TxI-03 - Bilateral Treaty Governance of Cultural and Creative Tax Incentives — Legal Architecture and Structural Fiscal Access Constraints

Evelyse Carvalho-Ribas

Abstract

Cultural and creative tax incentives are frequently analysed as domestic fiscal instruments, designed and applied within the confines of national tax law. This approach obscures the decisive role played by bilateral treaty frameworks in shaping eligibility, access, and exclusion in cross-border cultural and creative activity. In practice, bilateral tax treaties, bilateral co-production treaties, and cultural cooperation agreements function as intermediate governance layers that redistribute taxing rights, constrain domestic discretion, and directly affect the practical availability of cultural-creative tax incentives. This paper examines the bilateral treaty level as a distinct and under-analysed layer of governance — the intermediate axis between national law and supranational or international frameworks — and demonstrates that access to cultural-creative tax incentives is structurally produced through the interaction of treaty norms, administrative interpretation, and institutional coordination, rather than determined solely by domestic eligibility criteria.

The analysis is grounded in doctoral research conducted at the University of Leeds (2026) on cultural-creative tax incentives at the international level, comparative legal research across the bilateral treaty networks of France, the United Kingdom, Germany, Italy, Spain, the Netherlands, Ireland, Canada, Australia, the United States, Mexico, Brazil, and Chile, and 20+ years of applied advisory practice across audiovisual co-production structuring, cross-border cultural philanthropy, and international artistic mobility. Three bilateral instrument families are examined in integrated form: bilateral tax treaties (BTTs), whose distributive rules derived from the OECD Model Tax Convention, the UN Model Tax Convention, and the US Model Income Tax Convention determine where cultural income is taxed; bilateral co-production treaties, including the approximately 400 audiovisual co-production instruments worldwide and the Council of Europe Convention on Cinematographic Co-Production (ETS No. 147, Strasbourg 1992; revised ETS No. 220, Rotterdam 2017); and bilateral cultural cooperation agreements, whose soft-law architecture frames but does not guarantee fiscal access.

Structural Fiscal Access Constraints (SFACs) are shown to arise at the bilateral level through recurring patterns: normative disjunction between treaty commitments and domestic law, administrative reinterpretation and procedural re-gatekeeping, and institutional fragmentation between fiscal and cultural authorities. Particular attention is paid to Article 17 of the OECD Model Tax Convention (artists and sportspersons), which derogates from general allocation rules by granting source-state taxing rights over performance income, and Article 24 of the same Model (non-discrimination), whose scope is structurally narrow: it prevents discriminatory taxation but rarely crystallises into affirmative entitlement to cultural tax incentives. The paper also examines the recognition-without-access dynamic generated by co-production treaties, which confer national status on qualifying productions but leave fiscal entitlement mediated through domestic statutes, administrative certification (CNC in France, BFI in the United Kingdom, CAVCO in Canada, Telefilm Canada, Screen Australia, ANCINE in Brazil, NFVF in South Africa), and discretionary expenditure tests.

The empirical significance of the bilateral layer is substantial. Worldwide, there are over 3,000 bilateral tax treaties in force, supplemented by approximately 400 bilateral co-production treaties and hundreds of bilateral cultural cooperation agreements. In the audiovisual sector alone, bilateral co-production structures account for a material proportion of cross-border production value: Canada has concluded co-production treaties with 55+ partners under the Canadian Audiovisual Treaty Coproduction framework; France operates co-production treaties with more than 50 states including Canada (1983, revised 2015), Australia (1986), and Germany; Ireland operates co-production relationships with 19+ countries; the United Kingdom operates treaty-based co-production with Brazil (UK-Brazil Film Co-Production Treaty 2017), France (UK-France Co-Production Treaty 1994), and others. The fiscal consequences of treaty misalignment materialise as withholding-tax drag on touring artists, double taxation of royalties, non-recognition of cross-border charities for deductibility purposes, denial of co-production certification where expenditure tests diverge, and exclusion from national tax credits despite formal treaty eligibility.

The paper is intended for international tax lawyers and counsel, cross-border tax advisers, cultural authorities, policymakers, audiovisual producers, and institutional actors whose practice engages bilateral instruments in the cultural-creative domain. It does not catalogue individual treaties. Instead, it explains how bilateral access is structurally produced, how professional competence at the bilateral layer operates through treaty interpretation, mutual agreement procedures (MAP), advance pricing agreements (APA), and cross-border authority engagement, and why mastery of the bilateral layer is a prerequisite for operating effectively across national, supranational, and international cultural-fiscal frameworks. Subsequent papers in the TxI series develop the EU supranational layer (TxI-04) and the UNESCO 2005 Convention layer (TxI-05) with the same analytical rigour.

Keywords: Keywords: Bilateral-Layer SFACs · Cultural-Creative Tax Incentives · Bilateral Tax Treaties · Co-Production Treaties · Cultural Cooperation Agreements · OECD Model Article 17 (Artists and Sportspersons) · OECD Model Article 24 (Non-Discrimination) · UN Model Tax Convention · Mutual Agreement Procedure (MAP) · Advance Pricing Agreements · Council of Europe Convention on Cinematographic Co-Production · Cultural Philanthropy Equivalency · Eligibility Engineering · Recognition-Without-Access · SFAC Multi-Layer Governance Model

Core Concepts and Workable Definitions

I. Bilateral Tax Treaties as Cultural-Fiscal Governance Instruments

Bilateral tax treaties (BTTs) constitute the most legally entrenched and normatively binding instruments through which states govern the fiscal consequences of cross-border cultural and creative activity. Although not designed as cultural policy tools, their distributive rules, non-discrimination guarantees, and jurisdictional allocation mechanisms exert decisive influence over the economic viability of transnational cultural production, circulation, and monetisation. Worldwide, over 3,000 BTTs are in force, the vast majority concluded on the basis of the OECD Model Tax Convention (2017, updated 2019-2023), with a significant minority following the UN Model Tax Convention (2021) or the US Model Income Tax Convention (2016).[1] In practice, BTTs determine where artists, cultural workers, and creative professionals are taxed; how income from performances, exhibitions, and creative services is allocated between source and residence states; the level and incidence of withholding taxes on royalties and intellectual property; and the treatment of grants, scholarships, stipends, and other forms of cultural remuneration.

Through these mechanisms, BTTs reshape the fiscal outcomes of tours, live performances, cross-border exhibitions, authorship and rights exploitation, and increasingly, digital cultural deliveries. Their role within the cultural-fiscal ecosystem is therefore constitutive: they establish the baseline legal architecture within which other cultural-creative tax incentives must operate. Unlike co-production treaties or cultural cooperation agreements, BTTs are embedded primarily in international tax law rather than cultural policy. Their provisions are drafted in abstract, sector-neutral terms, reflecting a design logic oriented toward income allocation and tax coordination rather than access to sector-specific incentives. This normative orientation yields a paradoxical configuration: BTTs possess strong binding force, yet limited cultural specificity.[2]

Article 17 (Artists and Sportspersons) as Treaty Interface

Within the BTT framework, Article 17 of the OECD, UN, and US Model Tax Conventions occupies a structurally distinctive position. It represents a deliberate derogation from general allocation rules by granting source states taxing rights over income derived from personal performances, irrespective of residence or permanent establishment. Article 17 thus functions as the principal treaty interface between international tax law and cultural labour. It determines whether income from concerts, festivals, theatre productions, exhibitions, film appearances, or live artistic interventions is taxable at source — often through withholding — even where the artist or performer is non-resident. Its application directly conditions the fiscal feasibility of international touring, residencies, and short-term cultural engagements.[3]

The 2014 OECD Commentary on Article 17 (paragraphs 2-14) acknowledges the structural asymmetry: artists typically face source-state taxation on gross fees without deduction for expenses, while the residence state credits only net-basis domestic tax liability. A limited number of treaties include cultural-exchange carve-outs — such as the 1977 Germany-United States treaty protocol, the France-Canada treaty framework for government-funded cultural exchanges, and several Nordic treaties exempting performances financed wholly by public funds of the other state. However, the majority of treaties omit such exceptions, producing withholding-tax drag on modest cultural fees. The OECD 2014 update (incorporating the 1987 and 2014 reports on Taxation of Entertainers, Artistes and Sportsmen) recommended reforms, including a de minimis threshold and a voluntary net-basis taxation option, but adoption has been uneven: some jurisdictions (Germany, Netherlands, Nordic states) provide net-basis election procedures; many others retain gross-basis withholding as the default.[4]

Article 24 (Non-Discrimination) and the Limits of Treaty Protection

Article 24 OECD Model establishes the non-discrimination obligation: a contracting state may not subject nationals of the other state to taxation or connected requirements more burdensome than those applicable to its own nationals in the same circumstances. The provision extends to stateless persons (Article 24(2)), permanent establishments (Article 24(3)), payments to non-residents (Article 24(4)), and enterprises owned or controlled by residents of the other state (Article 24(5)). In theory, Article 24 positions BTTs as potential vehicles for rights-based enforcement in the cultural-fiscal domain. In practice, however, its enforceability is attenuated by three structural features.[5]

Accordingly, while BTTs enhance conditioned sovereignty by limiting discriminatory fiscal practices, they rarely crystallise into positive entitlements to cultural tax incentives. Their protective function operates as a legal floor, not as a gateway. From the perspective of legal certainty, BTTs perform a stabilising function by allocating taxing rights ex ante and limiting discretionary fiscal claims by source states. Clear residence definitions, fixed withholding ceilings, and explicit non-discrimination obligations create predictable parameters within which operators can structure cross-border activity. Yet legal certainty under BTTs remains incomplete. Treaty relief is typically conditional upon administrative verification — such as residence certification, beneficial ownership tests, or proof of effective taxation — which reintroduces domestic discretion at the implementation stage.[6]

Where treaty concepts are interpreted through domestic lenses rather than as autonomous international norms, predictability gives way to jurisdiction-specific gatekeeping. As a result, BTTs often secure certainty at the level of abstract allocation while leaving incentive eligibility exposed to domestic reinterpretation. This structural limitation sets the stage for the analysis of co-production treaties and cultural cooperation agreements, which engage more directly — but not always more effectively — with cultural-creative tax incentive regimes.

II. Co-Production Treaties and Eligibility Engineering

Co-production treaties occupy a distinctive position within the architecture of bilateral cultural-fiscal governance. Unlike bilateral tax treaties or cultural cooperation agreements, they are explicitly sector-optimised instruments: hybrid frameworks that combine cultural policy objectives with economic and fiscal incentives in a single regulatory architecture. Their normative ambition is correspondingly higher. Most co-production treaties embed granular substantive criteria relating to qualifying productions, expenditure thresholds, creative participation, and reciprocal recognition, thereby supplying a comparatively determinate framework that — at least in design — enhances legal certainty and suggests the possibility of rights-based enforcement. Approximately 400 bilateral audiovisual co-production treaties are in force worldwide, supplemented by the Council of Europe Convention on Cinematographic Co-Production (ETS No. 147, Strasbourg 1992; revised ETS No. 220, Rotterdam 2017), which operates as the principal multilateral framework in Europe.[7]

Yet this promise is systematically diluted by two structural features. First, co-production treaties are typically non-self-executing, displacing enforceability to domestic implementing measures and reintroducing administrative gatekeeping at precisely the point where treaty commitments should crystallise into rights. Second, the doctrinal categories imported from general tax law — residence, permanent establishment, qualifying expenditure — are frequently transplanted into the co-production context without recalibration to the project-based, mobile, and collaborative realities of audiovisual production. The result is a regime in which sector-specific optimisation at the treaty level coexists with doctrinal rigidity and fragmentation at the implementation stage, generating residual SFACs despite prescriptive treaty drafting.[8]

National Status as the Treaty's Most Powerful Device

At their core, co-production treaties function as eligibility-engineering mechanisms. By conferring "national status" on qualifying productions, they transform a transnational project into a juridical artefact capable of accessing domestic tax credits, subsidies, and regulatory privileges that would otherwise be reserved for purely national works. This legal fiction is the treaty's most powerful device: it bridges cultural collaboration and fiscal access without formally dismantling domestic incentive regimes. However, national status under a co-production treaty is not equivalent to fiscal entitlement. Treaty recognition operates as a necessary but insufficient condition. Access to tax credits remains mediated through domestic fiscal statutes, administrative certification processes, and expenditure tests only partially harmonised with treaty logic.[9]

As a result, treaty-certified productions frequently encounter a recognition-without-access dynamic: acknowledged as co-productions for cultural purposes but excluded, limited, or delayed in accessing fiscal benefits. France has concluded co-production treaties with more than 50 states — including the France-Canada Film Co-Production Agreement (1983, revised 2015), the France-Australia Agreement (1986), France-Germany, France-Italy, France-United Kingdom, France-Brazil, France-South Africa, and France-Senegal. Canada operates the Canadian Audiovisual Treaty Coproduction framework with more than 55 treaty partners through Telefilm Canada. The United Kingdom operates treaty-based co-production with Brazil (UK-Brazil Film Co-Production Treaty 2017, Treaty Series No. 7 (2017) CM 9406), France (UK-France Co-Production Treaty 1994, CM 2697), India, Israel, Jamaica, Morocco, New Zealand, Occupied Palestinian Territories, and South Africa. Ireland operates treaty-based co-production with 19+ countries.[10]

Eligibility Criteria as Structural Fiscal Access Constraints

SFACs materialise most visibly through eligibility criteria embedded in expenditure tests, residency requirements, permanent establishment concepts, and cultural content assessments. Although framed as technical filters, these criteria encode substantive decisions about inclusion and recognition. Expenditure thresholds illustrate the problem. Co-production treaties typically require that a minimum proportion of the budget be spent in each treaty state, yet rarely define how "qualifying expenditure" is calculated. Domestic authorities fill this silence with divergent methodologies: supplier-location tests, labour-based thresholds, territorial use-spend rules, or discretionary exclusions of transnational post-production and remote services. The treaty promise of reciprocal eligibility is thus converted into a jurisdiction-specific filter, undermining predictability and amplifying administrative opacity.[11]

Residency and permanent establishment requirements further entrench SFACs. Classical PE concepts privilege territorial permanence and sustained presence, poorly reflecting the project-based and itinerant nature of audiovisual production. Cultural content tests compound these exclusions. Nationality quotas for key creatives, linguistic requirements, and formal identity markers privilege mononational and monolingual narratives, marginalising diasporic, multilingual, and transnational storytelling. Judicial practice confirms the fragility of enforcement. Across jurisdictions, courts consistently hold that no vested right to fiscal benefits arises prior to final administrative certification. Judicial review is limited to procedural irregularities, with courts deferring to administrative expertise and fiscal sovereignty. Treaty-based arguments are rarely treated as determinative, reinforcing a system in which eligibility is contingent on administrative tolerance rather than legal entitlement.[12]

III. Cultural Cooperation Agreements and the Application of Equivalency in Cultural Philanthropy

Cultural cooperation agreements generally function less as instruments of fiscal regulation than as vehicles of cultural diplomacy. Their primary normative function lies in articulating shared values, symbolic commitments, and policy orientations rather than in generating enforceable legal obligations. Compared to co-production treaties or bilateral tax treaties, their architecture is normatively thin: while they promote collaboration, mobility, and recognition, they rarely contain the substantive detail required to regulate access to cultural-creative tax incentives in a predictable or judicially cognisable manner. As a consequence, their capacity to mitigate SFACs resides not in rights creation, but in their role as diplomatic scaffolding — facilitating dialogue, signalling cooperative intent, and enabling soft coordination between administrations.[13]

This structural thinness produces two interrelated effects. First, the absence of remedial pathways — judicial or administrative — means that selective implementation, restrictive interpretation, or outright non-application cannot be effectively contested. National discretion therefore remains largely intact. Second, reliance on aspirational clauses of mutual supportiveness, unaccompanied by institutionalised monitoring or enforcement mechanisms, results in weak functional integration. Coordination remains contingent on political will and administrative capacity rather than legal compulsion.

Cultural Philanthropy as a Second Frontier of SFACs

Cross-border cultural philanthropy exposes a second, distinct frontier of SFACs, where the divergence between normative intent and functional implementation becomes particularly acute. The non-recognition of foreign deductible gift recipients (DGRs) illustrates how ostensibly cooperative regimes reproduce domestic gatekeeping. While certain bilateral tax treaties (BTTs) and cultural cooperation agreements contain provisions enabling deductibility of donations to foreign public-benefit organisations, their operationalisation remains heavily filtered through domestic certification frameworks. Several treaties formally endorse mutual recognition or equivalency of public-benefit entities. Normatively, these provisions express a commitment to mutual supportiveness: philanthropy is framed as a transnational public good aligned with cultural cooperation. Functionally, however, these regimes entrench conditional sovereignty: recognition is contingent upon domestic confirmation that the foreign entity satisfies local public-benefit criteria, thereby preserving unilateral control over equivalency determinations.[14]

Administrative cooperation under these treaties is formally reciprocal but substantively asymmetric. Equivalency determinations often require extensive disclosure of governance structures, financial data, and compliance records in formats unfamiliar to foreign institutions. Smaller cultural organisations — particularly those operating outside Anglophone regulatory cultures — face disproportionately high entry barriers, undermining functional integration and chilling philanthropic flows. The absence of harmonised benchmarks or streamlined procedures results in a proliferation of parallel equivalency assessments. Once equivalency is denied, no MAP-style mechanism exists to resolve the impasse; domestic appeal remains the sole, and often impractical, remedy.

Limited Judicial Recognition of Treaty-Based Equivalency

Equivalency provisions are typically framed as policy accommodations rather than enforceable rights. In dualist systems, treaty clauses lack direct effect, and claimants cannot invoke them as self-executing entitlements. The result is recognition without recourse. Judicial review, where available, is generally confined to procedural legality rather than substantive entitlement. Nevertheless, isolated decisions demonstrate latent interpretive possibilities. In the illustrative case designated Fundación Y v AFIP, the Buenos Aires Tax Tribunal relied on a bilateral treaty mutual-recognition clause to uphold deductibility for donations to a Mexican entity, using the treaty's object and purpose to constrain administrative discretion. Similarly, in the illustrative case designated Künstler Z v Finanzamt, the Munich Fiscal Court treated a treaty provision as sufficiently precise to override administrative denial. These illustrations — drawn from comparative practice and analogous judicial reasoning — demonstrate that normatively clear treaty language can achieve de facto enforceability when courts adopt a purposive interpretive posture.[15]

By contrast, courts in North America and much of Europe routinely defer to administrative discretion, limiting review to reasonableness or legality and declining to derive substantive rights from treaty text. EU case law (Case C-386/04 Stauffer [2006] ECR I-8203; Case C-318/07 Persche [2009] ECR I-359) offers partial relief through fundamental freedoms, but this rests on supranational law rather than bilateral treaty enforcement and is analysed in depth in TxI-04. Functional integration between fiscal and cultural governance remains weak at the bilateral layer. Treaties invoke mutual supportiveness but rarely establish standing bodies, interpretive committees, or review mechanisms capable of sustaining convergence. Soft-law instruments — memoranda of understanding, ministerial exchanges, or cooperative initiatives — can facilitate dialogue, but their influence is indirect and contingent. Platforms such as Transnational Giving Europe or OECD-supported philanthropy initiatives mitigate the effects of fragmentation, yet they operate parallel to, rather than within, treaty frameworks.[16]

IV. Treaty-Based SFACs: Unified Doctrinal Framework Across Bilateral Instruments

At the bilateral level, SFACs arise from the interaction between treaty norms, domestic legal orders, administrative practices, and institutional architectures. Across the principal categories of bilateral instruments examined in this paper — bilateral tax treaties (BTTs), audiovisual co-production treaties, and cultural cooperation agreements — recurring patterns of exclusion emerge notwithstanding formal commitments to reciprocity, equivalency, or mutual supportiveness. These constraints are not episodic failures of implementation but systemic outcomes of how bilateral governance is legally designed and institutionally executed.[17]

Normative Misalignment Between Treaty Commitments and Domestic Legal Filters

A primary source of treaty-based SFACs lies in normative misalignment between treaty-level commitments and domestic legal implementation. Bilateral treaties frequently articulate principles of reciprocity, national treatment, or equivalency, yet they rarely operate as self-contained sources of entitlement. Domestic tax statutes, cultural legislation, and administrative regulations remain the operative gateways to access. In BTTs, non-discrimination clauses, provisions on artists and entertainers, and rules on charitable deductibility or withholding are drafted in abstract, sector-neutral terms and interpreted through domestic fiscal doctrines not designed for cultural or creative activity. In co-production treaties, detailed eligibility criteria promise legal certainty but are subsequently filtered through domestic tax rules governing expenditure recognition, certification, or residency. Cultural cooperation agreements, by contrast, tend to remain at the level of declaratory norms, offering no binding constraint on domestic authorities.

The resulting bifurcation between normative entitlement and functional access is structural. Treaty language creates an expectation of eligibility, yet domestic law reasserts sovereignty through incorporation requirements, restrictive definitions, or legislative silence. Bilateral instruments thus generate what may be described as symbolic access: formal recognition without guaranteed fiscal effect. This misalignment necessitates a layered analytical approach in which treaty norms are assessed not in isolation but in conjunction with domestic statutory gateways, regulatory instruments, and administrative practice.

Administrative Reinterpretation and Procedural Re-Gatekeeping

Even where domestic law appears compatible with treaty commitments, administrative practice frequently reintroduces exclusion through reinterpretation and procedural design. Tax administrations, cultural agencies, and certification bodies operate as de facto gatekeepers of treaty access. Across treaty types, common mechanisms include unilateral reinterpretation of treaty concepts (such as "artist", "eligible expenditure", or "national production"), the imposition of documentation standards not contemplated by treaty texts, and the segmentation of decision-making across agencies with divergent mandates. Administrative cooperation clauses, where present, typically facilitate information exchange rather than substantive interpretive convergence. Consequently, recognition or certification in one jurisdiction does not reliably translate into fiscal recognition in another. This pattern reflects a structural asymmetry embedded in bilateral governance: treaties coordinate commitments, but administrations retain control over access.[18]

Institutional Fragmentation Between Fiscal and Cultural Authorities

Treaty-based SFACs are further amplified by institutional fragmentation. Cultural-creative tax incentives operate at the intersection of fiscal and cultural governance, yet bilateral treaties are typically negotiated, implemented, and administered within siloed institutional frameworks. Tax authorities prioritise revenue protection and compliance; cultural authorities prioritise policy objectives such as diversity, mobility, or production capacity. Bilateral treaties presuppose coordination between these domains but rarely institutionalise it. In co-production regimes, cultural certification does not bind fiscal authorities assessing tax-credit eligibility. In cross-border cultural philanthropy, recognition of public-benefit status by cultural bodies does not constrain tax administrations evaluating deductibility. In BTT contexts, cultural realities are subsumed under general tax doctrines developed for commercial enterprises. No single institution bears responsibility for ensuring that treaty commitments translate into functional access.[19]

Legal Decisiveness and Structural Underuse of Bilateral Instruments

Despite these constraints, bilateral instruments remain legally decisive. They operate at the critical junction between domestic fiscal sovereignty and cross-border cultural activity, conditioning how national incentives apply in transnational configurations. Their decisiveness derives from three core functions: (1) bilateral instruments allocate taxing rights and fiscal recognition across jurisdictions; (2) they function as normative constraints on domestic discretion, shaping the interpretive boundaries within which national authorities operate even where provisions lack direct effect; (3) they create gateways to incentive eligibility — such as national-treatment effects under co-production treaties or relief from discriminatory taxation under BTTs — that cannot be replicated through domestic law alone. Yet these instruments remain systematically underused. They are often treated as background coordination tools rather than as active determinants of incentive access. This underuse is structural: bilateral instruments sit outside the routine operational focus of domestic administrations and advisers, whose training and institutional incentives remain anchored in national legal systems.

V. The Five Analytical Variables Applied to the Bilateral Treaty Layer

The five analytical variables — original to the ECR PhD thesis — provide the diagnostic lens through which bilateral-layer SFACs can be systematically assessed. Each variable operates across the three structural dimensions (normative, administrative, institutional) and reveals where reform potential is highest and where constraints are most acute. Applied to the bilateral treaty layer, the variables expose a consistent pattern: legal certainty is delivered at the abstract allocation level but eroded at implementation; rights-based enforcement is structurally absent for co-production and cultural-philanthropy disputes; conditioned sovereignty is strongest in BTTs but weakest in cultural cooperation agreements; functional integration between fiscal and cultural governance is shallow; and mutual supportiveness is invoked rhetorically but rarely operationalised procedurally.[20]

At the bilateral layer, legal certainty is structurally bifurcated. BTTs deliver relatively high certainty at the level of abstract allocation — residence definitions under Article 4 OECD Model, withholding ceilings under Articles 10-12, and non-discrimination obligations under Article 24 provide predictable parameters within which operators can structure cross-border activity. However, treaty relief is typically conditional upon administrative verification — residence certification, beneficial ownership tests, proof of effective taxation — which reintroduces domestic discretion at implementation. Where treaty concepts are interpreted through domestic lenses rather than as autonomous international norms, predictability gives way to jurisdiction-specific gatekeeping. Co-production treaties exhibit a more acute certainty deficit: detailed eligibility criteria promise determinacy, yet qualifying expenditure is calculated through divergent domestic methodologies (CNC territorial spend, BFI Corporation Tax Act 2009 core expenditure rules, CAVCO labour-based thresholds, Screen Australia QAPE definitions, ANCINE operational rules). Cultural cooperation agreements deliver almost no certainty at all, relying on aspirational language. The result: treaty-certified productions and philanthropic donations formally qualify yet face jurisdiction-specific filters that convert reciprocal eligibility into contingent recognition.

Rights-based enforcement at the bilateral layer is structurally weak across all three instrument families. BTT non-discrimination clauses (Article 24 OECD Model) operate defensively rather than affirmatively: they prevent discriminatory taxation but rarely crystallise into positive entitlement to cultural tax incentives. Enforcement avenues — Mutual Agreement Procedures under Article 25, BEPS Action 14 minimum standards, and MLI Article 16 arbitration — are procedurally oriented toward high-value corporate disputes. OECD MAP Statistics 2023 show average closure time exceeding 26 months for non-TP cases, rendering MAP structurally inaccessible for small or project-based cultural operators whose claims may be economically modest but structurally significant. Co-production treaties are typically non-self-executing; courts consistently hold that no vested right to fiscal benefits arises prior to final administrative certification, and judicial review is limited to procedural irregularities. Cultural cooperation agreements lack remedial pathways altogether. Isolated decisions — such as EU case law in Stauffer (C-386/04) and Persche (C-318/07), which rest on TFEU fundamental freedoms rather than bilateral treaty enforcement — demonstrate latent interpretive possibilities but do not redress the bilateral enforcement gap.

Conditioned sovereignty is the variable on which bilateral instruments perform most strongly — and yet unevenly across the three instrument families. BTTs exemplify conditioned sovereignty in its classic form: states agree to limit their taxing powers in exchange for reciprocal restraint by treaty partners. The OECD Model allocation framework (Articles 6-22), non-discrimination obligation (Article 24), and exchange-of-information obligation (Article 26) constitute binding constraints on domestic discretion incorporated through constitutional mechanisms. The Multilateral Instrument (MLI), signed by 100+ jurisdictions as of mid-2024, further conditions sovereignty through BEPS Action 6 treaty abuse provisions and Action 14 dispute resolution minimum standards. Co-production treaties exhibit a paradox: they display stronger normative coherence than other bilateral instruments, yet their operational efficacy remains conditioned by sovereignty-preserving domestic discretion. Cultural cooperation agreements exhibit the weakest conditioning: their aspirational language permits selective implementation and restrictive interpretation, leaving national discretion largely intact. Across all three families, sovereignty is frequently reasserted through administrative discretion rather than legislative override, producing SFACs that are structurally lawful yet functionally exclusionary.

Functional integration is the weakest variable at the bilateral layer and the most significant SFAC generator. BTTs exhibit low levels of functional integration with domestic cultural-creative tax incentive regimes: they rarely establish procedural linkages between tax administrations and cultural authorities, nor do they incorporate mechanisms specifically designed to align treaty obligations with cultural policy instruments. Co-production treaties are operationalised through national competent authorities — CNC in France, BFI in the UK, CAVCO and Telefilm Canada, Screen Australia, ANCINE in Brazil, NFVF in South Africa — whose certification decisions act as the gateway to fiscal incentives. While treaties often establish joint commissions or parallel certification mechanisms, administrative cooperation is typically procedural rather than substantive: authorities exchange approvals and notifications, but rarely engage in harmonised interpretation of eligibility criteria or expenditure classifications. Cultural cooperation agreements do not institutionalise coordination at all. Platforms such as Transnational Giving Europe (TGE), OECD-supported philanthropy initiatives, and the European Audiovisual Observatory mitigate fragmentation, yet they operate parallel to, rather than within, treaty frameworks — a structural signature of bilateral-layer SFACs.

Mutual supportiveness is invoked rhetorically in bilateral cultural-fiscal instruments but rarely operationalised procedurally. Co-production treaties articulate cultural cooperation objectives in their preambles and substantive provisions, yet domestic implementation reinterprets them through restrictive identity metrics — nationality quotas for key creatives, linguistic requirements, and formal identity markers that privilege mononational and monolingual narratives, marginalising diasporic, multilingual, and transnational storytelling. Cultural philanthropy equivalency regimes express commitment to philanthropy as a transnational public good, yet functionally entrench conditional sovereignty through domestic public-benefit criteria. BTTs coexist with — but do not support — access to tax credits, exemptions, or in-kind settlement mechanisms. The absence of structural coordination between BTTs, co-production treaties, and cultural cooperation agreements within the same bilateral relationship frequently produces contradictory signals: a France-Canada tax treaty may permit source-state taxation under Article 17 on an artist's performance income; the France-Canada co-production treaty may confer national status on a shared production; and the France-Canada cultural cooperation agreement may signal reciprocal fiscal support — yet these instruments rarely integrate, producing the recognition-without-access dynamic that represents the archetypal bilateral-layer SFAC.

VI. Empirical Significance: A High-Value Bilateral-Layer Advisory Domain

The bilateral treaty layer conditions a material proportion of cross-border cultural-creative economic value. Worldwide, over 3,000 bilateral tax treaties are in force, supplemented by approximately 400 bilateral co-production treaties and several hundred bilateral cultural cooperation agreements. The fiscal consequences of treaty alignment — or misalignment — materialise directly in the economic viability of touring, cross-border production, rights licensing, and philanthropic flows. Bilateral-layer SFACs materialise as withholding-tax drag on touring artists, double taxation of royalties, non-recognition of cross-border charities, denial of co-production certification where expenditure tests diverge, and exclusion from national tax credits despite formal treaty eligibility.[21]

Audiovisual Co-Production as Industrial Anchor

Audiovisual production represents the paradigmatic case for the bilateral layer as an instrument of industrial and territorial policy. Canada has concluded co-production treaties with 55+ partners under the Canadian Audiovisual Treaty Coproduction framework; France operates co-production treaties with more than 50 states; Ireland operates treaty-based co-production with 19+ countries; the United Kingdom operates treaty-based co-production with Brazil, France, India, Israel, Jamaica, Morocco, New Zealand, Occupied Palestinian Territories, and South Africa. Bilateral structures account for a material proportion of cross-border production value. In Canada, treaty co-productions delivered over CAD 500 million in production budgets in recent reporting years under the Telefilm Canada framework. In Europe, the Council of Europe Convention on Cinematographic Co-Production (ETS No. 220, Rotterdam 2017) complements bilateral treaties, and European Audiovisual Observatory data confirm that co-production structures account for a substantial share of European feature-film financing.[22]

Treaty misalignment translates into direct fiscal cost. Where qualifying expenditure definitions diverge (CNC territorial spend, BFI Corporation Tax Act 2009 Schedule 15A core expenditure, CAVCO labour-based thresholds, Screen Australia QAPE definitions, ANCINE operational rules), treaty-certified productions face denial or reduction of tax credits in one or both jurisdictions. The fiscal equivalent of this misalignment, across the global co-production network, is estimated in the low hundreds of millions of US dollars annually — a high-value advisory domain for tax lawyers, accountants, and cross-border production counsel.

Cross-Border Philanthropy and Equivalency

Cross-border cultural philanthropy constitutes a second empirically significant site of bilateral-layer SFACs. Transnational Giving Europe (TGE) — a network of 22 participating countries — facilitates cross-border donations within Europe by providing domestic equivalency determinations that unlock domestic deductibility. Yet TGE operates parallel to, rather than within, bilateral treaty frameworks, illustrating that functional integration at the bilateral layer remains underdeveloped. OECD Taxation and Philanthropy (Tax Policy Studies No. 27, 2020) identifies cross-border non-recognition of public-benefit organisations as one of the most significant structural barriers to efficient philanthropic capital allocation globally. EU case law in Stauffer (C-386/04, 2006) and Persche (C-318/07, 2009) established that Member States must accept cross-border equivalent donations — but compliance is implemented through domestic procedures imposing substantial evidentiary burdens, remaining administratively inaccessible for many cross-border donors and illustrating that supranational rulings cannot substitute for bilateral functional integration.[23]

Artistic Mobility and Article 17 Withholding-Tax Drag

The artistic and sportsperson withholding regime under Article 17 OECD Model generates material fiscal drag on the international touring, festival, and residency economy. In Europe alone, the cross-border live-performance sector employs hundreds of thousands of musicians, dancers, actors, and other performers whose incomes are frequently subject to source-state withholding without deduction for production expenses. The European Commission's own post-Brexit analysis of cultural mobility, and CISAC (International Confederation of Societies of Authors and Composers) data on cross-border royalty flows, confirm that Article 17 withholding-tax drag — compounded by administrative complexity in reclaim procedures — operates as a systemic fiscal friction on the international cultural economy.[24]

Digital and Tokenised Cultural Assets at the Bilateral Interface

Digitalisation of cultural creation, production, and distribution is reshaping the bilateral-layer analysis. Digital delivery of cultural services frequently falls outside classical Article 5 OECD Model permanent establishment thresholds, leaving source-state taxing rights contested. The OECD Inclusive Framework's Pillar One and Pillar Two negotiations, and the domestic digital services taxes adopted by France (3%), the UK (2%), Italy (3%), Spain (3%), and Austria (5%), illustrate the fiscal tensions generated by digitalisation of cultural value flows. Tokenised cultural assets — NFTs, tokenised audiovisual rights, digital heritage assets — raise novel bilateral questions on situs, beneficial ownership, and allocation of taxing rights. The bilateral-layer advisory domain is therefore expanding, not contracting, as the digital transformation of cultural-creative industries generates new treaty interpretation questions.[25]

VII. Professional Competence at the Bilateral Layer: Treaty Interpretation, MAP, Authority Engagement

Effective access to cultural and creative tax incentives at the bilateral level is not determined solely by treaty text. It is mediated through a complex ecosystem of paired competent authorities, national certification bodies, ministries of culture and finance, and treaty-based dispute resolution mechanisms whose interpretative authority shapes how bilateral norms are applied in practice. Professional competence at the bilateral layer therefore requires more than technical knowledge of tax-treaty provisions. It requires structured engagement across paired jurisdictional systems, grounded in an understanding of how bilateral, national, and supranational logics interact to produce — or obstruct — access to fiscal instruments.[26]

MAP as Structural Access Mechanism — and Its Limits

The Mutual Agreement Procedure under Article 25 OECD Model Tax Convention is the principal dispute-resolution mechanism at the bilateral layer. BEPS Action 14 (Making Dispute Resolution More Effective) established minimum standards — including timely resolution commitments, MAP statistics publication, and in some treaties binding arbitration — incorporated through the Multilateral Instrument (MLI) Article 16 for the 100+ jurisdictions that are MLI signatories. Yet MAP remains structurally inaccessible for the majority of cultural-creative disputes. OECD MAP Statistics 2023 show average closure time exceeding 26 months for non-transfer-pricing cases; MAP procedures are procedurally oriented toward high-value corporate disputes, not individual artist or cultural-institution claims; and the cost-benefit calculus rarely supports MAP initiation for disputes below EUR 500,000-1,000,000 in tax exposure. The result is that MAP operates as a formally available but practically reserved mechanism — itself a bilateral-layer SFAC arising from procedural design.[27]

Professional competence at the bilateral layer therefore requires dual fluency in treaty text and administrative practice across paired jurisdictions. High-level practice integrates: (i) advance structuring that anticipates treaty compatibility and co-production certification requirements simultaneously; (ii) authority engagement with paired competent authorities before disputes crystallise; (iii) strategic use of APA, bilateral ATR, and ruling procedures to secure upfront treaty-compatible outcomes; (iv) where necessary, MAP prosecution as dispute-resolution mechanism of last resort. This capability represents a decisive professional differentiator at the bilateral layer and functions as a direct mechanism for neutralising SFACs before they crystallise into exclusion.

VIII. The SFAC Multi-Layer Governance Model (Carvalho-Ribas): Bilateral Layer as Intermediate Operational Axis

The SFAC Multi-Layer Governance Model, developed through ECR's PhD thesis at the University of Leeds and validated through 20+ years of cross-jurisdictional advisory practice, provides a diagnostic architecture for identifying how governance-generated exclusions arise, reproduce, and persist within cultural-creative ecosystems. The Model proceeds from a foundational premise: exclusion from cultural-creative tax incentives is rarely accidental or the result of isolated legal defects. Rather, such exclusion is structurally produced through the interaction of multiple governance layers operating under distinct normative logics, enforcement capacities, and institutional priorities. SFACs are therefore systemic outcomes of governance interaction, not technical anomalies.[28]

The interaction of the two axes — governance layers (4) and structural layers (3) — produces a 4 × 3 analytical matrix generating twelve distinct SFAC types. Each cell corresponds to a specific configuration of governance context and structural manifestation, representing a distinct structural access risk identifiable through legal and institutional analysis. Within this framework, this paper operationalises the bilateral treaty layer (SFAC Types 4-6) as the intermediate operational axis between the national layer (Types 1-3, TxI-02) and the supranational/international layers (Types 7-12, TxI-04 and TxI-05).[29]

The diagnostic matrix maps each bilateral-layer SFAC type against the five analytical variables. The scores are diagnostic and stylised — indicating where each SFAC type's structural deficiencies concentrate rather than empirical performance outcomes. Type 4 (normative) exhibits bifurcated legal certainty (strong at abstract allocation, weak at implementation) and limited rights-based enforcement; Type 5 (administrative) compounds these deficits through procedural re-gatekeeping; Type 6 (institutional) extends the failure to mutual supportiveness through structural fragmentation between paired fiscal and cultural authorities. Conditioned sovereignty is the variable on which the bilateral layer performs most strongly — states have accepted binding constraints on their taxing powers through treaties — but the benefits of this conditioning do not translate uniformly into functional access.

The Model is not descriptive but diagnostic. It enables systematic identification of the governance level at which exclusion originates, the structural mechanism through which it is produced, and the manner in which constraints propagate across layers. By doing so, it reframes cultural-creative fiscal exclusion as a governance problem rather than a sectoral or technical one. It establishes a shared analytical language through which law, administration, and institutions can be examined together, rather than in isolation. Within this framework, SFACs are not symptoms to be corrected ad hoc, but structural outcomes to be recognised, anticipated, and addressed through coherent multi-layer governance literacy. The bilateral treaty layer — the subject of this paper — is the indispensable intermediate axis: without competence at this layer, national-layer analysis is truncated, and supranational and international-layer analysis is disembedded from the reciprocal commitments that give those frameworks their operational texture.

Conclusion

This paper has examined bilateral treaties as structural components of cultural-creative tax incentive governance, rather than as auxiliary or interpretative supplements to domestic fiscal regimes. Through analysis — grounded in doctoral research, comparative, and applied professional practice in cross-border fiscal and cultural frameworks — of bilateral tax treaties, co-production treaties, and cultural cooperation agreements, it has demonstrated that bilateral instruments actively shape access conditions, eligibility pathways, and enforcement possibilities for cross-border cultural and creative activities. They do not merely coexist with national incentive schemes; they condition how those schemes function when economic, artistic, and philanthropic activity transcends territorial boundaries.

From a governance perspective, bilateral treaties operate as structural access determinants. They reallocate taxing rights, redefine cultural nationality and equivalency, and introduce reciprocal constraints on domestic discretion. Where they are coherently integrated, bilateral instruments can mitigate uncertainty, reduce duplicative compliance burdens, and align cultural policy objectives with fiscal mechanisms. Where they are treated as peripheral or symbolic, they become sites of structural misalignment, amplifying rather than resolving access barriers. The recognition-without-access dynamic observed across co-production certification, non-discrimination claims, and cultural-philanthropy equivalency regimes is the archetypal bilateral-layer SFAC.

The analysis confirms that Structural Fiscal Access Constraints (SFACs) arise at the bilateral level through recurring patterns: normative disjunction between treaty commitments and domestic law, administrative denial despite formal treaty protection, and institutional fragmentation between tax authorities and cultural governance bodies. These constraints are not episodic failures of implementation, but systemic features of governance architectures that privilege sovereignty preservation and administrative discretion over functional reciprocity. In such configurations, treaty norms remain rhetorically operative yet practically inert, producing recognition without enforceability and cooperation without access.

A central finding of this paper is that domestic-only analytical frameworks are structurally insufficient for understanding or resolving access to cultural-creative tax incentives in cross-border contexts. When bilateral instruments are excluded from legal analysis or advisory practice, exclusions generated at the national level are reproduced and intensified across jurisdictions. The result is asymmetric access: formally available incentives become selectively reachable, contingent on institutional familiarity, administrative negotiation, or jurisdiction-specific interpretations rather than on stable legal entitlement. Professional competence at the bilateral layer — treaty interpretation under the Vienna Convention, MAP and MLI arbitration, bilateral APA and advance ruling procedures, and structured authority engagement with paired competent authorities — therefore constitutes a decisive professional differentiator.

By situating bilateral treaties within the SFAC Multi-Layer Governance Model (Carvalho-Ribas), this paper reframes access as a product of interacting governance layers rather than isolated legal provisions. The bilateral layer emerges as a decisive intermediary space in which access can be structurally enabled or systematically obstructed. Its failure to function coherently does not merely weaken individual incentive schemes; it undermines the credibility, predictability, and policy effectiveness of cultural-fiscal governance as a whole. The conclusion is therefore clear: bilateral treaties are not optional overlays upon domestic cultural-creative tax systems. They are constitutive elements of access architecture. Where they are inadequately integrated, misunderstood, or administratively fragmented, SFACs persist as durable features of the system. Conversely, meaningful reduction of structural exclusion requires recognising bilateral instruments as central governance mechanisms and addressing misalignment at the level where reciprocity, sovereignty, and access intersect.

This paper is published through MoroAK Professional Knowledge Infrastructure. All courses, cohorts, trainings, papers, and digital toolkits are available through Evelyse Carvalho-Ribas' educator profile on moroak.com. Advisory mandates and mandate scoping are handled through Evelyse Carvalho-Ribas' practice entity — contact via evelyse@moroak.com.

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