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.
Memo for File
Re: Royalty Payments by the Canadian Cable TV Industry
The Copyright Act was amended by the Canada-United States Free Trade Implementation Act (Chapter 65 of the Revised Statutes of Canada).
Paragraph 2 of the Copyright Act was amended to add the following definition:
"Telecommunication means any transmission of signs, signals, writing, images or sounds or intelligence of any nature by wire, radio, visual, optical or other electromagnetic system".
Paragraph 3(1)(f) of the Copyright Act was amended to include the following in the definition of copyright:
"in the case of any literary, dramatic, musical or artistic work to communicate the work to the public by telecommunication".
Subsection 3(1.2) of the Copyright Act clarifies that:
"For the purpose of paragraph 3(1)(f), persons who occupy apartments, hotel rooms or dwelling units situated in the same building are part of the public and a communication intended to be received exclusively by such persons is a communication to the public."
Article 28.01(2) of the Copyright Act indicates that:
"It is not an infringement of copyright to communicate to the public by telecommunication any literary, dramatic, musical or artistic work if
(a) the communication is a retransmission of a local or distant signal...
(d) in the case of retransmission of a distant signal, the retransmitter has paid any royalties, and complied with any terms and conditions, fixed under this Act."
In view of the amendments to the Copyright Act, the requirement for cable TV companies to make payments under such Act with respect to the retransmission of local or distant signals would be subject to copyright in Canada pursuant to subsection 3(1) of the Copyright Act.
Where the Canadian cable TV companies pick up distant signals which are transmitted from films or video tapes, any payments in respect of the retransmission of such signals will fall within paragraph 212(5)(b) of the Income Tax Act (the "Act") as payments for the use of a film, video tape or other means of reproduction for use in connection with television. Where the signals of live broadcasts of sporting or other events are retransmitted by Canadian cable TV companies, such payments will also fall within the wording "or other means of reproduction for use in connection with television" and be subject to withholding tax in Canada when paid to non-residents of Canada.
While an argument can be made that such payments when made to non-residents, would fall within subparagraph 212(1)(d)(i) of the Act and be exempt from withholding tax by virtue of subparagraph 212(1)(d)(vi) of the Act, it is our view that the exemption does not apply in respect of royalties falling within subsection 212(5) of the Act since the latter subsection is more specific and will take precedence over paragraph 212(1)(d).
21(1)(b),23
K. Major
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