Notice to producers
This correspondence is addressed to all producers/employers and aims to provide clarification on certain elements related to the taxation of musicians and at the same time, to standardize the way of doing things.
In fact, it has been brought to our attention that some producers use erroneous methods when the time comes to issue T4A/T4s at the end of the year or when they calculate the consumption taxes to be remitted to musicians registered with the GST and QST files.
Given the complexity of the numerous articles of consumption tax and income tax laws and in order to support the information and information disclosed in the following lines, the Guild of Musicians and Musicians of Quebec (ci - after “GMMQ”) called on experts from Raymond Chabot Grant Thornton (hereinafter “RCGT”). They have been given the mandate to provide us with an opinion on consumption taxes and income taxes for professional musicians with self-employed status, like the vast majority of our members.
Following this consultation with RCGT, an article entitled "Taxation of the musician" was published in the Entracte magazine of December 2013. We invite you to read it or reread it because, although it was published a already a few years, it is still relevant since the rules have not changed.
You will find below excerpts from this article and explanations on how to proceed for a producer concerning consumption taxes as well as the taxable income to be entered on the T4A/T4.
What is subject to GST and QST when I acquire the services of a musician?
Depending on the type of commitment, there are several collective agreements negotiated by the GMMQ with producers or producer associations. The working conditions are different from one agreement to another since in addition to the minimum fee for the benefit which differs, there is the percentage of contribution to the pension fund, the presence or not of a contribution to vacation , the percentage of exercise contribution, travel allowances, etc.
The basic principle that must be remembered is that according to the rules applicable to the GST and the QST, the taxes must be calculated on the total amount payable by the producer to acquire the service rendered by the musician .
For the purposes of the example below we will use simple numbers that do not refer to any particular collective agreement.
- Minimum fee (subject to exercise cost of 4.50%) $100.00
- Pension fund (10%) $10.00
- Holidays (4%) $4.00
- Travel allowance $32.00
Consideration payable by the producer $146.00
Total : $167.86
Here is how this sum would be distributed:
- To be given to the musician :
- Fee (net of the financial year contribution) $95.50
- Travel allowance $32.00
- GST/QST $21.86
Total : $149.36
- To be submitted to the Pension Fund: 10.00
- To be submitted to the GMMQ:
- Financial year contribution $4.50
- Vacation $4.00
Total : $8.50
Therefore, according to the applicable rules, the GST and the QST must be calculated on the amount of $146.00, which corresponds to the total amount payable by the producer for the supply of the musician's service. The amount for the retirement fund (pension) is taxable, even if it is remitted to the body that manages the musicians' pension fund and not directly to the musician.
Let's go back to the example above assuming that the musician has negotiated a fee of $150 for the performance. Contributions to the pension fund and vacation would be the same because the collective agreements provide that they must be calculated on the minimum fee provided, however, the consideration payable by the producer and subject to taxes would be $196.
When do I have to take income into account?
For a self-employed person, it is important to use accrual accounting to declare his income and compile his expenses. In other words, income and expenses must be considered at the time the service is rendered, so the T4A/T4 must reflect this statement, even if there are still amounts to be paid to the musician.
It is also important to note that a self-employed musician is required to have a financial year ending on December 31.
What should be included in the calculation of income on a T4A or T4?
As you already know, depending on the collective agreement in force and the type of commitment, the amounts that a producer will have to pay for the acquisition of the service provided by the musician can vary considerably.
Of course, the fee agreed with the producer is income. Also, if the collective agreement provides for the payment of a percentage of the minimum vacation fee, this amount must be included as income when the service is rendered, even if you do not pay this amount directly to the musician.
All the amounts that you pay as "per diem", i.e. travel allowances for kilometers traveled, accommodation and meal expenses when the services offered are far from the major centers of Quebec or again, the cost of transporting instruments when certain criteria are met. These indemnities are taxable and must be compiled in order to include them in the calculation of income. However, when he is away from home, the musician may deduct certain expenses against his income.
As you all know, most of the collective agreements negotiated by the GMMQ provide for the payment of a percentage of the minimum fee to the pension fund. What is less known, however, is that the amount paid into the pension fund should not be considered income on the T4A or T4 , but should rather appear as a pension adjustment. The Plan is a defined benefit Registered Pension Plan (RPP) and the Income Tax Act requires pension adjustments to be reported for all contributions made to the Plan. Thus, on a T4A, the producer must indicate in box 34 the amount paid into the plan and in box 36, he must enter the retirement plan approval number which is 0215145. On a T4, the amount must be entered in box 52 and the approval number in box 50.
Mario Lacoursiere, CPA
Director, Finance and Member Services