Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: General information on taxation of non-resident professional athletes.
Position: Non-resident athletes generally taxed like other non-resident employees; in particular, US athletes playing for US teams usually not taxable in Canada.
Reasons: Sections 2 and 115 of the Act; Canada-US Income Tax Convention; 2IT-168R3
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Dear XXXXXXXXXX:
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter of May 20, 2001, concerning the taxation of professional athletes who are members of either Canadian or foreign-based teams and who are not resident in Canada.
In your letter, you comment that your understanding is that non-resident professional athletes are subject to regulations drawn up by the Canada Customs and Revenue Agency (CCRA). I would like to clarify that the CCRA, which is accountable to the Minister of National Revenue, is not responsible for drafting Canada's income tax laws. The CCRA's role is to administer and enforce the Income Tax Act as passed by Parliament and in accordance with relevant jurisprudence. The Department of Finance is responsible for drafting and amending the Act.
With respect to the taxation of professional athletes, the athlete's residence status determines how he or she is taxed under the Act. A resident of Canada is taxable on his or her income from all sources, both inside and outside Canada. Generally, a non-resident person is only taxable on his or her income from Canadian sources. The CCRA takes a number of factors into account in determining a person's residence status for income tax purposes. Details on how this determination is made can be found in Interpretation Bulletin IT-221R2, Determination of an Individual's Residence Status, which is available from either your local tax services office or the CCRA's Web site on the Internet at www.ccra-adrc.gc.ca.
Generally, professional athletes, whether resident or non-resident, are not taxed differently than other persons under the Act. For example, a non-resident athlete who is a member of a professional team is liable for tax under the Act on the portion of his or her remuneration that relates to employment performed in Canada, mainly games played in Canada, regardless of whether the team is based in Canada or in another country such as the United States. However, when the non-resident athlete is resident in a country with which Canada has a tax treaty, the tax treaty may affect Canada's right to tax the athlete's income from employment performed in Canada. Generally, Canada's tax treaties with other countries maintain Canada's right to tax athletes in respect of employment income earned in Canada. However, a non-resident athlete who is resident in the United States and employed by a professional team based in that country, and who is not present in Canada for more than 183 days in the particular calendar year, will usually be exempt from Canadian tax on any of his or her income related to employment with the team pursuant to the Canada-U.S. Income Tax Convention.
For specific information regarding the taxation of professional athletes, including non-resident professional athletes, please see Interpretation Bulletin IT-168R3, Athletes and Players Employed by Football, Hockey and Similar Clubs, a copy of which is attached for your convenience. You may also wish to refer to Interpretation Bulletin IT-420R3, Non-Residents - Income Earned in Canada, which is available from either your local tax services office or on the Internet at the Web site mentioned previously.
Should you require further information on a particular issue related to the taxation of non-resident athletes, such as the application of a specific tax treaty, I invite you to call the Income Tax Rulings Directorate at 0-613-957-8953 collect. For residency determination information, please call the Enquiries and Adjustments Division of the International Tax Services Office, toll-free, at 1-800-267-5177.
I trust the information provided is helpful.
Yours sincerely,
Bill McCloskey Assistant Commissioner Policy and Legislation Branch
Attachment
Eliza Erskine
952-1361
June 27, 2001
2001-008764