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.