13 June 1984 Income Tax Severed Letter B-5249 F

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.

RE: Part XIII and Programs and Movies Imported for T.V. Broadcasting purposes

This is in reply to your memo of April 19, 1984 concerning the Part XIII tax which may be applicable with respect to programs and motion pictures that are imported into Canada to be used in television broadcasting.

Subsection 212(5) of the Income Tax Act (the "Act") provides that every non-resident person shall pay an income tax on every amount that a person resident in Canada pays for a right in or the use of' a film or video tape for use in connection with television in Canada. The effect of this provision is that any payment to acquire a right in or for the use of a program or motion picture on film or video tape is subject to Part XIII of the Act. Payments in respect of motion picture films are not subject to the exemption set out in Article XIIIC of the current Canada-U.S. Income Tax Convention (the "Treaty"). The exception contained therein "but not inclusive of rents or royalties in respect of motion picture films" is interpreted by the Department to refer to programs recorded on either films or video tapes.

In accordance with the foregoing provisions (and subject, of course, to applicable provisions in our tax conventions with other countries), it is our view that:

1. Where the motion picture is conveyed into Canada, for use in Canada, by microwave or satellite, the payment therefore would be subject to the provisions of subsection 212(5) of the Act;

2. Where a person resident in Canada makes a payment for a right in a film or video tape for use in connection with television in Canada (for example, if a Canadian television station paid a specified amount to a non-resident for a right to televise a recorded program - including commercials - in Canada), the payment would be subject to the provisions of subsection 212(5) of the Act;

3. Where a program is conveyed to Canada and telecast live' (although it is unclear whether there are any truly live telecasts, as most, if not all, are taped and then telecast a few seconds later) the payment therefore may be subject to the provisions of subsection 212(5) of the Act or the provision of paragraph 212(1)(d) of the Act, as described below.

While a truly live telecast would appear to fall outside the provisions of subsection 212(5), it may be subject to the provisions of paragraph 212(1)(d) of the Act. In this determination, it is necessary to distinguish between payments for the use of or the right to use as opposed to a payment for the right of ownership. (Acquisition of ownership rights fall outside the scope of paragraph 212(1)(d) of the Act). Should the payment be for the use of or the right to use a live telecast (not pretaped), then it will be subject to the provisions of subparagraph 212(1)(d)(1) of the Act and, accordingly, taxable under Part XIII, unless the telecast is copyrightable and the payment falls within subparagraph 212(1)(d)(vi). Those portions of the telecast which consist of replays and scripts prepared in advance may be copyrighted. Aside from this the law appears to be that no copyright can be obtained in Canada with respect to the remainder of the live event (such as a sporting event). While this appears to b-e the law, the matter is not free from doubt because of the various international copyright conventions of which Canada is a signatory.

If we can be of further assistance in this regard, please advise.