2011-0404511C6 confirmed CRA’s longstanding position in IT-303SR, so that the exception in s. 212(1)(d)(vi) applied to all payments for copyright in respect of a literary, dramatic, musical or artistic work, unless that payment was for a right referred to in s. 212(5). This would indicate that payments made, for example, by a Canadian broadcaster to acquire the rights from a non-resident to broadcast live sport or artistic events in Canada (“broadcast rights payments”) would fall within s. 212(1)(d)(vi), unless the s. 212(5) exception applied.
However, Entertainment Software Association v. Society of Composers, Authors and Music Publishers of Canada [2012] 2 S.C.R. 231 drew a clear distinction between the right to perform in public and the right to produce or reproduce a copyrighted work. Does this change the CRA view expressed in 2011?
CRA noted that the 2012 ESA decision dealt with one of the enumerated rights accorded to copyright holders under s. 3 of the Copyright Act, namely, s. 3(f), which accords the copyright holder the sole right to, “in the case of any literary, dramatic, musical or artistic work, to communicate the work to the public by telecommunication.” There, the Supreme Court found that the enumerated rights in s. 3 essentially protect three basic rights: the right to perform, the right to produce, and the right to reproduce, a work; and found that the communication right under s. 3(f) came within the performance aspect of copyright, and not that of production or reproduction.
Accordingly the ESA decision establishes that broadcasting relates to the performance of a work, not to its production or reproduction. The 2011 IFA response therefore ceased to be correct and, as a result, CRA was thereafter required to assess broadcast rights payments as being subject to tax under s. 212(1)(d).