Flourishing Film Industry in Alberta –
Tax Considerations for Inbound Actors
CompassTAX - March 2005
International film producers love Alberta, and no wonder. We offer sunny skies, spectacular vistas, Emmy and Oscar-nominated production crews, no sales tax, lower cost accommodations, and a comprehensive range of production services. In 2004, seventeen films and TV series were co-produced in Alberta, with the initiative for the filming coming from the American end, and each film including at least one headliner American actor. Film production is typically synonymous with intensity to meet tight deadlines - amidst all of this tension and excitement, is it at all possible that any thought is being put toward the inbound actors’ tax liabilities?
Film production companies in Canada, by law, must withhold 23% income tax from the amounts paid to inbound non-resident actors. Further to that, non-resident actors providing acting services in Canada are eligible for significant tax savings, if their individual circumstances are reviewed and the appropriate steps taken. Many inbound actors are not even aware of this potential for tax savings, let alone the fact that their acting incomes are going to be taxed in Canada. Production companies that do not do their tax homework can find themselves with disgruntled actors on their hands and the Canada Revenue Agency (CRA) knocking on their door.
The Canadian Government is Waiting for Inbound Actors’ Tax Dollars
How does the CRA know that a non-resident actor owes taxes in Canada? Does the watchdog eye extend to even remote filming locations in BC? The answer is as simple as a few keystrokes. All inbound actors must obtain a permit to work in Canada, and ACTRA and its members make sure that this happens, in order to protect their own rights. The CRA now has access to these work permit databases, allowing them to determine which non-residents were involved in filming in Alberta, and for how long. The path is then clear for them to go after those tax dollars.
Tax Liability of Non-Resident Actors
The Income Tax Act stipulates that all non-resident actors providing acting services in Canada are subject to 23% non-resident withholding tax, which is their final tax liability on the acting income. Production companies must withhold, remit and report on this amount. If the acting income is the non-resident actor’s only source of income in Canada, filing of an income tax return is not required. This lack of filing requirement makes the tax seem quite nebulous to non-resident actors at the outset. However, if not informed in advance of the withholding, or if the production company in error of omission must go back to the actor later to collect, to comply with tax laws, then the non-resident actor is justifiably quite upset.
It is clear that there is potential for disputes where the taxation of inbound non-resident actors is concerned. Lack of knowledge of income tax requirements is usually the source of this discontent and can be easily avoided. The BC film industry has been built on the province’s attractive working environment, and Canadian production companies can make a positive impression on their American counterparts, with whom they will potentially be co-producing, by pro-actively informing them and their headliner actors of income tax requirements.
Possibility of Reducing Tax Liability
There is another positive slant to the taxation issue which can be relayed to inbound non-resident actors. It is possible for them to pay tax on their net Canadian-source acting income at graduated rates, instead of paying tax on the gross amount at the 23% rate. This will result in a tax refund if tax withholding at 23% was made. An application for reduced withholding could also be made before services are rendered. Production companies can inform inbound non-resident actors of this possibility, and offer to investigate its viability in the individual circumstances.
At CompassTAX™ we help production companies to determine their tax withholding, remitting and reporting obligations. We also assist in establishing the most beneficial way of approaching inbound non-resident taxation, and preparing appendices to employment contracts which clearly lay out the Canadian income tax responsibilities. This effort ensures that the production company is well-informed to comply with Canadian tax law, is in a position to pro-actively educate their American co-producers and inbound non-resident actors of the tax responsibilities, and in so doing, cast a positive light on their serviceability as a production company in the Canadian film industry.
Contact us at 1-866-531-2281, (403) 531-2200 or www.compasstax.ca for assistance on issues related to the taxation of inbound non-resident actors.