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 concept and a stretch after I thought I’d change into a music instructor reasonably 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 adjustments.
Basic rock and blues ask nothing of me: three chords, a easy beat and lyrics which are gloriously dumb, the right antidote to a day spent studying the Revenue Tax Act.
However outdated habits die exhausting, so by the point the home lights go up, a part of my mind will drift towards a problem I’ve been fascinated with at rock concert events for 3 a long time: How does Canada tax a overseas rock band for enjoying right here?
Each greenback AC/DC, Bruce Springsteen or every other non-resident performer earns for a Canadian present is caught by Regulation 105 of the Revenue Tax Act. It requires the payer, usually the promoter , to withhold 15 per cent of any charge paid to a non-resident for companies rendered in Canada and remit it to the Canada Income Company . 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 companies carried out on Canadian soil, Regulation 105 catches it. Again in black.
The withholding isn’t a last tax; it’s a deposit towards the precise Canadian legal responsibility. Which tax treaty applies relies on who’s being paid. Most bigger acts tour by loan-out companies , 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 method: it preserves Canada’s proper to tax entertainers’ Canadian-source earnings regardless of common guidelines that might 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 charge . Multiply that throughout a stadium tour and a touring get together operating into the lots of, and it’s simple to see why whole 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 nighttime. 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 mean ticket value of $180 can be near $42.3 million in gross Canadian field workplace.
Prime-tier legacy acts usually 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 earnings 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 an entire lotta Rosie held by the CRA towards a last tax invoice that, as soon as touring prices are deducted, is nearly definitely a fraction of that.
The restoration requires a T1 or T2 return to be filed beneath Part 115 of the Revenue Tax Act, relying on who was paid. The 25 per cent royalty withholding is a special animal: that’s typically 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 course of for non-resident artists and athletes incomes not more than $15,000 in Canada yearly, which is helpful for a assist act, however ineffective for AC/DC. Above that threshold, touring artists don’t get the better path different non-resident service suppliers can use. As an alternative, they get thunderstruck.
Price range 2024 proposed giving the CRA legislative authority to difficulty a single waiver protecting a number of transactions over a specified interval, reasonably than engagement by engagement, which is exactly the excessive voltage a touring act wants.
That measure turned regulation by Invoice 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 session by summer season 2025 and has mentioned 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 earnings 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 engaging cease on a worldwide tour with its associated financial advantages, the multi-transaction waiver authority in Invoice C-15 is an actual step ahead . However it should solely matter if the CRA implements it with quick turnaround instances and clear, revealed standards.
A touring act wants certainty measured in weeks, not months. In different phrases, the soiled deeds must be finished grime low cost.
I’ll be conserving a stiff higher lip on the Vancouver present, attempting 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 Personal Consumer, 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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