If you are a musician or a performing artist, it is important to understand the tax rules that apply to creative activities. According to the Self-Government's regulations, concerts and performances are taxed as A-income. This means that the person or entity paying the musician is required to withhold tax when the payment is made.
Section 7, paragraph 8 covers:
- Fees for services as a soloist, artist, musician, author, performing artist, athlete, columnist, judge, lay judge, or advisor.
This means that the venue or event organizer must report your income to the Employer Register and withhold A-tax. However, you must still declare the fee as B-income on your tax return. While this may seem illogical, it ensures that:
- You avoid being taxed on your income long after your performance, as the tax is already paid.
- You gain the right to deductions for expenses related to your artistic business. You can only deduct expenses related to your work as a musician/artist, not other personal expenses.
- Make sure to obtain receipts for your expenses and written documentation for your salary. If you only receive cash payments, the payer cannot document that tax was withheld, and you will not be able to prove that you earned the money legally.
Understanding and following these tax rules helps to protect you financially and ensures compliance with the law.
Here is a breakdown of which artistic services are taxed as either A-income or B-income:
- Artists, fees: A-income
- Library royalties: A-income
- Tips: B-income
- Tips in an employment relationship: A-income
- Ensembles, fees for: A-income
- Lecturers, fees in employment: A-income
- Lecturers, fees outside employment: B-income
- Author royalties: A-income
- Gifts (for the recipient): B-income
- Handicrafts: B-income
- Kalaallit Nunaata Radioa participation, fees for: A-income
- KODA/GRAMEX royalties: B-income
- Meals and lodging, value of free: A-income
- Artists, fees: A-income
- Copyright: A-income
- Orchestras, payments to: A-income
- Private tutors, fees: B-income
- Royalties: B-income
- Singers and soloists, fees: A-income
- Sale of items like CDs: B-income
This guide helps to clarify how different a