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: A Canadian resident corporation operates as a television channel. It pays a fee to a non-resident distributor of sport media programming. The payer uses the highlights of professional sports games, features, and other programming in its sports news and sports content analysis broadcasts. Can we say that those highlights are used "solely in connection with and as part of a news program produced in Canada" and be exempted from withholding under 212(5)(b)?
Position: No.
Reasons: According to the CRTC's television program categories, sports content analysis or magazine shows are not news programs. http://www.crtc.gc.ca/canrec/eng/tvcat.htm
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2010-037902
Nancy Turgeon, CGA
November 5, 2010
Sir:
Re: Paragraph 212(5)(b)
This is further to your letter of August 18, 2010, in which you requested our view on the meaning of the phrase "other than solely in connection with and as part of a news program produced in Canada" in paragraph 212(5)(b) of the Income Tax Act ("The Act").
Situation
A Canadian resident corporation, the payer, operates as a television channel. The payer pays a fee to a non-resident distributor of sports media programming. Under the terms of the agreement, the payer receives the right to include highlights of professional sports games, features, and other programming ("Sports Highlights") in its sports news and sports content analysis broadcasts from the media programming provided by the distributor. The payer does not have the rights to broadcast games (either live or replay).
Issue
You would like to know whether the payment made by the Canadian corporation qualifies for the exemption from withholding tax under paragraph 212(5)(b) of the Act as those highlights could be considered used "solely in connection with and as part of a news program produced in Canada".
Comments
The particular circumstances outlined in your letter seem to relate to a factual situation involving specific taxpayers. As explained in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, the Income Tax Rulings Directorate of the Canada Revenue Agency ("CRA") does not comment on transactions involving specific taxpayers except by way of an advance income tax ruling in respect of proposed transactions. When the situation involves a specific taxpayer and a completed transaction, the question should be directed to the appropriate Tax Services Office of the CRA for their views, along with all relevant facts and documentation. Nevertheless, we are prepared to offer the following general comments, which may be of assistance. Our comments constitute technical interpretations. They are not income tax rulings and are not binding on the CRA.
The Canadian Radio-television and Telecommunications Commission has a listing of all television program categories. Category 1 is called "News" and includes "News programs" and sportscasts. It reads as follows:
Category 1 News
Newscasts, newsbreaks, and headlines. Programs reporting on local, regional, national, and international events. Such programs may include weather reports, sportscasts, community news, and other related features or segments contained within "News Programs."
Category 6 is entitled "Sports" and includes programs reviewing and analyzing professional competitive sports events and/or teams (i.e. pre- and post-game shows, magazine shows, scripted sports, call-in and talk shows, etc.). It reads as follows:
Category 6 Sports
Programs of live or live-to-tape sports events and competitions including coverage of professional and amateur tournaments. The category also includes programs reviewing and analyzing professional or amateur competitive sports events/teams (i.e. pre- and post-game shows, magazine shows, scripted sports, call-in and talk shows, etc.). This category includes the following sub-categories:
Category 6(a) Professional sports
Category 6(b) Amateur sports
In the given situation, we understand that the right to include highlights of professional sports games, features, and other programming is used not only in sports news programs, but also in sports content analysis programs. As the Sports Highlights can be used in both types of television program categories, the payment cannot be said to be for a right that is to be used "solely in connection with and as part of a news program produced in Canada". Consequently, we are of the view that the payment would not qualify for the exemption under paragraph 212(5)(b) of the Act.
We regret that our answer could not be more favourable.
We trust the above comments will be of some assistance.
Yours truly,
Alain Godin, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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