Article 16

See Also

Cheek v. The Queen (2002), docket 1999-1113-IT-G (TCC)

In finding that the taxpayer, who was a U.S. resident who provided radio commentary for each Blue Jays game, was not an artiste or athlete for purposes of Article XVI of the Canada-U.S. Convention, Mogan T.C.J. found that the taxpayer was not a radio artiste but, rather, a very skilful and experienced radio journalist.

Locations of other summaries Wordcount
Tax Topics - Treaties - Income Tax Conventions 47

Khabibulin v. The Queen, 00 DTC 1426 (TCC)

Article 12 of the Canada-USSR treaty provided an exemption from Canadian income tax in respect of the personal activities of a USSR athlete exercised in Canada if such income was "derived in respect of two performances and other public performances". When the taxpayer signed a contract with the Winnipeg Jets he was entitled, in addition to a guaranteed salary of U.S.$60,000 per year, to a signing bonus of U.S.$125,000 payable in two installments. The parties agreed that the signing bonus would be exempt only if he was paid for hockey rather than for signing the contract. Bowie TCJ. found that the first installment (which was at issue) was exempt given that the taxpayer was entitled to receive the second installment only if he performed stipulated services and given that the taxpayer considered that all of the money was being paid to him for playing hockey, and not that part of it was paid simply to sign his name.

Administrative Policy

27 July 2016 External T.I. 2015-0603271E5 - Subsection 216.1(1) and permanent establishment

Art. 16 of US Treaty permits gross withholding taxation even if PE

A U.S.-resident actor provides Canadian acting services through an LLC or S corp. The 23% withholding tax under ITA s. 212(5.1) on the gross consideration paid could be avoided if the corporation files a Part I return for the year by its filing due date therefor and elects therein to have s. 216.1 apply. CRA considered that if the non-resident corporation misses this deadline, there is no ability to access s. 216.1, and (based on s. 115(2.1)) the non-resident corporation cannot late-file a “regular” Part I return where the provision of the acting services had resulted in it having a Canadian permanent establishment under the Treaty. CRA then added:

[I]ncome from the acting services provided in Canada by the actor through another person (such as a company owned by the actor) may be taxed in Canada notwithstanding Article VII of the Treaty. In other words, Article XVI overrides Article VII and allows Canada to tax such income irrespective of whether the company maintains a permanent establishment in Canada.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 216.1 - Subsection 216.1(1) late filing under s. 216.1 not accommodated 216
Tax Topics - Income Tax Act - Section 115 - Subsection 115(2.1) prohibition against acting income being filed on a net basis in absence of timely s. 216.1 election 105

1 March 2010 Internal T.I. 2009-0346951I7 F - Article XVI-Établissement stable-Province

Art. XVI of US Convention applicable irrespective of whether a PE

A U.S.-incorporated resident of the U.S. for Treaty purposes (“Non-Resident Corporation”), whose shares were 50% owned by a non-resident artist whom it represented, presented various shows in Canadian provinces, and received a share of the revenues from the promoter. For each show, it (through its employees) had to install the stage, lights, sound system, etc. on the day of the show, and used a number of trailer trucks to transport the stage equipment.

Before finding that Non-Resident Corporation did not have a permanent establishment in any province for purposes of Part IV of the Regulations, the Directorate stated:

Article XVI of the Convention … applies without regard to, inter alia, Article VII of the Convention, and ... permits Canada to tax income derived by a non-resident company from performances in Canada without requiring that such income be earned through a permanent establishment in Canada under the Convention.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) being on concert tour in Canada did not render the various arenas fixed places of business, given lack of “regularity and recurrence” 140
Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) - Paragraph 400(2)(e) using massive stage equipment for Canadian concerts did not result in deemed PEs given that at each venue under 30 days and in Canada under 90 days 240

16 September 2009 External T.I. 2008-0295951E5 F - Article XVI de la Convention Canada-É.U

$15,000 gross receipts exclusion under Art. XVI(1) of US Convention is inapplicable where the income is earned by the artist’s corporation

By virtue of paragraph 1 of Article XVI of the Convention, an American artist or athlete ("Non-resident") has, in your opinion, no tax payable in Canada if his or her Canadian-source artistic or athletic income is less than $15,000.

Is the $15,000 exemption accorded under Art. XVI(1) of the Canada-U.S. Convention to an American artist or athlete (the “Non-resident”) also applicable under Art. XVI(2) where the Non-resident does business in Canada through a corporation ("Foreign Co), of which the Non-resident is the sole shareholder? CRA responded:

With respect to the income from activities exercised personally by the Non-resident as an artist or an athlete which accrue to Foreign Co, the provisions of paragraph 2 of Article XVI of the Convention apply to Foreign Co and permit Foreign Co to be subjected to Canadian tax on all business income so accruing to it. Consequently, we are of the view that the rule on gross receipts derived in Canada in paragraph 1 of Article XVI does not apply to Foreign Co. In other words, even if the total gross receipts of the "other person" (Foreign Co) do not exceed $15,000, the income of that "other person" from the gross receipts is not exempted from tax under paragraph 2 of Article XVI, regardless of the receipts of the artist or athlete (the Non-resident) for the purposes of paragraph 1 of Article XVI of the Convention.

15 July 1992 T.I. 920480 (January - February 1993 Access Letter, p. 9 ¶C9-253)

An association of professional racing car teams is not a league "with regularly scheduled games" for purposes of paragraph 3(a) of Article XVI of the U.S. Convention because the racing car teams would generally not be required to enter each event.