Late in the 2019 Summer tour season, the Canada Revenue Agency (CRA) surprised the live entertainment community by introducing a long-awaited simplified waiver process. It allows eligible performers to benefit from a waiver or reduction of the 15% Federal R105 withholding tax without having to go through the traditional application process.

This simplified waiver process is not an application at all. It is a declaration completed and signed by both the non-resident individual performer and the buyer, which allows Canadian Federal withholding tax to be eliminated or reduced without pre-approval of the CRA.

Eligibility

There are only two eligibility requirements. The performer must be:

1.  Contracted as an individual or group of individuals (not through a corporate entity), and
2. Earning less than 15,000 CAD in Canada in the calendar year ( that limit applies to each person in a group). Earnings include performance fees plus any expenses reimbursed or paid on the performer’s behalf, such as meals or accomodations.

So what’s the catch?

For U.S. residents, there is no catch. As along as you are eligible, you are entitled to a full waiver. That is, there should be no Federal tax deducted from your fees.

For non-U.S. residents, the waiver is a reduction based on your net income, which means you have to provide a summary of allowed expenses to the buyer(s). Instead of withholding 15% from your gross fees, a buyer will withhold 23% of the net income you declare on your portion of the form.

This can still be quite beneficial – if you are earning 10,000 CAD, but are spending 7,000 CAD on travel, hotels, meals, and commissions, your tax will go from 1,500 CAD (10,000 x 15%) to 690 CAD (3,000 x 23%). You will save over 800 CAD just by filling out a form.

The simplified process still has many limitations – many performers work through wholly-owned corporations or LLCs, which are not eligible; off-stage staff such as technicians cannot use the simplified process; coordinating forms when there are multiple group members and multiple buyers can become quite tricky; for non-U.S. performers, amounts paid to support staff are not eligible expenses, and many expenses – accomodations, per diem, commissions – are capped such that they may not be able to claim the real cost of their expenses. Finally, for non-U.S. performers, the very idea of revealing your detailed expenses to buyers may be a turn-off.

Still, the simplified process has offered a window for a number of performers to benefit from some tax relief without having to invest their time or money in going through the traditional waiver process, which seems to become more complex with each passing year.

Don’t forget Quebec!

Performers hired in the province of Quebec should also keep in mind that the additional provincial withholding of 9% is an entirely separate matter. Having that additional withholding waived still requires a separate application to Revenu Quebec.

Now what?

Not sure if the R105 simplified waiver process is right for your upcoming shows in Canada? Don’t hesitate to contact us – we are always happy to chat and help guide you in the right direction.

Canadian withholding taxes and waivers have long been part of the landscape of Canadian taxes, and the vast majority of non-resident artists and Canadian buyers were well aware of these regulations. In recent years however, the Canada Revenue Agency (CRA) has been placing an increasing emphasis on compliance with annual filing requirements. Remaining tax compliant is now a necessary condition for any artist who wants to benefit from Tax Waivers, not to mention avoid penalties or assessments being levied against them by the CRA.

Non-resident artists performing in Canada through a corporate entity in a given year are required to file a Canadian T2 Tax Return – this is the primary element of tax compliance. A new element has entered the compliance requirements in recent years: that of filing T4 Information Returns.

T4A-NR forms are essentially tax receipts which a payer must issue to all staff having been paid for services in Canada in any given year – for a touring artist, this generally means supporting musicians, techs, and tour managers traveling with the artist on their Canadian dates. The form indicates the fees paid to each individual, and any tax amounts withheld from their fees, for work in Canada. These forms must be issued regardless of whether or not taxes were withheld from fees paid to staff.

The artist must send a copy of all T4A-NR forms along with a T4A-NR Summary to the Canada Revenue Agency no later than February 28th following any given year in which the artist performed in Canada.

This is actually not a new requirement – in other words, the law did not recently change in this regard. Never heard of it? We are not surprised! The CRA turned a blind eye to this requirement for many years in connection with touring artists.

It was not until late 2014 that we started seeing artists being penalized for not filing these T4 Returns for work in Canada in previous years. Unfortunately, throughout 2015 we continued to learn of penalties being assessed against new clients for the non-filing of these T4 Returns, and so we now consider these filings to be an unavoidable requirement for maintaining tax compliance in Canada.

We are very aware of the increasing burdens of Canadian tax requirements on touring artists and we remain dedicated to ensuring our clients’ Canadian tax matters are managed as efficiently and cost-effectively as possible.

Not sure if you are required to file T4 Returns this year? Wondering what the risks are of not filing in past years? Do not hesitate to contact us, we will be pleased to assist you with any non-resident tax issues.

August, 2015

The Canadian Government recently introduced Draft Legislation with the intent of reducing the circumstances in which a Non-Resident Employer- Artist is required to file for a R102 Waiver to avoid the necessity of withholding 15% from their employee wages.

Currently under Canadian law, all Non-Residents who have staff working for them in Canada are required to withhold 15% on their wages in the absence of a Waiver issued by the CRA. In the context of touring artists, this kind of Waiver relieves the artist’s obligation to withhold taxes from the wages it pays to its musicians, crew, and other staff traveling on their Canadian tour. But of course securing this R102 Waiver creates an additional level of work for the touring artist who are faced with incurring risk of being taxed and penalized by the CRA if they do not secure this Waiver and then do not withhold 15% from their staff wages (and remit these withholdings to the CRA).

Regrettably this proposed legislation does not eliminate the need for Artists to file for R102 Waivers in all circumstances. Under its current language, it would only apply to US staff who are earning less than $ 15,000 Can in Canada during any calendar year and all non-artistic staff (i.e. tour manager, technicians, etc..) from Tax Treaty countries with Canada. Therefore this legislation would not apply for instance for musicians from England, France and Germany. But given that a majority of Non-Resident Artists performing in Canada are from the US, and given that most US staff earn less than $ 15,000 Can in any calendar year, this legislation becoming law would be a significant help to US artists touring Canada.

It should be emphasized though that this Draft Legislation has not yet been formally debated by the Canadian Parliament and given that Canada is currently in the midst of a Federal Election campaign (which may result in a change of government), there is no guarantee that this legislation will become law. There may be greater clarity around this towards the end of 2015.

If you would like to see the Draft Legislation, it can be found here on page 17 under the heading: “Withholding for Non-Resident Employers”:

http://www.fin.gc.ca/drleg-apl/2015/ita-lir-0715-l-eng.pdf

June, 2015

Our office, R.A.M. Management – Attorneys at Law sent a detailed letter to
the Canadian Minister of Finance and the Canadian Minister of Revenue making
extensive recommendations on how to lessen the burden of tax requirements
for Non-Resident Artists performing in Canada.

Over the past year our office has been increasingly concerned that the
increasing burden of tax requirements on Non-Resident Artists will result in
Non-Resident Artists losing interest in performing in Canada.

Among our recommendations are:

– Not applying withholding tax to deposits
– Eliminating penalties for failure to file T-4 Information Returns for
staff.
– Eliminating the need for Artists to file T-4 Information Returns in
certain circumstances.
– Reducing the penalties for failing to file a T-2 Tax Return
– Extending the scope of the Secondary Withholding exemption as proposed in
Budget 2015.

To see a copy of our letter, please click here: 

Letter To Canadian Ministers (Link)

April, 2015

The Canadian Arts Presenting Association (CAPACOA) recently sent a detailed letter to the Canadian Minister of Finance and the Canadian Minister of Revenue with suggestions on how to streamline the Regulation 105 Waiver procedure. The letter outlines how complicated it has become for a Non-Resident Artist to successfully file for an R105 Waiver which is resulting in Non-Resident Artists losing interest in touring Canada or requesting higher performance fees from Canadian presenters (to offset the loss of the 15% withholding tax).

In the their letter, CAPACOA makes 4 specific recommendations to improve the situation:

– Develop Performing Arts Specific Guidelines
– Exempt Performance Deposits from Withholding
– Streamline the R105 Application Process by use of Electronic Filing System
– Increase and Index the Waiver Threshold of Artist Fees not Subject to Tax.

CAPACOA’s letter is written on behalf of seventeen performance arts organizations, representing more than 1,000 stakeholders in the performing arts sector.

A full copy of the letter can be seen here:

http://capacoa.ca/documents/services/advocacy/150316_working_group_letter.pdf

As all our clients know, the R-105 tax waiver application process includes the application for a Secondary Withholding waiver – that is, a waiver from the artist’s obligation to withhold taxes from the fees it pays to its musicians, crew, and other staff traveling on their Canadian tour. In order for this Secondary Withholding waiver to be processed, each individual traveling to Canada must have an Individual Tax Number (ITN) from the Canada Revenue Agency.

Group members who do not yet have an ITN must obtain one, which means providing:

• A digital copy of their current passport
• A signed ITN application form, a one-pager requesting basic personal information such as Name, Address, Phone Number, and Social Security Number

We used to submit these items with the other R-105 application, that is no later than 30 days before the artist’s first Canadian performance, but the rules regarding ITN applications have changed. The CRA now processes these requests through a separate department and requires ITN application documents to be submitted 6 weeks before the first date – that means 2 weeks earlier than the rest of your tax waiver application.

So, whether your whole group is coming to Canada for the first time, or you just have a new guitarist who needs an ITN, be sure to contact us as soon as possible so we can help you with your applications and avoid unnecessary delays!

Did we lose you at “Secondary Withholding”? Find out about it in our FAQ.

LINKS
CRA: http://www.cra-arc.gc.ca/E/pbg/tf/t1261/README.html
FAQ: http://taxwaivers.ca/faq/#faq4
Contact us: http://taxwaivers.ca/contact-us/