Organisational Structures for Theatre Productions

Af Inge Nilsson, Skatte Inform

The following describes possible organisational structures theatres can apply in connection with for instance co-productions between two organisations. You will discover particular information regarding tax conditions that apply to the various structures.

A production company can be established in a number of ways, like associations, limited companies, fixed venues, partnerships or joint ventures. Taxation varies according to the individual structures.

Partnerships

These organisations are transparent in the way that taxed befall the owners directly and not the company. The company can therefore be located in Denmark, have a registered head office in Denmark yet have a Swedish owner. In these cases the general view that the source country taxation will be in Denmark, and the entire taxation responsibility lies with the owner including any credit relief of the source country taxation. The company must uphold the Danish laws in other contexts, such as VAT, withholding of wages etc.

Joint Ventures

In cases of co-productions several companies from different countries may come together to make a performance. This can be done by creating a joint venture. Joint ventures are transparent in similar ways to the partnerships. They must therefore be taxed in the source country and in the country where the owner resides. Some relief will be given in the main source country of taxation as mentioned above for the partnerships.
The company responsible for the performance you will be liable for tax on the profit or loss directly attributable to the fixed venue in Denmark. As a joint venture company is transparent the two limited companies (co-producing theatres) should include the deficit / surplus in their taxable income according to internal laws in Sweden and Denmark referring to the individual ownership interests.

The joint venture company in Denmark will be responsible for recruiting and hiring employees and suppliers. Correspondingly the joint venture company must include taxation of salaries, reporting wages and paying VAT.

Limited companies and associations

Companies or associations are taxed in the country where the company or association is based. This will be where the company is registered, or where the daily management takes place. Additionally, there may be source country taxation to the country where the company operates with a fixed venue. Profits can be distributed to the owners or to the association's statutory purpose.
There are also associations that are profit based. Fees paid by association members are not considered as economic activity. These associations will generally be considered tax-free and should not submit tax returns. Each case should explore the options of being a profit based association or not.

The Tax Conditions for Production Companies

Corporation Tax

Opposite to individuals companies are taxed territorially. This means that the company's activities should only be taxable in Denmark, if the company is run in a fixed venue in Denmark.

Thus, profits from a Danish limited company can only be taxed in Denmark when the theatre company operates in a fixed venue in Denmark. If the venue is in Sweden, Denmark cannot tax the profits from this activity.

  • Corporation tax rates in Denmark are 24,5 % for 2014
  • Corporation tax rates in Sweden are 22 % for 2014
  • Corporation tax rates in Norway are 27 % for 2014

Tax Withholding and Obligatory Reports

You are required to register as an employer in any country in which you run a permanent enterprise and have employees. You must withhold and report income taxes connected with the company.

If you aren’t running a permanent enterprise tax remuneration for the employees isn’t required. In this case they are responsible for paying their income tax.

Companies that have a permanent space with employees are obligated to report and pay withholding taxes as well as report wages, fringe benefits, including tax benefits etc. Employers generally have the duty to calculate the withholding tax on the earned income and pay the amount to the IRS. The amount due depends on the individual employee's tax status.

Applicable rules and deadlines for the different countries are provided on Nordic eTax.

It applies in all Nordic countries that failure to report information can lead to charges, or administrative fines, and the responsibility for paying taxes and duties that the contracted person hasn’t paid. The fines are relatively large, we therefore recommend that the rules on tax declaration are studied throughly, possibly assisted by an advisor.  

Further information on these submission can be located on SKAT's website.

VAT Rules

Danish VAT rules exempt VAT on some creative endeavours. This term does not include theatre presenters. A production company responsible for staging the production will have to charge for services that include VAT. For instance theatre tickets can be subject to VAT. It follows that the production also can deduct VAT on taxable purchases.

  • The VAT rate in Denmark is 25%.
  • The VAT rate in Sweden is composed of a normal rate of 25%, a reduced rate of 12%, including food, restaurant / catering and transport and a reduced rate of 6% on theatre tickets, books and magazines.
  • The VAT rate in Norway is composed of a normal 25% rate, a reduced rate of 15% on food, and a reduced rate of 8% on movie tickets and human transportation. 
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