Every working person should check whether they are obliged to pay income tax on their income. If an individual works in a country other than the one they live in, or enters into contracts with people from other countries, the question arises as to where income tax must be paid and who is liable for paying it.
The country in which an individual resides (country of residence) has much more comprehensive taxation rights than a country in which an individual gives a guest performance or a concert or participates in an exhibition (country of performance):
The country of residence may tax the income earned worldwide, including all income earned in other countries. In this case, gainfully employed individuals are subject to unlimited tax liability.
By contrast, the country in which an actor or actress gives a guest performance, for example, only has access to the income earned in connection with that particular performance. The access of the country of performance to the income is "limited". Thus, because the performance takes place in a country other than the country of residence, the actor/actress is subject to "limited tax liability" for the income from this specific guest performance in the country of performance.
"Limited tax liability" may therefore apply to individuals whose earnings include cross-border income.
Artists based abroad who perform in Germany are deemed to have cross-border income. This is also the case if licensors (artists) resident abroad grant rights of use to licensees (clients) resident in Germany.
The somewhat simplified term "foreigner tax" (hereinafter referred to as "withholding tax") is used in the industry to refer to the limited tax liability that pertains to the cross-border activities of artists.
Where there is no cross-border income, artists (as natural or legal entities) simply take care of their own (corporate) income tax. The parties liable for the remuneration (clients, organisers, theatres, etc.) are not involved in the taxation of the artists' (corporate) income.
However, this changes if there is cross-border income.
Please note: Withholding tax is not the only tax that becomes relevant in the case of cross-border income. Cross-border income may also cause specific issues with regard to VAT law as a result of which the payment debtor may be liable for paying VAT (in addition to the withholding tax) (keyword: reverse charge procedure). VAT must be examined separately from the withholding tax, as other conditions and legal regulations apply. You can find more information on VAT with regard to cross-border income here.
Steuertipps für Künstler (Bayerisches Staatsministerium der Finanzen)(only available in German)