Double Taxation

Case : Pierre Boulez

Kelompok 5 :
Elisabeth Nevoria
Indah Tiara Amiati
Nabila Mashabi Ahmad
Rizky Mafriza

Pierre Boulez CASE

Boulez, a renowned music director and orchestra
conductor, was a citizen of France and was a
resident of Germany in 1975.
He contracted with CBS Record (1969) for
exclusive service as a producer and/or performer
for the recording of music and/or literary
composition for the purpose of making
phonograph record. The contract also included
Boulezs service as producer and/or performer
with the NY Philharmonic for the recording of
musical and/or literary composition for the
purpose of making phonograph record. For this
Boulez reporte approximately S40.000 of income
The contract used both "services" and "royalty"
terminology ("For your services rendered . . . we
will pay you the following royalties: . . . ").
Applications for the
copyrights of all the
recordings were filed by CBS, Inc

Differing Income
Characterization

Double taxation relief arising from different characterization of

income can occur when the two parrties to a tax treaty view and
treated a transaction differently, the categorization of the
transaction itself, including :
Application of anti-abuse doctrines
The clasiffication of an entity receiving the income
The source of the income
The quantification of branch income or income earned in relatedparty transaction

US Model Treaty
Article 4 : Taxpayer is considered a resident of
contracting state based on his tax obligation
to that state by reason odf domicile,
residence, citizenship
Article 12 (Royalties) : Tax treatment of royalty
income is based on an individuals residence.
Article 16 ( Entertainers and Sportsmen
Income) : the US may impose tax if a nonresident musical act performs in the US and
earns more than $ 20.000 from those
performance within taxable year

Case Issues
The issue in the case was whether certain payments
received by Pierre Boulez in 1975 constituted "royalties"
or "compensation for personal services".
If the payments were characterized as royalties,
then the payments were exempt from U.S. tax
under the U.S.-German Income Tax Treaty.
Under German law: royalties
Article VIII DTC Germany/USA 1954/65:
taxable only by state of residence

If the payments were characterized as

compensation for personal services, then the
payments were subject to U.S. Tax.
Under US law: compensation for personal services
Article X of the same DTC:
taxable only by state of performance

Conclusion
The competent authorities of the two nations were unable to reach
agreement on the correct treatment for income tax purposes.

Germany's

position was that these payments constituted

"royalties," within the meaning of Article VIII of the treaty, and

therefore were taxable exclusively by Germany.

The Internal Revenue Service, on the other hand, took the

position that the income was from the performance of personal
services in the U.S. by Boulez, and therefore was taxable by the
U.S. under the provisions of Article X of the treaty

Recommendation

Bagi
pemberi
penghasilan
(company)
harus
dapat
menyatakan secara jelas jenis pekerjaan, hak-hak terkait
pekerjaan tersebut di dalam kontrak/ perjanjian agar tidak
menimbulkan potensi multiinterpretasi dari sisi hukum ataupun
dari sisi pajak.
Bagi penerima penghasilan/ Wajib Pajak agar lebih aware
dengan peraturan perpajakan yang berlaku, terutama yang
bersinggungan dengan perlakukan perpajakan di negara
lainnya.