With the 2011 IRB Rugby World Cup (RWC) around the corner, the question often arises as to how the Springbok players are likely to be taxed on their match fees earned during their period in New Zealand.
To answer this question, one must first have regard to the tax legislation in New Zealand as it applies to entertainers and sportspeople. Where the domestic tax legislation imposes tax on match fees earned while performing in New Zealand, it must be considered whether an applicable Double Tax Agreement (DTA), which New Zealand has entered into, limits its right to tax in any way.
Under New Zealand domestic law, non-resident sportspeople (ie persons performing in any sporting event or game) are subject to a 20% withholding tax on payments made to that person or to any other person acting in the capacity of an agent. Under Article 16 of the New Zealand / South Africa DTA, dealing with entertainers and sportspersons, taxing rights are in any event allocated to the country in which the activities are exercised, which in this case will be New Zealand. In principle, the payment of match fees to Springbok players participating in the RWC would be subject to the 20% withholding tax. However, non-resident sportspeople may apply for a tax waiver from the New Zealand tax authorities where, inter alia, they represent a national body that administers the game or sport in their home country, in this case, rugby.
The basis on which the Springboks would likely rely on exemption from withholding tax is that they are official representatives of the South African Rugby Union (SARU) as SARU contracted players. As SARU is the national controlling body for all levels of rugby in South Africa, it is likely that the tax waiver for match fees earned while in New Zealand for the RWC would apply.
It must be noted that the match fees earned by the Springboks, although not subject to tax in New Zealand, will remain subject to tax in South Africa.
Ruaan van Eeden