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Canada/ 5.1 General legislation  

5.1.5 Tax laws

Tax deductions by individuals for donating to not-for-profit charities and cultural organisations are an important incentive for philanthropy. While the number of donors to cultural organisations decreased by 21% from 571 000 in 1997 to 451 000 in 2000, the value of cultural donations increased 22% from CAD 39.4 million in 1997 to CAD 47.9 million in 2000, or twice as fast as the rate of increase in the value of donations to any type of non-profit organisation. In 2004, about 732 000 Canadians aged 15 and over, or 3.3% made financial donations to arts and culture organisations, or 3.3% of all donations, including visual arts, architecture, ceramic art, performing arts, museums, zoos, aquariums, media and communications  as well as historical, literary and humanistic societies. Donors indicated that they made a total of CAD 188 million to cultural organisations or CAD 257 as an average donation per donor compared to CAD 395 for the average value of donations to religious organisations per donor. The top one-quarter of donors provided the great majority of the total value of all donations. Arts and culture rank eighth out of 11 types of not-for-profit organisations in value of donations, well behind religious organisations (CAD 4 billion), health care (CAD 1.2 billion) and social service organisations (CAD 903 million).( Statistics Canada, National Survey of Giving, Volunteering and Participating 2006 and Hill Strategies Research, 2006). There is continuing pressure for the elimination of tax measures such as a reduction in the capital gains tax of donations of optioned shares.

Corporations and foundations also contribute to cultural organisations through grants and donations, endowment funds and sponsorships. The largest proportion of cultural donations flows to media, communications (public television, libraries and newsletter organisations) and the performing arts. As a percentage of total revenues, private sector revenues including endowments, trust funds, fund raising and sponsorships amount to 21% for the performing arts and 10% for heritage institutions. Both showed growth potential during the 1990s, an otherwise difficult period. An incentive was announced in 2006 to increase the opportunity to make private donations to charitable institutions, including not-for-profit arts and cultural groups, through improved tax treatment for the donation of publicly traded securities. See chapter 5.3.6 for film production credit legislation and chapter 4.2.2 for cultural property tax incentives.

Certain deductions to the Income Tax Act (1985) are in effect for visual artists and writers, and performing artists. Visual Artists and Writers: visual artists and writers who are self-employed are entitled to deduct reasonable expenses incurred in connection with earning income from their business, including work space in home expenses and professional membership dues. Visual artists and writers who are employees can deduct, within certain limitations, their expenses paid (e.g. advertising and promotion, travel expenses) to earn employment income from "qualifying artistic activity" which includes:

  • creating (but not reproducing) paintings, prints, etchings, drawings, sculptures or similar works of art;
  • composing a dramatic, musical or literary work;
  • performing a dramatic or musical work as an actor, dancer, singer or musician; or
  • an artistic activity in respect of which the taxpayer is a member of a professional artists' association that is certified by the Minister of Communications, now the Minister of Canadian Heritage.

Performing artists who are self-employed can deduct reasonable business expenses, including the following: insurance premiums on musical instruments and equipment, the cost of repairs to instruments and equipment, legal and accounting fees, union dues and professional membership dues, an agent's commission, publicity expenses, transportation expenses related to an engagement, cost of music, acting or other lessons incurred for a particular role or part or for the purpose of general self-improvement in the individual's artistic field. Artists who are employees may deduct reasonable employment expenses, subject to certain limitations (e.g. advertising and promotion, travel expenses). An employee, who is employed in the year as a musician and is required as a term of the employment to provide a musical instrument for a period in the year, may deduct certain costs related to the musical instrument (e.g. capital cost allowance, amounts for maintenance, rental and insurance of the instrument). It should be pointed out that both employed and self-employed artists may make such deductions only against their self-employed artistic income. This provision applies to both visual artists and writers and to performing artists. The deduction related to musical instruments for performing artists is the only one that does apply to artists' employment income.

Artists receive an income tax credit, calculated on the basis of fair market value, for a gift to institutions and public authorities designated under the Cultural Property Export and Import Act (1985), which regulates the import and export of cultural property and provides special tax incentives to encourage Canadians to donate or sell important objects to public institutions in Canada. An independent, administrative tribunal certifies cultural property for income tax purposes by making determinations with respect to the "outstanding significance and national importance" and the fair market value of objects or collections donated or sold to museums, archives and libraries. It is a tax credit scheme for "donors" of cultural property that may include an artist if the person actually owns the artwork at the time of the gift, but the scheme itself is open to any taxpayer in Canada who wishes to make a gift to public institutions. Arts service organisations recognised by the Minister of Canadian Heritage and the Minister of Revenue as having charitable status may issue receipts for income tax purposes to persons who make gifts to associations. Income averaging measures have not been introduced to date.

Chapter published: 19-01-2011

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