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.
Principal Issues: Characterization of payments from the Public Lending Rights Program under the Canada-Ireland Income Tax Convention.
Position: The Public Lending Right Program payments fall under Article 14 of the Canada-Ireland Income Tax Convention.
Reasons: The payments are in respect of independent literary or artistic activities.
June 16, 2014
HEADQUARTERS HEADQUARTERS
Debt Management Compliance Directorate Income Tax Rulings
Attention: Mary Ann McNulty Directorate
Eli Kae Moore
(613) 957-2104
2014-052790
Characterization of payments from the Public Lending Right Program of the Canada Council for the Arts under the Canada-Ireland Income Tax Convention
We are writing in response to your email of April 14, 2014 in which you asked us to comment on how payments from the Public Lending Right Program (the "PLRP") of the Canada Council for the Arts should be characterized for purposes of the Canada-Ireland Income Tax Convention (the "Convention"). We also acknowledge the additional information you provided by email on April 24, 2014.
It is our understanding that a taxpayer in receipt of a PLRP payment is contesting the characterization of the payment for the purposes of the Convention, arguing that the payment should fall under Article 12 Royalties. It is your position that a PLRP payment is more appropriately addressed by Article 14 Independent Personal Services.
In summary, we agree that the appropriate characterization of the PLRP payment for purposes of the Convention is income derived in respect of professional services or other activities of an independent character, specifically independent literary or artistic activities, and that this income falls under Article 14 of the Convention.
About the PLRP
Our understanding of the PLRP is as follows:
A public lending right is generally defined as a legal right to receive a royalty for works that are lent out by a public library. Some countries grant authors and artists a public lending right in their copyright law while others do not. Canada has not enshrined a public lending right in its copyright law but does have a funding program meant to compensate Canadian authors and artists for the lending of their works by Canadian libraries, namely the PLRP. According to the PLRP website, the PLRP was established in 1986 to provide payments to Canadian authors, co-authors, illustrators, photographers, translators, anthology contributors, and editors with original written contributions (hereafter referenced simply as a "Canadian author"), in order to compensate them for the free access to their works in Canadian libraries. However, the PLRP is not based on copyright or other legal rights to receive a payment when a creative work is lent by a library. In order to receive a PLRP payment, a Canadian author must register their work with the PLRP and the work must be found in one or more Canadian libraries included in the annual PLRP survey. The size of a Canadian author's PLRP payment is based on a number of factors including the number of works registered by the Canadian author with the PLRP, the number of times the works were found in the PLRP survey, and the PLRP budget for the year. For 2013, the PLRP made payments to 18,186 Canadian authors, and the maximum, average, and median PLRP payment sizes were $3,367, $537, and $261.66, respectively.
In comparing the Convention's definition of "royalties" in paragraph 4 of Article 12 to the definition of "professional services" in paragraph 2 of Article 14, it is our view that the PLRP payments are appropriately characterized as falling under Article 14.
Paragraph 4 of Article 12 of the Convention defines "royalties" as payments made in consideration for the use of, or the right to use, certain forms of intangible property, including the copyright of literary, artistic, or scientific works. While the PLRP may have compensating Canadian authors for the lending of their works as one of its purposes, the PLRP payments are not made in consideration for the use of, or the right to use, the work being lent out (or their copyright in the work) and, in our view, are not "royalties" as defined by paragraph 4 of Article 12.
Paragraph 2 of Article 14 of the Convention defines "professional services" to include independent literary and artistic activities. In our view, when a Canadian author receives a PLRP payment, that payment would be in respect of their independent literary or artistic activities. In other words, the PLRP payment would be income derived in respect of "professional services" for the purposes of Article 14 of the Convention. In the case of a resident of Ireland receiving a PLRP payment, that payment would be taxable in Canada only to the extent that the author has a fixed base in Canada for the purposes of performing their "professional services" and only to the extent the PLRP can be attributed to that fixed base.
We hope that this adequately addresses your inquiry and allows you to proceed with your file. If you have any questions concerning our response, please contact Eli Kae Moore at (613) 957-2104.
Yours truly,
Lori M. Carruthers CPA, CA
for Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy Regulatory Affairs Branch
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