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 once I thought I’d develop into a music trainer reasonably than a tax accountant. However classical music is figure for my mind; I can’t learn or research with it enjoying as a result of I find yourself dissecting the timing and key adjustments.
Traditional rock and blues ask nothing of me: three chords, a easy beat and lyrics which can be gloriously dumb, the proper antidote to a day spent studying the Revenue Tax Act.
However previous habits die laborious, 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 overseas rock band for taking part in right here?
Each greenback AC/DC, Bruce Springsteen or some 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 remaining tax; it’s a deposit in opposition to the precise Canadian legal responsibility. Which tax treaty applies will depend on who’s being paid. Most bigger acts tour via 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 approach: it preserves Canada’s proper to tax entertainers’ Canadian-source earnings regardless of basic 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 charge . Multiply that throughout a stadium tour and a touring social gathering working into the a whole bunch, 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 offered — roughly 235,000 paid followers — a mean ticket worth 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 web 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 a complete lotta Rosie held by the CRA in opposition to a remaining tax invoice that, as soon as touring prices are deducted, is nearly actually 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 remaining 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 provided a simplified course of 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 problem a single waiver overlaying 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 grew to become regulation via 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 via 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 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 an actual step ahead . However it should 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 should be accomplished dust low-cost.
I’ll be maintaining 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 may be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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