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.
Issue:
Whether payments to a U.S. resident for a live telecast of a sporting event are subject to Part XIII tax and, if so, is the rate of withholding tax reduced or eliminated pursuant to either Canada-U.S. income Tax Convention.
Problem
A U.S. sporting event is transmitted live (without any delay) to a Canadian broadcaster who immediately broadcasts the signal to Canadian viewers. Are the payments therefor for the right to use or the right of ownership, i.e., are the payments subject to paragraph 212(1)(d)?, If so, is the rate of tax abated or eliminated pursuant to either the 1942 Treaty or the 1980 Treaty?
Position
Payments to a non-resident for the use of a signal carrying a live telecast of a sporting event are subject to Part XIII tax (they are considered to be use payments and are not eligible for the subparagraph 212(1)(b)(vi) exemption as live signals do not have copyright protection in Canada), but are exempt from withholding tax pursuant to Article XIII of the 1942 Treaty. While live signals are not copyrightable in Canada they are in the U.S. and as a tax treaty has to be given a broader interpretation then the Income Tax Act, the payments are considered to fall with the opening words of Article XIIIC which read "Royalties for the right to use copyright ...". Furthermore, as such payments do not fall within the scope of Article XII of the 1980 Treaty, they are exempt from tax in Canada in the relevant years if they are business profits to the non-resident and the non-resident does not have a permanent establishment in Canada.
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