Backgrounder

Updated June 5, 2000

CANADA - U.S. AGREEMENT ON MAGAZINES

Foreign Publishers Advertising Services Act

• The Foreign Publishers Advertising Services Act (FPASA) received royal assent on June 17, 1999. It came into force on July 1, 1999.
  
  
• The prohibition on foreign publishers selling advertising services aimed primarily at the Canadian market was amended to allow two controlled forms of access to the Canadian advertising services market:
  • an exemption that allows foreign publishers to invest in Canada, create new businesses and produce a majority of Canadian content if they want to have greater access to advertising revenues.
    
    
  • a de minimis exemption of up to 18% of the advertising in any foreign periodical. This exemption will be phased in over three years from the date of enactment of FPASA (12% as of July 1, 1999, 15% as of January 1, 2001, and 18% as of July 1, 2002).

Investment

• A foreign publisher will not be able to sell more than 18% of advertising aimed at Canada unless it invests and creates new businesses, hires Canadians, and produces magazines containing majority Canadian content.
  
  
• New investments that result in ownership and control by a foreign investor will be reviewed under the Investment Canada Act for net benefit to Canada, using policy guidelines that will be made public. These guidelines will ensure that, in addition to any economic benefits, new businesses will have to generate majority Canadian content in their magazines. Accordingly, authority for the review and approval of investments related to all cultural industries, including periodicals, was transferred to the Minister of Canadian Heritage from the Minister of Industry on May 26, 1999.
  
  
• Acquisitions of Canadian publishers will continue to be not permitted.

Canadian Content

• For the purposes of investment review, and for determining eligibility for tax deductibility, Canadian content is content that is created for the Canadian market or that has been authored by a Canadian.
  
  
• Editorial content is everything that is not advertising pages, such as stories, illustrations, graphics and photographs. Canadian means a citizen or permanent resident of Canada. Original means it does not also appear in other foreign editions of a magazine.
  
  
• There will not be any subjective assessment of themes or subject matter to determine what is Canadian content. Stories, illustrations and photographs created by Canadians will count, regardless of subject, even if they appear in foreign editions. Content created by non-Canadians will count only if it was created for the Canadian edition and is not reproduced in other editions.

Tax Deductibility

• The proposed amendments to section 19 of the Income Tax Act become effective June 1, 2000. A deduction will be available for advertisements placed in periodicals - regardless of whether the ownership of the periodical is domestic or foreign.
  
  
• A full tax deductibility is available for advertising placed in periodicals for an advertisement directed at the Canadian market if the original editorial content in the issue is 80% or more of the total non-advertising content in the issue.
  
  
• A 50% tax deductibility is available for advertising placed in periodicals for an advertisement directed at the Canadian market if the original editorial content in the issue is less than 80% of the total non-advertising content in the issue.
  
  
• The proposed changes to section 19 apply only to periodicals. There are no fundamental changes on the availability of the tax deductibility for newspapers. The tax deductibility remains available for advertising placed in newspapers with a minimum of 75% Canadian ownership.

Other Issues

• The federal government will provide a package of assistance to the Canadian magazine publishing industry, details of which will be announced by the Minister of Canadian Heritage, following consultations on its design with the industry.
  
  
• The agreement does not affect the Publications Assistance Program, operated by agreement between Canadian Heritage and Canada Post, that supports the mailing costs of paid circulation Canadian magazines and small community newspapers.
  
  
• Nothing in the agreement directly affects newspapers or electronic magazines, just as was the case with FPASA.

 

* Foreign publishers who make an investment in periodical publishing which has been approved under guidelines set out in the Investment Canada Act will have unrestricted access to the Canadian advertising services market.