As a general rule, non-resident actors or other 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, or even assess tax based on the gross revenue.
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].
Endnotes
[1] 2(3)(b) the Act-all subsequent statutory references are to the Act.
[2] See, for example, Article XVI (1) of Canada’s tax treaty with the US
[3] See, for example, Article XVI (2) of Canada’s tax treaty with the US
[4] Regulation 105. For performances in the Province of Quebec, an additional 9% is required on account of Quebec taxes.
[5] Subsection 212(5.1)
[6] Subsection 216.1(1)
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