FAQ - Canadian Tax Advisors

What is Canadian Withholding Tax?
What is a Canadian Tax Waiver?
Why Would I apply for a Canadian Tax Waiver?
Are there other benefits in applying for a Canadian Tax Waiver?
How do I know if I should apply for a Canadian Tax Waiver?
Why would I NOT apply for a Canadian Tax Waiver?
When should I consider engaging an office like RAM Management to process our Tax Waivers?
Will obtaining a Canadian Tax Waiver facilitate my entry into Canada?
When should I contact RAM Management about applying for a waiver?

1) What is Canadian Withholding Tax?

If you have performed in Canada before, you likely already know that Canadian tax law requires Canadian payers to withhold 15% in taxes from all fees paid to American entertainers, which the payers then remit to the Canada Revenue Agency (CRA) after the performance. This is a provisional tax amount that payers are required to withhold, regardless of how much money the entertainer is being paid for their Canadian performance(s).

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2) What is a Canadian Tax Waiver?

The US-Canada Tax Treaty provides American entertainers the opportunity to submit a waiver application prior to their performance(s) in Canada so that the 15% withholding tax may be reduced or completely eliminated. A Canadian Tax Waiver is a decision issued by a Canadian Tax Services Office (TSO) which directs a Canadian payer to fully pay an American entertainer without deducting any Canadian withholding taxes or to withhold a lesser amount than the usual 15%.

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3) Why Would I apply for a Canadian Tax Waiver?

The main reason would be to save all or a part of the Canadian withholding tax.

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4) Are there other benefits in applying for a Canadian Tax Waiver?

Yes, there is a second benefit which many American entertainers are not aware of. The same way Canadian payers are responsible for withholding 15% from payments to American entertainers and remitting this tax to the CRA, American entertainers are also responsible for withholding and remitting the 15% tax from payments to their own band members, sound technicians, tour managers, and any other employees or sub-contractors traveling with them to Canada. This is known as “secondary withholding”.

American entertainers may be liable to remit secondary withholding amounts to the CRA whether or not they actually withheld these amounts from their employees’ and subcontractors’ fees. Secondary withholding waivers are processed within the general waiver application, so applying for a waiver protects the American entertainer from any potential secondary withholding liability.

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5) How do I know if I should apply for a Canadian Tax Waiver?

The US-Canada Tax Treaty allows the Canadian withholding tax to be completely waived if you earn less than $15,000 in Canada during a calendar year. If you earn more than this, you can still obtain a reduction of your withholding tax if your expenses related to your Canadian performances leave you with a net profit less than $ 15,000. For example, if you are a musical group with 3 tour dates in Canada earning a total gross revenue of $ 60,000, but your expenses (salaries, commissions, travel, hotels, etc..) add up to $ 55,000, you may still obtain a substantial reduction of your withholding tax for these 3 performances.<

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6) Why would I NOT apply for a Canadian Tax Waiver?

A) There may be no good reason. If you are earning well over $15,000 in Canada during any calendar year and you have no substantial expenses surrounding your Canadian dates, your waiver application will probably not be successful. For example, if you are a comedian earning $ 50,000 for one performance date in Canada and are traveling alone into the country, there would be no chance of successfully reducing your withholding tax and you would not have to worry about secondary withholding.

B) You may be able to get a credit in the U.S for the tax you paid in Canada. When you are paid for a performance in Canada, the Canadian payer must issue you a Canadian tax slip at the end of the calendar year in which you performed, stating how much they paid you and how much tax they withheld. The US-Canada Tax Treaty allows you to use this Canadian tax slip to obtain a credit against your US income, which is an alternative way to regain some of the Canadian taxes you paid. Of course, only you are capable of determining whether or not this is beneficial to your tax situation in the United States.

C) If you file a Canadian tax return, you may be reimbursed for any excess taxes paid during that year. The 15% withholding tax is a provisional tax; the amount of tax you actually owe to the CRA at the end of the year may be less than the amounts withheld from your fees in Canada during that year. If you file a Canadian tax return at the end of a calendar year and it is determined that your tax requirement is less than the 15% which had been withheld during that year, the CRA may reimburse you for any taxes withheld in excess of what you actually owe by sending you a check some time after April 30th the following year. Of course, choosing this course of action means you will have to pay any professional fees associated with filing a Canadian tax return, and you will have to wait 4 to 16 months to get your refund.

It is important to note that while individuals can choose to file a Canadian tax return, US Corporations and LLCs are required by law to file a Canadian return if they earned money in Canada during the year, regardless of whether or not they applied for waivers during that year.

Finally, it should be noted that entertainers who choose not to apply for a Canadian tax waiver fo the reasons stated in B or C above will lose the protection with regards to secondary withholding (see Question 4 above) and therefore we still recommend that these entertainers consider applying for a waiver.

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7) When should I consider engaging an office like RAM Management to process our Tax Waivers?

Although our fees for processing tax waivers are very moderate, there are certain cases in which our fees will exceed the amount of money you may save by applying for a waiver. For example, if you are only scheduled to perform once in Canada this calendar year and are earning $1,500.00, you would owe $ 225.00 in withholding tax. While your waiver application would likely be successful in this case, our fee would be greater than the tax you save so you may prefer to try and apply for the waiver yourself from the United States, or simply accept the tax amount as an additional expense.

That being said, if you expect to continue performing in Canada, it may be worth investing in having an office like ours handle the waiver process on your behalf. For the first waiver, we charge a higher fee due to the more extensive work it takes to set-up an entertainer in the CRA’s database. However, once this is done, it becomes much simpler (and less expensive) to process Canadian tax waivers in the future, whether done by our office or yourself.

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8) Will obtaining a Canadian Tax Waiver facilitate my entry into Canada?

No – the CRA is only concerned with your tax liability once you have entered Canada and are earning money to perform here. Your admissibility to Canada is determined solely by Canadian Immigration and Border Services (CIBS). Just as the CRA is not concerned with your admissibility to Canada, the CIBS are not concerned with your tax matters in Canada. We have extensive experience in this area as well and will be happy to advise you on any questions you may have regarding your admissibility to enter and work in Canada.

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9) When should I contact RAM Management about applying for a waiver?

The CRA requires waiver applications to be submitted 30 days before the date of your show (or the date of your first show if you are playing several dates) in Canada. Because it can take a week or two to gather all the information required to submit the waiver – particularly when it is your first application – it is best that you contact us 6-8 weeks prior to your first Canadian performance.