Part 1
January 9, 2025
With the US-Canada exchange rate so favorable in the last few years, it’s clear that the bustling film industry in Toronto or Vancouver, or “Hollywood North” as it is so colloquially known, has been attracting numerous producers, actors and supporting cast from the U.S. and elsewhere.
Tax Implications for U.S. actors
Let’s face it. With the high volume of Los Angeles productions filmed in Canada contributing directly to Canada’s economy, you would think that U.S. actors would not have to worry about Canadian tax. There must be some kind of agreement between the two countries where no tax needs to be withheld from all the countless hours spent, all the sweat and (sometimes literal) blood poured over production.
Nuh-huh.
Any self-employed person who carries on business in Canada is subject to Canadian income tax. This includes self-employed U.S. resident actors who cross the border to work and is irrespective of the individual’s country of residency or citizenship.
There are some exceptions to this rule. For example, a self-employed U.S. resident actor earning less than $15,000 CAD may be exempt from Canadian tax on that income based on the Canada-U.S. Tax Treaty.
For any non-resident actors in film and video productions making over $15,000 CAD, the Canadian government introduced a flat 23% withholding tax on their gross income, with no deductions permitted, for acting services rendered in Canada. This tax is typically withheld by the Canadian payer and is considered the final tax obligation to Canada on that income. They introduced this flat tax after recognizing the importance of attracting foreign talent to Canada’s thriving film and television industry and with the view of facilitating compliance. The key here is that no Canadian tax return is needed in this case from the U.S. actor.
There may however be an option to paying less than 23% tax for certain U.S. actors. This is by way of filing an elective Canadian tax return on a net income basis (after certain allowable expenses) paying tax at Canada’s graduated rates. These graduated rates are tricky. In the province of Ontario, for example, the combined Federal and Ontario 2025 marginal rates range from 20.05% to 53.53%. An analysis needs to be performed to determine whether it is beneficial for the U.S. actor to file a Canadian income tax return based on their net income. Time is of the essence here. No late-filing or extension is allowed for this elective return.
Regardless of whether one pays 23% taxes or less, U.S. citizens or deemed residents must ultimately report their Canadian income (and corresponding Canadian taxes) to the IRS. The Canada-U.S. Tax treaty is designed to prevent double taxation, allowing actors to claim a reduction on their U.S. taxes for taxes paid to Canada, subject to certain limitations. In most situations therefore, the taxes paid to Canada is in effect ‘absorbed’ by the U.S. taxes due on that income, and the U.S. actor is “made whole” from a tax perspective.
It’s crucial for U.S. resident actors to understand their tax obligations when working in Canada. Actors filing a Canadian tax return, or earning below the $15,000 taxation threshold, may apply to have the withholding reduced or eliminated.
These provisions do not extend to other roles in the film industry such as directors, producers, or behind-the-scenes personnel. Part 2 and 3 of this series will cover such instances.
In light of the complexities surrounding tax regulations for
non-resident actors performing in Canada, it is highly recommended that you
consult a knowledgeable tax professional to ensure compliance and minimize your
tax liabilities. Brian Li, a seasoned cross-border tax advisor, is well-versed
in the nuances of Canadian and U.S. tax laws and can provide expert guidance
tailored to your unique situation. He has over a decade of experience servicing
various individuals and corporations (including LA-based actors, producers,
directors and BTS personnel) and is dedicated to helping actors like yourself
navigate the intricacies of international tax obligations and maximize your
financial well-being.
We invite you to book a consultation with Brian to discuss
your specific concerns and explore how his expertise can benefit you. To
schedule an appointment, please visit our website at http://www.brianlicpa.ca or directly use
the following meeting invite: Calendly
– Brian Li. We look forward to the opportunity to assist you in optimizing
your tax strategy and ensuring your peace of mind.
