195, Taxes Consolidation Act, 1997 provides that a work for the purpose of the Section is an original and creative work in one of the following categories:
1. a book or other writing;
2. a play;
3. a musical composition;
4. a painting or other picture;
5. a sculpture.

Revenue may determine such a work to have, or to be generally recognized as having, cultural or artistic merit.

3. In broad terms, therefore, in order to secure exemption under Section 195, a work has to be both original and creative and to have either cultural merit or artistic merit.
4. In order to be granted a determination under Section 195, it is not necessary for a work to have both cultural and artistic merit - the presence of either quality is sufficient.
5. In applying these guidelines, Revenue may, as provided for in Section 195, consult with such person or body of persons as may, in their opinion provide authoritative assistance to them in establishing whether a work is a qualifying work for the purposes of Section 195

Cultural or artistic merit

6. A work has cultural merit if its contemplation enhances the quality of individual or social life by virtue of that work's intellectual, spiritual or aesthetic form and content.
7. A work has artistic merit when its combined form and content enhances or intensifies the aesthetic apprehension of those who experience or contemplate it.

Original and Creative

8. For the purpose of a determination under Section 195, Taxes Consolidation Act, 1997 the term "original and creative" encompasses any unique work which is brought into existence for the first time as an independent entity by the exercise of its creator's imagination.
9. A non-fiction work in category (a), a book or other writing, will be considered original and creative only if,
1. It comes within one of the categories cited in Appendix A, and
2. The essence of the work is the presentation of the author's own ideas or insights in relation to the subject matter, and the ideas or insights are of such significance that the work would be regarded as a pioneering work casting new light on its subject matter or changing the generally accepted understanding of the subject matter.
10. Exclusions from the compass of "original and creative"
    The following types of work in the categories set out in Section 195, Taxes Consolidation Act, 1997 will NOT be regarded as coming within the compass of "original and creative".
1. A Book or other writing, notwithstanding paragraph 9, above
1. A book or other writing published primarily for, or which is or will be used primarily by, students pursuing a course of study or persons engaged in any trade, profession, vocation or branch of learning as an aid to professional or other practice in connection with the trade, profession, vocation or branch of learning.
2. An article or series of articles published in a newspaper, magazine, book or elsewhere - except a book consisting of a series of articles by the same author connected by a common theme and therefore capable of existing independently in its own right.
2. A Play
   Types or kinds of plays written for advertising purposes which do not exist independently in their own right by reason of quality or duration.
3. A Musical Composition
   Types or kinds of musical compositions written for advertising purposes which do not exist independently in their own right by reason of quality or duration. Arrangements, adaptations and versions of musical compositions by a person other than a bona fida composer who is also actively engaged in musical composition.
4. A Painting or like picture
   Types or kinds of photographs or drawings (other than a set or sets of photographs or drawings that are collectively created for an artistic purpose) which are mainly of record, or which serve a utilitarian function, or which would not exist independently in their own right by reason of quality or by reference to their potentiality for inclusion as part of an art exhibition.
5. A Sculpture
   Types or kinds of objects which are primarily functional in nature, objects produced by processes other than by hand, objects produced by hand by persons other than those actively engaged as bona fide artists in the field of visual arts.

Non Fiction works:

Non-fiction categories applicable to be considered as eligible for a determination under Section 195.

1. The following categories of literature (and any combination thereof) coming fully within the terms of reference of the Arts Council encompassing the subjects of fiction writing, drama, music, film, dance, mime or visual arts, and related commentaries by bona fide artists:
• arts criticism
• arts history
• arts subject works
• arts diaries
• autobiography
• belles-letters essays
• biography
• cultural dictionaries
• literary translation
• literary criticism
• literary history
• literary diaries
2. The following categories of works coming fully within the terms of reference of the Heritage Council including works which, in their entirety, comprise one or more of these categories:
• archaeology
• publications associated with items or areas of significant heritage value
3. The following category of works coming fully within the terms of reference of the National Archives Advisory Council:
• Publications which relate to the archives which are more than 30 years old concerning Ireland, and are based largely on research from such archives.
4. Categories of works which in their entirety comprise one or more of the categories cited in paragraph 1 to 3 above

The current list of people who have availed of this relief is available at (from 2002 onwards):

http://www.revenue.ie/en/tax/it/leaflets/artists-exemption-section-195-1997-act.html

If you are embarking on the long and rewarding trail of artistic Endeavour then contact Frank on 0469293891 to put in place the best structures of tax planning to minimize the tax you will pay on your hard earned creations. Remember planning is forward thinking, it is more difficult to minimize tax looking backwards.

© Frank McGivney 22 November 2013

All parts are protected by copyright and can only be reproduced if mention of the author is made on such reproductions.

Frank McGivney BA ACMA CGMA

Frank McGivney & Co. Ltd,

Chartered Management Accountants, 38 Cherryhill court Kells, Co Meath Tel 0469293891 Email fmcgivney@live.com