Vancouver: Putting the issue of foreign actor taxation to rest, the federal Department of Finance will introduce legislation that amends the Canadian Income Tax Act to allow for a 23% withholding tax on gross income earned after Jan. 1, 2001.

Previously, actors were charged a 15% withholding tax, but over the past two years the Canada Customs and Revenue Agency (ccra) had threatened to step up enforcement to ensure compliance and full tax returns – a prospect the service production industry predicted would chase away lucrative u.s. business.

Under the new terms, actors can pay the 23% and fulfil their responsibility to the ccra. Foreign actors have the option to file a tax return if they prefer taxation on net income. Actor contracts signed prior to Dec. 31, 2000 for work in 2001 are grandfathered at the 15% rate.

‘Thank God it’s over,’ says Tom Adair, executive director of the BC Council of Film Unions and a member of the Motion Picture Production Industry of Canada (mppic). ‘This is a solution that is permanent, it addresses the issues and it provides certainty. This is the best we could get and we’re breathing a sigh of relief.’

How California-based actors divide fees will determine how much double taxation will affect them. California State tax allows for a tax credit of only 20% of foreign income. It’s thought that most marquee actors will decline to file full tax returns (which may return tax paid) in order to protect their privacy.

Hedy Fry, Vancouver Centre mp, has been instrumental in pushing the actor tax resolution through and says that while the flat tax has implications across the country, it is most keenly felt in b.c.

‘The film industry is extraordinarily important industry to b.c., as a job generator and a revenue generator,’ she says, adding that the production service industry is the ‘bread and butter’ of the local film business.

‘Paul Martin has always been in touch with the [actor tax] issue,’ she says. ‘It’s always been on the radar screen. But the timeline was a problem – that people would have difficulties doing business after Jan. 1 if something wasn’t done.’

A compelling argument, Fry explains is that the withholding tax issue isn’t just a non-indigenous industry challenge.

‘Even a Canadian indigenous film may need to have saleable names,’ she says, referring to the focus on marquee talent to move projects forward.

In other tax news, the finance department has reviewed the tax waivers for non-resident behind-the-scene workers, an issue that has threatened to chase away u.s. producers who frequent Canada for favorable production costs. Non-residents who work behind the camera are subject to a 15% withholding tax. *

-www.ccra-adrc.gc.ca/tax/nonresidents/trtyguid1-e.html