Information from the GMMQ concerning the GST-QST when paying musicians
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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, standardize the way of doing things.
Indeed, it has been brought to our attention that certain producers use erroneous ways of doing things when it comes time to issue T4A/T4 at the end of the year or when they calculate the consumption taxes to be remitted to musicians registered with GST and QST files.
Given the complexity of the numerous articles of legislation on consumption taxes and income tax and in order to support the information and information disclosed in the following lines, the Guild of Musicians of Quebec (hereinafter -hereinafter “GMMQ”) called on experts from Raymond Chabot Grant Thornton (hereinafter “RCGT”). They were mandated to provide us with an opinion regarding 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 journal Entracte in December 2013. We invite you to read or reread it because, although it was published a few years old, it is still relevant since the rules have not changed.
Below you will find extracts from this article and explanations on how to proceed for a producer regarding consumption taxes as well as taxable income to be entered on the T4A/T4.
Consumption taxes
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 service which differs, there is the percentage of contribution to the pension fund, the presence or absence of a contribution to vacation , the percentage of service contribution, travel allowances, etc.
The basic principle that must be remembered is that according to the rules applicable to the GST and the QST, taxes must be calculated on the total amount payable by the producer to acquire the service provided by the musician .
Example
For the purposes of the example below we will use simple figures not referring to any particular collective agreement.
- Minimum fee (subject to exercise contribution of 4.50%) $100.00
- Retirement fund (10%) $10.00
- Vacation (4%) $4.00
- Travel allowance $32.00
Consideration payable by the producer $146.00
GST $7.30
QST $14.56
Total : $167.86
Here is how this sum would be distributed:
- To give to the musician :
- Fee (net of 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:
- Exercise contribution $4.50
- Vacation $4.00
Total : $8.50
Then, 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 organization which manages the musicians' pension fund and not directly to the musician.
Let's take the example above assuming that the musician has negotiated a fee of $150 for the performance. Contributions to the retirement 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.
Income tax
When should I take income into account?
For a self-employed worker, it is important to use accrual accounting to declare your income and compile your expenses. In other words, income and expenses must be considered at the time the service is provided, 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 point out that a self-employed musician is required to have a financial year ending on December 31.
What should be included when calculating 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 an 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 at the time the service is provided, even if you do not pay this amount directly to the musician.
All amounts that you pay as "per diem", i.e. travel allowances for kilometers traveled, accommodation and meal expenses when the services offered are away from the major centers of Quebec or again, instrument transportation costs when certain criteria are met. These allowances 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 will be able to deduct certain expenses against his income.
As you all know, most 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 to the retirement fund must not be considered as income on the T4A or T4 , but must rather appear as an equivalence factor. The plan is a defined benefit registered pension plan (RRP) and the Income Tax Act requires that pension adjustments be reported in respect of all contributions made to the plan. Thus, on a T4A, the producer must indicate in box 34 the amount paid to the plan and in box 36, he must enter the approval number of the retirement plan 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