Hells bells, I’ll be in Vancouver for my sixth AC/DC live performance in a few weeks. My roots are classical: grade 10 piano, grade 6 idea and a stretch after I thought I’d grow to be a music trainer slightly than a tax accountant. However classical music is figure for my mind; I can’t learn or examine with it enjoying as a result of I find yourself dissecting the timing and key modifications.
Basic rock and blues ask nothing of me: three chords, a easy beat and lyrics which are gloriously dumb, the proper antidote to a day spent studying the Income Tax Act.
However previous habits die arduous, so by the point the home lights go up, a part of my mind will drift towards a problem I’ve been fascinated by at rock concert events for 3 many years: How does Canada tax a foreign rock band for enjoying right here?
Each greenback AC/DC, Bruce Springsteen or any other non-resident performer earns for a Canadian present is caught by Regulation 105 of the Earnings Tax Act. It requires the payer, typically the promoter , to withhold 15 per cent of any charge paid to a non-resident for providers rendered in Canada and remit it to the Canada Revenue Agency . Add one other 9 per cent for Revenu Québec if the present is in that province.
It doesn’t matter whether or not the performer is the headliner or a lighting director flown in from Los Angeles, in the event that they’re a non-resident paid for providers carried out on Canadian soil, Regulation 105 catches it. Again in black.
The withholding isn’t a final tax; it’s a deposit in opposition to the precise Canadian legal responsibility. Which tax treaty applies depends upon who’s being paid. Most bigger acts tour by means of loan-out corporations , so the relevant treaty activates the place that entity resides, not the place the band began out.
Whether or not that’s Article XVI of the Canada-United States treaty or one thing else, the mechanism works the identical approach: it preserves Canada’s proper to tax entertainers’ Canadian-source revenue regardless of common guidelines that will in any other case protect a non-resident with no everlasting institution right here.
That 15 per cent comes off gross Canadian income at every cease. Merchandise brings a wrinkle: t-shirts aren’t caught by Regulation 105, however the royalties a band earns by licensing its identify to a merch firm faces a 25 per cent withholding rate . Multiply that throughout a stadium tour and a touring occasion operating into the tons of, and it’s straightforward to see why total specialist practices exist to navigate these guidelines.
Cash talks, proper?
None of AC/DC’s numbers are public, however let’s take a shot at midnight. The stadiums in Edmonton, Vancouver, Montreal, Toronto and Winnipeg have a mixed capability above 260,000. Assume the 5 dates run about 90 per cent offered — roughly 235,000 paid followers — a median ticket worth of $180 could be near $42.3 million in gross Canadian field workplace.
Prime-tier legacy acts sometimes command 85 per cent to 90 per cent of internet field workplace as soon as facility charges and taxes are stripped out, which works out to roughly 60 per cent of gross; name it $25.4 million in Canadian-source efficiency revenue on this case.
Add merchandise, say, $25 a head and that’s roughly $5.9 million in product sales, with maybe 35 per cent of that, or $2.05 million, flowing again as royalty, thus forcing a 25 per cent withholding tax.
On that mixed $27.45 million, Regulation 105 and the 25 per cent royalty withholding would pull greater than $4.3 million earlier than the tour bus leaves the nation. That’s a complete lotta Rosie held by the CRA in opposition to a last tax invoice that, as soon as touring prices are deducted, is sort of definitely a fraction of that.
The restoration requires a T1 or T2 return to be filed underneath Part 115 of the Earnings Tax Act, relying on who was paid. The 25 per cent royalty withholding is a special animal: that’s usually a last tax; there’s no return to file to get it again.
As a result of 15 per cent of gross income virtually at all times exceeds a touring act’s actual Canadian tax legal responsibility as soon as bills are counted, the system permits for sure waivers.
Since 2018, the CRA has supplied a simplified process for non-resident artists and athletes incomes not more than $15,000 in Canada yearly, which is useful for a help act, however ineffective for AC/DC. Above that threshold, touring artists don’t get the simpler path different non-resident service suppliers can use. As an alternative, they get thunderstruck.
Funds 2024 proposed giving the CRA legislative authority to challenge a single waiver protecting a number of transactions over a specified interval, slightly than engagement by engagement, which is exactly the excessive voltage a touring act wants.
That measure grew to become legislation by means of Bill C-15 earlier this 12 months, however the CRA hasn’t but constructed the method to make use of it. Individually, the CRA ran its personal consultation by means of summer season 2025 and has said administrative enhancements are coming this 12 months.
Angus Younger and his advisers have lengthy figured all of this out. However the mid-tier and rising acts who don’t have a battalion of tax consultants can usually get shot down in flames by the compliance complexity. The foundations aren’t unreasonable in precept — Canada has each proper to tax revenue earned on its soil — however getting aid from over-withholding is disproportionately burdensome relative to the income at stake.
If Canada needs to be a extra enticing cease on a worldwide tour with its associated financial advantages, the multi-transaction waiver authority in Invoice C-15 is a real step forward . However it’ll solely matter if the CRA implements it with quick turnaround instances and clear, printed standards.
A touring act wants certainty measured in weeks, not months. In different phrases, the soiled deeds must be accomplished filth low-cost.
I’ll be protecting a stiff higher lip on the Vancouver present, making an attempt to neglect about Regulation 105 for 2 hours. Invoice C-15 gave the CRA the amplifier. For these about to rock — and people about to withhold — we salute you.
Kim Moody, FCPA, FCA, TEP, is the founding father of Moodys Tax/Moodys Non-public Shopper, a former chair of the Canadian Tax Basis, former chair of the Society of Property Practitioners (Canada) and has held many different management positions within the Canadian tax group. He will be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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