Legislation was passed in Parliament on June 14, 2001 which set the withholding tax on acting income earned by non-resident actors at 23%. The legislation applies to non-resident actors in film or video production, such as feature films, movies of the week, television series, documentaries, video productions, and commercials, in Canada .
The legislation does not apply to other people employed or providing services within the movie industry, such as directors, producers, and other personnel working behind the scenes. As well, the legislation does not apply to people in other sectors of the entertainment industry, such as musical performers, ice or air show performers, or international speakers. If a non-resident person earns other income in Canada (for services as a producer or director, for example), this income will continue to be subject to withholding at the rate of 15% and the person will be required to file a tax return.
If the acting income is your only source of Canadian income, you are not required to file a tax return. However, you may be able to reduce your tax obligation by electing to file an income tax return. Electing to file a return allows you to pay tax on your net Canadian-source acting income at graduated individual or corporate rates, instead of paying tax on the gro ss amount at the 23% rate. Depending on the amount of your income and expenses, the tax calculated on the net income may be less than the 23% withholding tax on gross earnings
The 23% withholding applies to all amounts paid or credited to you, or a related corporation, for acting services that you provide in Canada on a film or video production which include: per diem payments for days in Canada ; amounts paid on your behalf to third parties; and similar benefits. However, withholding of 23% is not required from the following amounts: reasonable travel expenses (airfare, hotels) paid directly to third parties on your behalf, and reasonable travel expenses reimbursed to you provided they are adequately supported by vouchers, maintained by the payer.
To allocate income to Canada, you have to calculate the following:
- Number of days inside Canada - This is the number the days you were present in Canada to provide the services specified under the acting contract, whether or not you actually provided the services on all of those days. It therefore includes the days you arrived in and departed from Canada , weekends, statutory holidays, days you were on "standby," days you were "on call," and short breaks if you remained at or near your work location. The CRA considers that you have to be in Canada on such days to be able to provide the services. They are therefore relevant to determining the amount of income you earn in Canada .
- Number of days outside Canada - This is the number of days you spent outside Canada providing services under the contract, multiplied by 7/5.
- Total number of days on the production - The "number of days inside Canada " plus the "number of days outside Canada " equals the "total number of days on the production." This number should be consistent with the time periods identified in the contract for services.
- Percentage (%) of days inside Canada - This is the percentage represented by the following formula:
Number of days inside Canada X 100 = % of days inside Canada
Total number of days on the production
- Acting income allocated to Canada - To calculate the amount of acting income to allocate to Canada , multiply your income under the contract that is attributable to acting services by the "percentage (%) of days inside Canada ."
Amounts paid to non-resident actors no subject to the 23% withholding tax include: ( all amounts are quoted in Canadian $)
- reasonable travel expenses (airfare, hotels) paid directly to third parties on behalf of the non-resident actor, and
- reasonable travel expenses reimbursed to the non-resident actor provided they are adequately supported by vouchers, maintained by the payer. (Reimbursement of meals including incidentals to a maximum $100/day will not require receipts.)
Amounts above $100/day reimbursed for meals will require that the payer retain receipts from the non-resident actor. If receipts for the full amount paid are not retained, withholdings of 23% on the amount in excess of the total receipts retained are required. For example, a non-resident actor is paid a per diem amount of $600/day for a 10 day period. The payer obtains receipts for the period from the non-resident actor of approximately $200/day. The payer must therefore withhold on the additional $400/day paid to the non-resident actor for which the payer does not retain receipts.
Amounts of $100/day or less paid as a reimbursement of meals expenditures will require only that the payer obtain an attestation from the non-resident actor that such amounts were incurred. However, the non-resident actor is required to retain the receipts for possible subsequent verification by the CRA. It is expected that payers exercise reasonable discretion in accepting such attestations from non-resident actors. For example, where shooting for a particular period took place in a remote area without access to restaurants, and all meals were provided on the set, it would not be reasonable to accept an attestation that a non-resident actor incurred meal expenditures of $100/day for this period.
The 23% withholding tax is required to be remitted to the Receiver General by the 15th of the month following the month in which the payments were made. For example, if a per diem is paid to a non-resident actor on January 10, the remittance of the withholding tax would be required to be made to the Receiver General by February 15. Payers and non-resident actors should consider these time frames when determining whether the withholding tax should be applied and whether receipts may be provided to the payer by the non-resident actor before the time required for remitting the tax.
It would be helpful for non-resident actors to seek the advice of a Canadian tax professional. Further information from the CRA is available on the CRA website at http://www.cra-arc.gc.ca..