International Artists in Canada: Promoters’ Tax Liability

Event promoters, are you familiar with Regulation 105? This federal tax rule applies to contracts with an international artist in Canada.

Cultural events and festivals in Quebec include Canadian and international artists in order to present a diverse and competitive program. From a contractual stand point, signing a Canadian or international artist is essentially the same and involves negotiating the following: fees, equipment, accommodations, transportation, meals, etc. However, there is one difference for an international artist—the event promoter’s tax liability.

International artist’s fee instalments

A contract between an event promoter and an international artist to provide services in Canada for fees is covered by federal tax Regulation 105. Under this Regulation, the payer (event promoter) is required to withhold and remit an instalment equal to 15% of the fees paid to the non-resident (international artist) to the Canada Revenue Agency within a prescribed deadline. Furthermore, if the service is provided in Quebec, an additional amount of 9% must be withheld. To recover some or all of the withholding, the non-resident is required to file an income tax return in Canada.

This Regulation is simple to apply, however, failure to do so could cause problems for the payer, who could be liable for a penalty of 10% of the amounts to be remitted.

Streamlined procedure: prevention is better

Fortunately, the tax rules provide for relief mechanisms (waiver application) and a streamlined procedure for artists. It is to the benefit of any organization, from both an operational and financial perspective, to ensure proactive management of contracts that could be subject to Regulation 105. This simply requires that the application of Regulation 105 be determined at the time of signing a contract with a non-resident, making and remitting any withholding required or filing a waiver application.

Over the long term, failure to comply with Regulation 105 could prove to be expensive and time consuming for an organization’s directors. Whether they are making a voluntary disclosure or undergoing a tax audit, the directors will need to spend considerable time on this matter. Financially, these can be very costly situations. For example, it may be necessary to finance the unremitted payments (such as taxes, penalties or interest), depriving the organization of some of its operating budget.

Don’t hesitate to contact our experts to obtain good advice.