Regulation 105 of the Income Tax Act requires every person (whether resident or non-resident in Canada) who pays a non-resident person (individual, corporation, partnership, joint venture, hybrid entity such as a limited liability company or other) a fee, commission, or other amount for services (of a non-employment nature) rendered in Canada, to deduct and withhold 15% tax from such a payment.
Payers are generally required to remit the tax to the Canada Revenue Agency (CRA) by the 15th of the month following the month in which they paid the non-resident. This means the deductions must be received by the CRA on or before that day. Payers who fail to withhold without authorization from the CRA may be assessed tax, penalty, and interest.
Payers are also required to complete a T4A-NR, Statement of fees, commissions, or other amounts paid to non-residents for services rendered in Canada, information slip for each non-resident person they pay and to provide each payee with the appropriate slip copies. Payers must file all slips together with one T4A-NR Summary form with the CRA. For more detailed information on preparing these forms, see the publication RC4445, T4A-NR Payments To Non-Residents for Services Provided in Canada.
Additional requirements for services rendered in Quebec
Additional withholding of 9% of payments made is required by Revenu Québec for services rendered in the province.
Best practices in the industry
- Don't presume of the residency of artists. A Canadian-born artist may have a permanent residence in another country. Similarly a group comprised mainly of resident artists may include a non-resident artist. In doubt, double-check the residency of artists with their representative.
- At the time of signing the contract, make sure to request the Individual Tax Number or Business Number (whichever applies) of each non-resident person you are paying. This information is required to complete the T4A-NR.
- Non-resident artists, groups or companies may often be represented by a resident agency. In these instances, it is a common practice in the industry for the agency to be responsible for withholding and reporting. However, in a few instances, the booker may only be a middle-person receiving payment on behalf of the artist group and may not be responsible for withholding. As a rule of thumb, if you are making the payment in full to the agency and HST is applied to the fee, you know for sure that you are not responsible for withholding and reporting. If no HST is charged, presenters should be diligent and double-check with the agency that they will indeed be responsible for withholding and reporting.
- For now, deposits are subject to withholding. If you know the artist/group/company will be applying for a waiver, wait until you've received a copy of the waiver approval before issuing the deposit. Otherwise, you have to withhold on the deposit.