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 principle and a stretch after I thought I’d grow to be a music instructor fairly than a tax accountant. However classical music is figure for my mind; I can’t learn or examine with it taking part in as a result of I find yourself dissecting the timing and key adjustments.
Basic rock and blues ask nothing of me: three chords, a easy beat and lyrics which might be gloriously dumb, the right antidote to a day spent studying the Income Tax Act.
However outdated habits die onerous, so by the point the home lights go up, a part of my mind will drift towards a problem I’ve been enthusiastic about at rock live shows for 3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 Revenue Tax Act. It requires the payer, typically the promoter , to withhold 15 per cent of any price 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 towards the precise Canadian legal responsibility. Which tax treaty applies depends upon who’s being paid. Most bigger acts tour via 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 title to a merch firm faces a 25 per cent withholding rate . Multiply that throughout a stadium tour and a touring occasion operating into the a whole bunch, and it’s simple 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 in the dead of night. 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 bought — roughly 235,000 paid followers — a median ticket worth of $180 can be near $42.3 million in gross Canadian field workplace.
High-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 towards a remaining 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 below Part 115 of the Revenue Tax Act, relying on who was paid. The 25 per cent royalty withholding is a unique animal: that’s usually a remaining tax; there’s no return to file to get it again.
As a result of 15 per cent of gross income nearly all the time 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 helpful 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 a substitute, they get thunderstruck.
Finances 2024 proposed giving the CRA legislative authority to subject a single waiver overlaying a number of transactions over a specified interval, fairly than engagement by engagement, which is exactly the excessive voltage a touring act wants.
That measure grew to become regulation via Bill C-15 earlier this yr, however the CRA hasn’t but constructed the method to make use of it. Individually, the CRA ran its personal consultation via summer season 2025 and has said administrative enhancements are coming this yr.
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 typically get shot down in flames by the compliance complexity. The principles aren’t unreasonable in precept — Canada has each proper to tax revenue earned on its soil — however getting reduction from over-withholding is disproportionately burdensome relative to the income at stake.
If Canada desires to be a extra enticing cease on a world 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 occasions and clear, revealed standards.
A touring act wants certainty measured in weeks, not months. In different phrases, the soiled deeds must be achieved grime low-cost.
I’ll be retaining a stiff higher lip on the Vancouver present, making an attempt to overlook 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 neighborhood. He will be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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