Taxes and Performing Artists

Yesterday was the tax filing deadline in the US, and April 30 is the date on which Canadians must file their tax returns.  So, you think you’ve got tax problems?  MTV reports on what happens when performers ignore the advice of their accountants:

Paying taxes as a rock star can be difficult, as you usually have dozens of different income streams, spend most of your time on the road and can’t often keep track of your own payroll (or, you know, what month it is). Sometimes it helps to move to a tax-free foreign country, like David Bowie (who moved to Switzerland), the Rolling Stones (France) and Cat Stevens (Brazil).

Though it seems like you could avoid the burden forever, the IRS tends to catch up with everybody.

MTV’s story focuses on rock and rap stars and the sometimes inventive ways in which they raise funds in order to meet their obligations (Willie Nelson released The IRS Tapes to help pay down $16.7 million in outstanding taxes; Jerry Lee Lewis “set up a phone number that allowed callers to hear the Killer tell stories from his childhood for the price of $2.75 per minute” – which proved popular enough to enable the Killer to pay the more than $500,000 he owed).

Actors have their own history of trouble with taxes: Wesley Snipes was sentenced to three years in prison for refusing to file tax returns (Snipes has appealed the sentence); Nicolas Cage has also faced financial and tax troubles recently, and is currently enmeshed in a lawsuit with his former business manager – the IRS has demanded more than $6 million in unpaid taxes from Cage.

Helpfully, our colleagues Mark Jadd, Norm Bacal and Kay Leung wrote a definitive paper on the topic of the tax treatment of non-Canadian artists and athletes performing in Canada: “Performing in Canada: Taxation of Non-Resident Artists, Athletes and Other Service Providers”, which was published in the Canadian Tax Journal (citation is 56 (3) Canadian Tax Journal 589 (2008)) and an abstract can be read here:

This article reviews the current state of Canadian tax law and administrative practice applicable to non-residents who provide services in Canada and to the businesses that engage them. Particular emphasis has been placed on the rules pertaining to foreign athletes and service providers within the entertainment industry, including an overview of the special provisions governing taxation of non-resident actors. The article examines the substantive tax liability for foreign service providers under Canadian domestic law and the effect that tax treaties may have on such liability. In particular, the impact of the fifth protocol to the Canada-us income tax convention is considered.

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Bob Tarantino

About Bob Tarantino

Bob Tarantino is Counsel at Dentons Canada LLP and focuses his practice on the interface between the entertainment industries and intellectual property law, with an emphasis on film and television production, financing, licensing, distribution, and IP acquisition and protection. His clients range from artists and independent producers to Canadian distributors and foreign studios and financiers at every stage of the creative process, from development to delivery and exploitation.

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