Fact Sheet

Artists' Exemption Scheme (Update)
Anthony Casey - Noone Casey Auditors and Accountants

As a result of the changes in budget 2006, the amount of artists' income which is exempt from Irish income tax has been capped at €250,000.

Income earned by artists, writers, composers and sculptors from the sale of their works is exempt from tax in Ireland in certain circumstances. Section 195, Taxes Consolidation Act, 1997 empowers Revenue to make a determination that certain artistic works are original and creative works generally recognised as having cultural or artistic merit. Accordingly, earnings derived from such works are exempt from income tax from the year in which the claim is made.

Guidelines have been drawn up by the Arts Council and the Minister for Arts, Heritage, Gaeltacht and the Islands, 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 recognised as having, cultural or artistic merit. Revenue may, having regard to the Guidelines, consult with a person or body of persons which may be of assistance to them in reaching decisions in relation to Artists Exemption. Revenue can make determinations in respect of artistic works in the following categories:

· a book or other writing;
· a play;
· a musical composition;
· a painting or other like picture and
· a sculpture.

Claimants for Artists Exemption must be resident, or ordinarily resident and domiciled, in the State and not resident elsewhere. However, Revenue is prepared to give advance opinions regarding the exemption to claimants resident abroad. If these claimants receive a favourable advance opinion, they are given a formal determination in respect of Artists Exemption on taking up residence in the State.

Artists, writers, composers and sculptors seeking Artists Exemption should submit a claim form to Revenue together with samples of their work and any supporting documentation in the form of testimonials etc. which they consider appropriate. Such claims should also be accompanied by evidence that their work has been published, produced or sold. The following samples and supporting documents are required for each category:

· a book or other writing - 1 published copy of the book
· a play - a copy of the play together with a production contract
· a musical composition - CDs or cassettes
· a painting or other like picture - 8/10 photographs or slides, evidence of sale (invoices) and CV if available
· a sculpture - as for painting above.

Payments to artists which are exempt from tax
The following payments are exempt from tax from when they are made to an artist whose has received an Artists Exemption:

· Arts Council bursaries
· Cnuas payments made under the Aosdana Scheme
· Payments from the sale of works that are considered eligible under the Artists Exemption scheme
· Advance royalties

Where an artist receives advance royalties that are attributable to the subsequent publication of a book or other piece of writing, he or she must lodge a claim with the Revenue Commissioners in the tax year in which the royalties are paid if the royalties are to be exempt from tax. The artist must provide confirmation from the publisher that the book will be published with his or her claim. A draft copy of the work must also be submitted.
Where a claim is received in the tax year in which the advance is received but a determination has not been granted, any tax liability arising on the advance must be paid. If a determination is subsequently granted, the Inspector of Taxes will review the artist's liability and make any appropriate refund if tax has been overpaid.

Advance royalties that were paid before the year of claim are not exempt from tax.

Restrictions

From January 1, 2007 there will be a restriction on the use of reliefs by high income taxpayers. This will include those who qualify for Artist Exemption but will only apply where income is more than €250,000. In that case the amount of relief will be limited to 50% of income.

Cultural or artistic merit

A work has cultural merit if:
· Its contemplation enhances the quality of individual or social life as a result of its intellectual, spiritual or aesthetic form and content.
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"

For the purpose of a determination under Section 195 of the Taxes Consolidation Act, 1997, the term "original and creative" encompasses any unique work that is brought into existence for the first time as an independent entity by the use of its creator's imagination.
A non-fiction book or other piece of writing will be considered original and creative only if:
· It is an example of one of the following categories of literature (and any combination thereof) coming fully within the terms of the reference of the Arts Council encompassing the subjects of fiction writing, drama, music, film, dance, mime or visual arts and any related commentaries by bona fide artists:

· Arts criticism
· Arts history
· Arts subject works
· Arts diaries
· Autobiography
· Belles-lettres essays
· Biography
· Cultural dictionaries
· Literary translation
· Literary criticism
· Literary history
· Literary diaries

And
· The essence of the work is the presentation of the author's own ideas or insights in relation to the subject matter and these ideas or insights are so significant 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.
Or
· The publication comes fully within the terms of reference of the Heritage Council, including work that, in its entirety, is a work of archaeology or a publication associated with items or areas of significant heritage value
Or
· The work is a publication that comes fully within the terms of reference of the National Archives Advisory Council and is a work that relates to archives concerning Ireland that are more than 30-years-old and are based largely on research from such archives.

Works that are not considered to be "original and creative"

The following types of work will not be regarded as "original and creative":
· A book or other piece of writing that is published primarily for or that is or will be used primarily by students pursuing a course of study or people 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.
· An article or series of articles published in a newspaper, magazine, book or elsewhere - except a book that consists of a series of articles by the same author connected by a common theme and that is therefore capable of existing independently in its own right.
· Types or kinds of plays that are written for advertising purposes and do not exist independently in their own right by reason of quality or duration.
· Types or kinds of musical compositions that are written for advertising purposes and do not exist independently in their own right by reason of quality or duration.
· Adaptations, arrangements, and versions of musical compositions by a person other than a bona fide composer who is also actively engaged in musical composition.
· 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) that are mainly of record, that serve a utilitarian function or that would not exist independently in their own right by reason of quality or by reference to their potential for inclusion as part of an art exhibition.
· Types or kinds of objects that are primarily functional in nature, objects produced by processes other than by hand or objects produced by hand by people other than those actively engaged as bona fide artists in the field of visual arts.
As can be seen in order to identify whether an artist qualifies for Artist exemption or not can be a complex matter; furthermore quantifying the tax relief has also become more complex as a result of new measure is being introduced with effect from 1 January 2007 which will limit the use of tax breaks by those with high incomes.

Noone Casey Registered Auditors and Accountants
54 Dame Street, Dublin 2, Republic of Ireland. | T: +353-1-6707900 |
F: +353-1-6707921 | E: info@noonecasey.ie