activities of.an entertainer or athlete accrues to a person other than, or

in addition to, the entertainer or athlete. It is based on paragraph (2)

• - of Article 17 (Artistes and Athletes) of the OECD Model Convention and a counterpart Is found in recent United States conventions with the United

Kingdom, Japan, Trinidad and Tobago, and Iceland. A common method ·employed by foreign entertainers is to perform services in the United States as an employee of or a contractor for a corporation or other person. That person may act as the nominal recipient of the income in respect of the entertainer's services and the entertainer may act as its "employee" or "contractor." In such cases, the corporation may escape taxation in respect of those services by reason of Article 8 (Business Profits) because it does not have a permanent establishment in the United States described under Article S (Permanent Establishment). The entertainer may also escape taxation by receiving a small salary ·while in the United States and by receiving payment in a later year when the income is subject to reduced rates or tax or no tax at all, or by liquidating the corporation after the services are performed.

Paragraph (2) is designed to deal with these situations by providing that where income in respect of the personal activities of an artiste or athlete accrues to the benefit of another person (including a co¯·poration, trust, or partnership of either Contracting State or any third State), that income may, notwithstanding the provisions of Articles 8 (Business Profits), 15 (Independent Personal Services), and 16 (Dependent Personal Services), be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, Thus, for example, such other person could not claim the permanent establishment protection provided by Articles 5 (Permanent Establishment) and 8 (Business Profits).

For purposes of paragraph (2), income is considered to accrue to the-benefit of another person where that other person has control over or the right to gross income derived in respect of an entertainer's or athlete's services as such. This rule applies regardless of whether the other person is a "sham" corporation or conduit. However, income wil not be deemed to accrue to the benefit of another person where it is established to the satisfaction of the competent authority of the Contract• ing State where the services are performed that neither the entertainer or athlete, nor persons related thereto, participate directly or indirectly in the profits of such other person or receive any benefit from such profits. Persons may be considered to be related to the artiste or athlete regardless of whether the persons are considered to be related under the provisions of paragraph (3) of Article 10 (Related P.ersons). For this purpose, a person may be considered to be related to the artiste or athlete

if he is an employee or agent of the artiste or athlete, or if he is regularly employed by the artiste or athlete in an advisory capacity, such as his attorney, accountant, or investment advisor. An artiste or athlete will be considered to participate in the profits of the other person if he received, or is entitled to receive, deferred compensation, bonuses, fees, dividend!l, partnership or other distributions from that person or the proceeds from the sale or disposition of an interest in that person during the year in which services are performed, or in any subsequent year.

Par.. :- . ·,1 (3) provides that, notwithstanding the provisions or para­ graph (1) ar,a Articles 15 (Independent Personal Services) and 16 (De­ pendent Personal Services), income derived from activities performed in a Contracting State by public entertainers or athletes will be exempt from tax in that Contracting State if the visit to that State is substantially sup­ po.rted or sponsored by the other Contracting State and the public entertainer or athlete is certified as qualified under this provision by the competent authority or the sending State. Under this provision, for example, Philip• pine folk dance troupe performers would be exempt from tax in the United States i! their visit is substantially supported or sponsored by the Philip•

pine Government and the Secretary or Finance of the Philippines or his delegate certifies those performers· as qualified for exemption.