2 March 2000 Internal T.I. 1999-0009997 - Artiste or entertainer

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Is the taxpayer who is a lighting designer for theatre and opera an entertainer for the purposes of paragraph 1 of Article XVI of the Canada-United States Income Tax Convention?

Position: No

Reasons: Article XVI is intended to cover only public performers, not technical staff, as noted in the Commentary to, and several articles concerning, Article 17 of the OECD Model Convention.

		March 2, 2000

M. Quebec	International Section
	Director	S. Leung
	International Tax Services Office	957-2115

	Attention: Zvonko Krupilnicki
	               Enquiries and Adjustments
		1999-000999

Article XVI of the Canada-United States Income
Tax Convention (the "Convention")

We are writing in reply to your memorandum of September 3, 1999 in which you requested our view as to whether paragraph 1 of Article XVI of the Convention would apply to the situation of XXXXXXXXXX (the taxpayer) who is a U.S. resident and who performed services in Canada as a lighting designer for theatre and opera.

Our Comments

Paragraph 1 of Article XVI of the Convention states:

"Notwithstanding the provisions of Articles XIV (Independent Personal Services) and XV (Dependent Personal Services), income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State, except where the amount of the gross receipts derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities do not exceed fifteen thousand dollars ($15,000) in the currency of that other State for the calendar year concerned."

Therefore, in order for the above-noted provisions to apply, the taxpayer must be an entertainer (such as in this case a theatre artiste). Is the taxpayer in this case a theatre artiste? The word "Artiste" is defined in the Concise Oxford Dictionary as "a professional singer, dancer, etc.". The same dictionary defines "artist" as "one who practises one of the fine arts, esp. painting; one who makes his craft a fine art; artiste; ...". As a result, it appears that generally an artist can be considered an artiste. This is consistent with the definition of "artiste" in the Random House Dictionary of the English Language (2nd Edition.) where artiste is defined as "an artist, esp. an actor, singer, dancer, or other public performer". The Oxford English Dictionary (2nd Edition) states that the word "artiste" is "a reintroduction of the French word in consequence of the modern tendency to restrict artist to those engaged in the fine arts, especially painting". It defines "artiste" as "a public performer who appeals to the aesthetic faculties, as a professional singer, dancer, etc.; also, one who makes a "fine art" of his employment, as an artistic cook, hairdresser, etc.". The latter part of this definition seems to imply that the word "artiste" can be used broadly to include not only a public performer but also an artistic professional who is not a performer. As a result, an artiste, according to the broad definition of that word in the dictionaries, may include a lighting designer for theatre and opera because such a person is no doubt an artist.

However, in a pamphlet issued by OECD in 1987 titled "Thin Capitalisation and Taxation of Entertainers, Artistes and Sportsmen" (the "Pamphlet") which referenced to the 1977 OECD Model Convention (which existed before the coming into force of the 1980 Canada-United States Income Tax Convention), the author stated in page 53:

"Consideration was given to whether, under the present wording of Article 17 (of the 1977 OECD Model Convention), there was some scope for covering "support" staff of artistes and athletes. There was agreement that a narrow interpretation should prevail and that both the intention and the language of Article 17 do not presently allow the taxation under Article 17 of producers, film directors, choreographers, technical staff, etc. Other Articles of the 1977 Model Convention would apply to such support staff (generally Article 14 or 15 and in certain cases Article 7)."¹

The above position is now clearly stated in the Commentary on Article 17 of the current OECD Model Convention. In paragraph 3 of the Commentary on Article 17, it is stated:

"On the one hand, the term "artiste" clearly includes the stage performer, film actor, actor (including for instance a former sportsman) in a television commercial. ... On the other hand, it does not extend to ... administrative or support staff (e.g. cameramen for a film, producers, film directors, choreographers, technical staff, road crew for a pop group, etc."

In other words, the word "artiste" is given a narrow interpretation in the current OECD Model Convention to reflect the intention of the drafters of the original OECD Model Convention.

Mr. Klaus Vogel also stated the following in the 2nd edition of his book "Klaus Vogel on Double Taxation Conventions" (1980) which referenced to the 1977 OECD Model Convention:

"The exemplary enumeration of the various types of entertainers is not exhaustive, but is restricted to performing entertainers. That only these can be meant is borne out by both original versions of the MCs (Model Conventions): the English text of OECD MC refers to "entertainers" (MC63 to "public entertainers") and the French text refers to "artistes du spectacle" (MC 63 to "professionels du spectacle"). Consequently, Article 17 (of the 1977 OECD Model Convention) relates only to individuals who perform in public, directly or indirectly (via the media), their performances providing entertainment, whether of an artistic nature or not. Article 17, therefore, does not cover those forms of artistic activities which, rather than culminating in performances in public, consist of producing "works", such as the activities of painters, sculptors, writers, composers. Nor do individuals involved in producing films (such as directors, cameramen, cutters, sound engineers) have income of the kind envisaged by Article 17, but only actors, and musicians, if involved."

Virtually all of Canada's tax conventions or agreements are modelled after the OECD Model Convention. Therefore, the Commentary to the OECD Model Convention plays a very important role in interpreting our tax conventions. This view is supported by the court of law in Canada.² Consequently, in interpreting paragraph 1 of Article XVI of the Convention, we should follow the narrow interpretation of the term "entertainer" to be consistent with the Commentary to the OECD Model Convention and conclude that a technical personnel such as a lighting designer for theatre and opera is not an entertainer for purposes of that provision of the Convention.

Furthermore, as Judge Bowie stated in Khabibulin v. The Queen,³ the principle which governs the application of tax treaties was stated by Addy J. in Gladden Estate v. The Queen⁴ and recently approved by the Supreme Court of Canada in Crown Forest Industries v. Canada:⁵

"Contrary to an ordinary taxing statute a tax treaty or convention must be given a liberal interpretation with a view to implementing the true intentions of the parties. A literal or legalistic interpretation must be avoided when the basic object of the treaty might be defeated or frustrated in so far as the particular item under consideration is concerned. (Emphasis added by the Supreme Court)"

As discussed earlier the Convention is modelled after the OECD Model Convention. Using the Pamphlet issued by the OECD as a guide, the negotiators of the Convention must have intended that the term "entertainer" be given a narrow interpretation (i.e., not to cover technical staff).

Conclusion

In light of all the above, we conclude that the taxpayer who is a lighting designer for theatre and opera is not an entertainer or theatre artiste for the purposes of paragraph 1 of Article XVI of the Convention.

Other Comments

As Article XVI of the Convention does not apply to the taxpayer, Article VII, Article XIV or Article XV of the Convention might apply. During the time period in question, if the taxpayer was an employee of a Canadian resident or an employee of a U.S. resident who had a permanent establishment in Canada and the salaries of the taxpayer was borne by such Canadian resident employer or by such permanent establishment, or if the taxpayer was present in Canada for more than 183 days in a calendar year, Article XV of the Convention would apply unless his remuneration from such employment is less than $10,000 in Canadian currency. In the event that the taxpayer was a self-employed person, Article XIV of the Convention would apply if the taxpayer had a fixed base in Canada through which he rendered his services. Since we do not have sufficient information to make a determination as to whether any or which of the above-noted Articles of the Convention would apply, we do not offer any specific comments in this regard.

However, if the taxpayer was self-employed and his income for services performed in Canada including reimbursement of expenses was not substantial (say, less than $15,000), it may be that he was not in Canada long enough to have a permanent establishment here. If that is the case, he would not be subject to tax in Canada with respect to his income for providing lighting design services in Canada. In fact, this may be the basis on which the other designers or directors referred to by the taxpayer in his letter obtained an exemption from tax in Canada. In this regard, it should be noted that the taxpayer's request in this case is unique. Usually non-residents who work behind the scene claim that Article XVI of the Convention does not apply so that they can avail themselves of the benefits provided by Article XIV or Article XV of the Convention.

We trust you will find the above to be of assistance. If you have any questions regarding the above, please do not hesitate to contact the writer.

for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch

P.S.: For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the CCRA's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their database. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Request for this latter version should be made by you to Jackie Page at (819)994-2898. The severed copy will be sent to you for delivery to the client.

ENDNOTES

¹ In this regard, see also the article "The Taxation in Canada of Non-resident Performing Artists and Behind-the-Camera Personnel" written by Norman Bacal and Richard Lewin and published in the Canadian Tax Journal, Nov.-Dec. 1986, Vol. 34, No. 6, pg. 1315, where the authors stated that "Article XVI applies only to income derived by 'an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or ... an athlete'. It therefore does not appear to apply to the income received by a U.S. resident rendering services as a film producer, director, editor, director of photography, art director, music editor, or other technical specialist involved in a film production (namely, the income of behind-the-camera personnel)."

² See, for example, Crown Forest Industries v. Canada 95 DTC 5389 (SCC)

³ Tax Court of Canada, October 14, 1999 (Docket: 96-4680(IT)G), not yet reported

⁴ (1985) CTC 163, (FCTD)

⁵ See footnote 2

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