Tax Issues for Non-Resident Actors & Entertainers in Canada
Contributed by Michael Atlas
10 June, 2016
As a general rule, non-resident actors or entertainers who derive income from performing in Canada will be subject to Canadian tax on such income. Typically, such persons are self-employed independent contractors, rather than employees. Therefore, they will be subject to tax in Canada on the basis that they are carrying on a business in Canada.1
Even if they are resident in a country with which Canada has a tax treaty, they will generally still be subject to Canadian tax on income from such activities in Canada. Typically, Canada's tax treaties contains a special provision that allows Canada to tax the income of actors and entertainers (as well as athletes), even if there is no "permanent establishment" or "fixed base" in Canada.2 This will be the case even if the actor or entertainer forms a corporation through which to provide his or her services.3
Any person paying the actor or entertainer for performing in Canada will generally be required to withhold 15% of the payment and remit it to the Canada Revenue Agency on account of taxes.4 In the following year, the payer is required to issue form T4A-NR to the payee.
Many people mistakenly think that the withholding and remitting of the 15% Canadian tax is the end of the matter from a Canadian tax perspective. That is not correct! That tax withheld is just an amount remitted on account of tax-it is not the actual tax. The non-resident will be required to file a Canadian tax return to compute the actual tax payable, on the Canadian income, after deducting expenses applicable to that income. That actual tax could well be more than the 15% withheld, and, in that case, the non-resident will be required to remit the balance to the Canada Revenue Agency. Failure to file a return and pay tax on a timely basis could render the non-resident subject to penalties and interest. If the Canada Revenue Agency does not ultimately see a tax return filed that ties into the T4A-NR, they will normally send a demand to the non-resident to file a Canadian tax return.
There are special rules that apply to non-residents who earn income from acting in Canada in a film or video production. These rules can apply to non-resident corporations that earn income from the performance of a related non-resident.
Under these rules, tax at the rate of 23% must be withheld on the gross amount of the payment to the non-resident. In the absence, of making an election, the non-resident will be subject to tax on the basis of the 23% tax withheld, with no filing requirement.5 However, if a tax return is filed on a timely basis, the non-resident will be subject to tax on the net income, after deducting applicable expenses, at the appropriate tax rate.6
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