58 th UIA CONGRESS Florence / Italy October 29 November 2, 2014 IMMIGRATION AND NATIONALITY LAW COMMITTEE

58 th UIA CONGRESS Florence / Italy October 29 November 2, 2014 IMMIGRATION AND NATIONALITY LAW COMMITTEE Saturday, November 1, 2014 CO-COUNSEL REVOLVING AROUND THE SAME STAR COORDINATION OF IMMIGRATION AND TAXATION ADVICE FOR THE GLOBALLY MOBILE ARTIST VISAS AND TAX IMPLICATIONS Anne O Donoghue (Immigration Solutions Lawyers), Suite 1304, World Tower, 87-89 Liverpool Street, Sydney, Australia, +61 (2) 9264 6432 / +61 (2) 9264 6437 anne@immigrationsolutions.com.au UIA 2013 1

MAIN THEMES REPORT 1. Introduction For the Globally Mobile Artist, immigration and tax issues must be considered in conjunction with one another because these issues are often interrelated. There are many points of intersection between immigration and tax to address. Immigration requirements result in the individual needing to have the correct work permits and visas. However, there are a range of different visas available for the globally mobile artist, and some can confer residency status. Distinguishing between residents and nonresidents is of vital importance in these situations because each status has various tax implications. Tax issues can be triggered by the type of visa issued and whether it confers residency status on the individual. For example, the individual may become liable for income tax and social taxes in multiple countries; the home and the host countries may both issue taxes. Therefore, for taxation purposes, the individual s residency status is a key factor. 2. What Type of Visa will the Artist Qualify For? The first step for the globally mobile artist will be to establish which visa is appropriate to meet their needs. There are various visas offered in Australia, both temporary and permanent, in relation to business, innovation and talent. Some viable options include; the Distinguished Talent visa, the Business Talent visa, Visitor visas, 457 Startup visas, and Business Innovation and Investment visas. After considering what visa best suits the artist, it is then worth considering the relevant pathways to citizenship. 2.1. Distinguished Talent Visa One relevant visa offered is the Distinguished Talent visa (subclass 124) which is available for people who possess a distinguished talent. To qualify, the applicant must have an internationally recognised record of outstanding and exceptional achievement in; academia and research, the arts, a sport, or a profession. The applicant must also be nominated by an Australian organisation or eligible person. The visa allows successful applicants to gain permanent residency. The benefits to the Distinguished Talent visa are that; the applicant and their dependents can gain permanent residency in Australia, the applicant s dependents will qualify for an open study and work permit, the applicant can sponsor people for permanent residence, the applicant will be granted a five year multiple entry visa, the applicant can apply for Australian citizenship after a period of two years, and the applicant will be entitled to all healthcare benefits and certain social security benefits. 2

There are certain eligibility criteria: The applicant must prove their financial capability without seeking recourse from Public funds of Australia The applicant should be able to establish themselves independently in Australia in a profession, or be able to secure a job in their area of expertise The applicant must have at least a functional level of English There is no constraint on the age of the applicant, but applicants under the age of eighteen and over the age of fifty-five must provide evidence that they are financially independent and would be an exceptional benefit to the Australian community The applicant must meet certain health and character requirements. Police clearance certificates must be obtained from any country in which the applicant resided for a period of more than 12 months in the 10 years prior to the application. The health examination must be performed by doctors chosen by Australian authorities The applicant must have a record of their outstanding and exceptional achievements in their profession and those achievements should be recognised internationally. They should also still be active in their area of expertise The applicant must be nominated by an eligible organisation or person who has a national reputation in the applicant s field of expertise. 2.2. Business Talent Visa The Business Talent (Permanent) visa (subclass 132) is available for individuals who are nominated by a state or territory government agency and invited to apply by the Minister. To be invited, the applicant must submit an Expression of Interest through SkillSelect. The visa is designed for high calibre business people who have a genuine commitment to participate in the management of an existing or new business in Australia, and who already own or part own a business overseas. The visa allows applicants to establish a new or develop an existing business within Australia. The visa has two streams; the Significant Business History stream for high-calibre business owners or part-owners who want to do business in Australia, and the Venture Capital Entrepreneur stream which is for individuals who have sourced venture capital funding from a member of the Australian Venture Capital Association Limited ( AVCAL ). To qualify for the visa, the candidate must either have a net business and personal assets of at least AUD1.5 million and an annual business turnover of at least AUD3 million if they intend to apply for the visa in the Significant Business History stream, or have obtained at least AUD1 million in venture capital funding to start the commercialisation and development of a high-value business idea in Australia if the individual intends to apply for the visa in the Venture Capital Entrepreneur stream. The candidate must also be under the age of fifty-five, although there are exceptions to this requirement, and must be able to demonstrate that they have had a generally successful business career. The benefits of the Business Talent visa are that it allows you to travel in and out of Australia an unlimited number of times while the visa is valid, study in Australia, work in an existing or new business in Australia, bring your family to accompany you as they will have access to study and work rights, and live in Australia as a permanent 3

resident for five years. After those initial five years, the applicant will have to apply for a resident return visa. A successful applicant for this visa has a number of business obligations. If the applicant is in the Significant Business History stream, then they must; establish a qualifying business in Australia or participate in an existing qualifying business. Within the business, the individual must maintain direct and continuous involvement in the da-to-day management, maintain substantial ownership, and make decisions affecting the performance and direction of the business in a manner that benefits the Australian economy. If the successful applicant is in the Venture Capital Entrepreneur stream, then they must meet the requirements of their venture capital agreement. The Business Talent visa is part of the Business Innovation and Investor Programme ( BIIP ). The Programme is comprised of three separate visa subclasses; the Business Talent visa, the Business Innovation and Investment (Provisional) (188), and the Business Innovation and Investment (Permanent) (888). The BIIP is currently under review by the Joint Standing Committee for Migration. However, the results of the review have not yet been published, but will hopefully make the programme more streamlined and successful. 2.3. Business Innovation and Investment visas There are two stages to the Business Innovation and Investment visa; the provisional (188) visa, and the permanent (888) visa. If an artist is interested in the Business Innovation and Investment visa, they must first apply for the provisional visa by lodging an Expression of Interest, after which they may be invited to apply. The candidate must be nominated by a State or Territory government agency, and then must invest funds in a business or designated investment in Australia for a period of four years. However, the candidate must be under the age of 55 although this requirement can sometimes be waived, and they must score a minimum of 65 of the Innovation Points test. In this test points are awarded for; age, qualification, English language ability, business turnover, innovation, net person and business assets, and experience in business or investing. If the applications are for the Business Innovation stream, then the candidate must also have total assets of AU $800,000, an annual turnover of $500,000 in at least two of the four fiscal years prior to receiving the invitation to apply, have a successful business career and experience in managing a business. If applications are for the Investor stream then candidates must have a net value of AU $2.25 million for the two fiscal years prior to receiving the invitation to apply, have a successful investment record, have a minimum of three years experience of directly managing a qualifying business of eligible investment, and possess a genuine desire to continue their business and investment activity in Australia once the original investment has matured. The Business Innovation and Investment (Permanent) (888) visa is the second stage of the Business Innovation and Investment (Provisional) (188) visa. No new invitation is required. The candidate must simply hold a 188 visa, must not have had their nomination from the State/Territory government agency withdrawn, and must have met the requirements of the visa in the stream in which they first applied. 4

2.4. Visitor Visa The Visitor visa (subclass 600) allows the individual to visit Australia for business purposes for up to three, six or twelve months. It is available for individuals who are travelling to Australia as a visitor, or to visit family, but it is also available for those pursuing business visitor activities. However, there are conditions imposed on the visa. For example, visa condition 8115 mandates that while business visitor activities are permitted, the applicant may not work. The applicant will also need to provide documents that indicate that they are a genuine visitor, such as documents providing evidence of sufficient funds, and information indicating that they have authority and an incentive to return to their home country (such as a letter from their employer stating their intention to return to their job). Additional documents are required for the business visitor stream. First, evidence of why the applicant needs to visit the country on business, such as; conference registration details, a letter from the employer stating the reasons for the visit, or a letter of invitation from the host organisation in Australia. The applicant will also have to provide their educational or professional qualifications, their current employment and their role during the visit to Australia, details of previous contacts with Australian businesspeople or organisations, and documents to indicate the company they work for is an actively operating business. 2.5. 457 Startup visas The Temporary Work (Skilled) (subclass 457) visa program is designed to enable employers to fill skill shortages by recruiting qualified individuals from abroad when those skilled workers cannot be sourced locally. Employers must undergo training to become sponsors, and then must nominate the positions that need filling as well as the employees that they want to fill them. The employees must continue to work in the nominated occupation that they were sponsored for. The nominated occupation must be on the list of occupations determined by the Australian government. 2.6. Case Studies 2.5.1. Distinguished Talent (Subclass 124) Visa Application: This case study is a good example of the application of the requirements for a Distinguished Talent Visa to a candidate. The Applicant had an internationally recognised record of exceptional and outstanding achievement in the arts. He had performed on four different continents, with concerts and broadcasts in Australia, Britain, continental Europe and Hong Kong. He had undergone training at the Royal College of Music in London where he had been awarded numerous prizes and fellowships. The Applicant had been extensively 5

involved in developing the Sing-Play Piano Method, which helps to teach music to individuals with disabilities and had been presented in workshops throughout Australia, England, the USA, Germany, Hong Kong and Switzerland. The Applicant had also published multiple papers and articles, been invited to guest conduct, directed concerts, and written film scores. Using this resume, it was argued that the Applicant was recognised internationally as an exceptional and outstanding achiever in the arts. The Applicant had remained prominent in within his area of expertise as he was a Director of a Music and Health Institution in the US which utilised music as a therapeutic tool. As such, he was deemed to still be an asset to the Australian community. The Applicant would also have opportunities to obtain employment or become established independently in Australia, due to his previous work experience as an educational consultant at the Australian National University, coupled with his impressive record of achievements. He would be working for the nominating company and would be able to support himself financially hence causing no undue difficulty or cost on the Australian community. There was also no basis upon which the Applicant could have failed the character test or the medical test. As such the applicant met the criteria and was successful in obtaining the visa. 2.5.2. Request for Ministerial Intervention in the Migration Review Tribunal s Decision to Refuse a Distinguished Talent (Residence) (Class BX) Visa Application: The Applicant submitted a request that the Minister intervene in the Migration Review Tribunal s decision to refuse his application for a Distinguished Talent (Residence) (Class BX) visa. The Tribunal stated that it was not satisfied that the Applicant met the requirement of: 1) Having an internationally recognised record of exceptional and outstanding achievement in the area of sport, and 2) Being still prominent in the area The Applicant had been a rugby player on the national Fiji team, however at the time of application his playing career had ended although he maintained coaching links with the team. He instead had begun a first grade playing career in an Australian Group rugby league competition, and thereafter he moved onto a coaching career. The Tribunal concluded that the Applicant was no longer playing representative rugby league or rugby union and had not been when he made the application. The Tribunal also considered that the Applicant s involvement in the sport at the time of lodging the application was of a minor level and did not constitute having an internationally recognised record of exceptional and outstanding achievement and being still prominent in the area. The Applicant had been nationally recognised in Australia and Fiji, but no longer had an international profile in the sport. However, he was incorrectly advised by his then migration agent to make an application for a Distinguished Talent visa. If the Applicant had instead made an application for a Sports visa his application would more likely have been successful; the Applicant continues to hold positions as a coach and manager 6

for junior teams in his community and he intended to coach local juniors in preparation for the 2013 Rugby World Cup. Therefore he had adequate means to support himself. As the Applicant would have been more likely to be successful if he had made an application for a Sports visa, his representative requested that the Minister exercise their decision to intervene in the Migration Review Tribunal s decision. The Applicant was wrongly advised and as such the Minister considered that. The Minister also considered the unique or exceptional circumstances in relation to the Applicant and his family s high level of integration into the Australian community, and the cultural benefit he provided to his community and to Australia. The Minister decided to intervene and substituted the decision with a more favourable one, granting the Applicant a Temporary Work (Long Stay Activity) (Subclass 401) visa, which allowed the Applicant to remain and apply for a Sports visa. However, this case study revealed the importance for the artist of applying for the correct visa. 2.7. Application Subclass 457 Startup visa Sponsorship and Nomination: This case study provides an example of a standard 457 application. The Applicant was nominated for the occupation of Program or Project Administrator by a restaurant that wished to sponsor her. She had distinguished herself through her overview and organisational talent. The Applicant was on a Work and Holiday visa and had been working at the restaurant while in Australia. She had been responsible for the purchasing bar management and the organisation of events. The tasks that the Applicant was responsible for included; negotiating variations to contracts and services, working with Project Managers and owners to ensure that goals are met, advising senior management on matters requiring attention and implementing their decisions, overseeing work by contractors, and reviewing submissions and reports concerning the organisation s activities. The nominated occupation for the application was on the specified list of occupations. The Applicant was successful and was granted a Temporary Business Entry (Class UC) Business (Long Stay) (Subclass 457) visa. The visa allowed her to travel to, enter and remain within Australia for a specified time. 3. What are the Tax Implications of Those visas? The residency status conferred by those visas can have important tax implications. This is due to the principle of double taxation which is the levying of tax by multiple jurisdictions. 3.1. The Principle of Double Taxation For taxpayers, there is a distinction between non-residents and residents. 7

Non-residents generally have a limited connection with the host country, but the income received by them will have an economic link to the country where it originated from. 1 In these circumstances, the country will seek to levy tax on that income, which is sometimes referred to as source taxation. The country s claim to tax this income is based on its relationship to that income, and the justification for this tax is that the country contributed to the creation of the economic opportunities allowing the taxpayer to obtain the income. Residents however, will have a close connection with the country in question and as such the country will tax the resident on their worldwide income, which is known as worldwide taxation. 2 This is justified by the relationship between the taxpayer and the country. Therefore, distinguishing between residents and non-residents can have tax implications. Residency can be determined according to immigration status, as well as by physical presence in a country for an extended period. Other factors can be relevant such as the location of the individual s home, their family and their fiscal interests. In some places, physical presence for 183 days of the year is sufficient to establish residence. Different countries often have different methods for determining, and different definitions of, residence. This can result in an individual being taxed on their world-wide income twice. For example, one state may determine that an individual as a resident under its tax rules because they were present in the country for 183 days during that year, and the same individual may be treated as a resident of another state because under its laws the individual lived in that State for years and has established close social and financial connections to that state. Double liability can be mitigated by tax treaties enacted between countries. The countries concerned will decide which tax is paid to which country in an attempt to reduce this strain on the individual. 3.2. Double Taxation in Australia Australian residents are taxed on their worldwide income, and non-residents are only taxed on their Australian-sourced income. However, most other countries also operate in this manner which results in the individual usually getting taxed twice. Australia has a number of tax treaties with other countries. For example, we have a Double Tax Agreement with the US. To use royalties as an example, the US will tax it at a rate of five percent, and Australia will tax it at normal rates as well, but will provide the individual with a credit for the five percent already paid to the US. However, this does not always work out so simply. For example, a US citizen who is also an Australian resident will normally be liable for US tax, but the application of the tax treaty results in the individual paying the higher level of tax within each category of income which restricts them from accessing the best tax breaks of either 1 Committee of Experts on International Cooperation in Tax Matters, Revision of the Manual for the Negotiation of Bilateral Tax Treaties (19 October 2011) United Nations <http://www.un.org/esa/ffd/tax/seventhsession/crp11_introduction_2011.pdf> 2 Ibid. 8

country. The US also has some taxes that Australia does not have and as such these do not qualify for tax credits. 3.3. Double Taxation in the United States The US has introduced some measures to help reduce double taxation. For example, the US permits an individual who is a resident of a foreign country to qualify for an exemption on all or some of their earned income. The US has also made provision for foreign tax credit, as discussed earlier. 3.4. Double Taxation in the European Union Member states of the European Union have enacted a multilateral agreement on information exchange which allows them to share any information concerning individuals who have claimed exemption from local taxation on the basis of not being a resident of the country in which the income arises. However, double taxation is still a problem within Europe that can prevent cross border trade. 4. A Useful Checklist for the Globally Mobile Artist Take with you a copy of your passport as well as a passport photo, in case while overseas you need a replacement passport; Make sure your passport isn t close to expiring; Visa applications can take a long time, so ensure you are organised in advance; Make sure you do your research - get information on work permits, visa requirements and residency regulations; Ensure you have travel and medical insurance; If you are receiving payment, specify that it is in your own currency to avoid rate fluctuations. 3 5. Conclusion 3 Sophie Travers and Linda Sastradipradja, International visas and taxation: a guide for performing arts organisations in Australia and New Zealand (August 2010) Australia Council <http://www.australiacouncil.gov.au/ data/assets/pdf_file/0020/145631/international_visa_and_taxation_resou rce_vfinal.pdf> 9

The globally mobile artist can encounter a number of immigration and taxation issues. Coordinating these issues and addressing them can be a confusing and difficult process. The globally mobile artist must first ensure that they choose the most suitable and correct visa to apply for. As was demonstrated by the case study outlined in section 2.5.2, ensuring you have applied for the correct visa is vitally important. If the artist elects a visa that is inappropriate or unsuitable for them it will not be granted, and the artist will have to go through the extra hardship of applying for ministerial intervention. There are many different visas on offer for the artist, and as such choosing the correct one for each artist and their individual circumstances and talents is crucial. Another consideration for the artist is whether the visa they have chosen grants, or has the potential to grant, residency. Residency status can have important tax considerations, due to the principle of double taxation. 6. Charts Please note that the Business Innovation and Investor Programme, depicted in the charts below, is currently under review. The Australian Government is aiming to make the programme more streamlined and more attractive. 10

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Business Talent Visa Must be nominated by a State/Territory government agency and be invited to apply by the Minister If applicant intends to apply for the Significant Business History Stream, they must; have net business and personal assets of at least AUD 1.5 million and an annual business turnover of at least AUD 3 million If the applicant intends to apply for the Venture Capital Entrepreneur Stream, they must; have obtained at least AUD 1 million in venture capital funding to start the commercialisation and development of a high-value business idea in Australia. Distinguished Talent Visa Applicants must have an internationally recognised record of outstanding and exceptional achievement in; academia and research, the arts, a sport, or a profession. Applicants must still be prominent in the area Applicants must meet the health and character requirements Applicants must also be nominated by an Australian organisation or eligible person Applicants must not have difficulty in obtaining employment, or in becoming established independently in their field in Australia Visitor Visa 457 Startup Visa Available for individuals who are travelling to Australia as a visitor, to visit family, on a tour with a registered travel agent from the People's Republic of China, or for business visitor activities Allows the applicant to visit for up to 3, 6, or 12 months Applicants will also need to provide documents that indicate that they are a genuine visitor, such as documents providing evidence of sufficient funds, and information indicating that they have authority and an incentive to return to their home country Enables employers to fill skill shortages by recruiting qualified individuals from abroad when those skilled workers cannot be sourced locally Employers must undergo training to become sponsors Employers must nominate the positions that need filling as well as the employees that they want to fill them The employees must continue to work in the nominated occupation that they were sponsored for The nominated occupation must be on the list of occupations determined by the Australian government Business Innovation and Investment Visa This visa has two stages; the provisional (188) visa, and the permanent (888) visa. There are also two streams; the Business Innovation stream, and the Investor stream Requirements for the Business Innovation stream; the candidate must have total assets of AU $800,000, an annual turnover of $500,000 in at least two of the four fiscal years prior to receiving the invitation to apply, have a successful business career and experience in managing a business. Requirements for the Investor stream; candidates must have a net value of AU 2.25 million for the two fiscal years prior to receiving the invitation to apply, have a successful investment record, have a minimum of 3 years' experience of directly managing a qualifying business of eligible investment, and possess a geniune desire to continue their business and investment activity in Australia once the original investment has matured13

6.1. NOTE: Visas Currently Under Review in Australia 4 4 Department of Immigration and Border Protection. 14