CANADIAN FILM TAX INCENTIVES
Canada, often referred to as "Hollywood North", continues as a leading innovator in the development and implementation of public sector incentives for film and television production. These incentives have stimulated a billion dollar industry in Canada for the production of both domestic or indigenous programming content and foreign based Canadian location or service productions.
Currently, these public sector initiatives comprise:
Direct Federal and provincial assistance in the form of grants, loans and equity investments in Canadian content programming;
Federal and provincial refundable tax credit programs available to domestic producers of Canadian content programming;
Federal and provincial refundable tax credit programs available to domestic and foreign producers of non-Canadian content programming that employ Canadians and choose Canada as a location or service centre; and
Canadian content program recognition designation for both qualifying Canadian domestic productions and foreign co-ventures.
In this monograph, we focus on the last two groups of these initiatives and in particular, their application to U.S.-based film and television productions.
FEDERAL REFUNDABLE TAX CREDIT PROGRAM FOR SERVICE PRODUCTIONS The Federal Tax Credit Program Under the administration of the Canadian Audio-Visual Certification Office (CAVCO) and the Canada Revenue Agency (CRA), the Canadian Federal government assists domestic and foreign producers by offering two types of refundable tax credits:
The Canadian Film or Video Production Tax Credit (CPTC) A refundable tax credit available to Canadian domestic producers for qualified labour expenditures paid for services rendered in connection with the production of eligible Canadian content film and television productions. The CPTC program is intended to encourage indigenous Canadian programming and to strengthen the domestic production sector. The CPTC is calculated at a rate of 25% of actual qualified labour expenditures capped at 60% of total production costs. To the domestic producer of Canadian content programming, the CPTC represents a budgetary contribution of approximately 15% of the total cost of production (i.e., 25% of 60%).
The Film or Video Production Services Tax Credit (PSTC) A refundable tax credit available to both Canadian producers and foreign producers with a permanent establishment (i.e., a production office) in Canada, for qualified Canadian labour expenditures paid for services rendered in connection with the production of qualifying non-Canadian content film and television productions. The PSTC program was designed to strengthen Canada's international reputation as a location of choice for film and video productions employing the services of Canadians. This refundable tax credit is based upon "qualified Canadian labour expenditures" incurred by an "eligible production corporation" for services provided in Canada by Canadian residents or taxable Canadian corporations for the production of an "accredited production." As a fully refundable tax credit, an eligible production corporation is entitled to a refund of the PSTC where the corporation has no federal income tax payable in a particular taxation year or where the credit is more than the amount owed in federal income tax.
How Much Does The PSTC Represent? The PSTC is calculated at a rate of 16% of qualified Canadian labour expenditures. There is no cap on the amount of credit that can be received and the credit is completely refundable. The PSTC is not available where the production has received a tax credit under the CPTC.
Who Is Eligible To Claim The PSTC? Canadian domestic corporate producers and foreign-owned corporations having a permanent establishment (a production office) in Canada are eligible to claim the PSTC. The corporation's primary activity must be in relation to a film or video production business or a film or video production services business. The applicant corporation must either own the copyright in the film during the production period or be engaged directly by the copyright holder to provide production services.
Minimum Expenditure Requirements To Qualify For The PSTC To qualify for the PSTC, a film or television production must meet the following minimum expenditure requirements:
$1,000,000 Cdn. for a feature film;
$200,000 Cdn. for a one-hour television episode; or
$100,000 Cdn. for a 30-minute television episode.
Eligible Genres Of Production The following genres of production do not qualify for PSTC benefits:
News, current event or public affairs programming
Talk and game shows
Sporting and award events
Reality television
Productions that solicit funds
Pornography
Advertising
Industrial, institutional or corporate productions
What Labour Expenditures Qualify For The PSTC? Qualifying Canadian labour expenditures consist of the following for the stages of production from the final script stage to the end of post-production, paid in the year or within 60 days after the year end:
Salaries and wages:
Paid to persons who were resident in Canada at the time the payments were made
Paid for services provided in Canada
Remuneration paid to:
Non-employee(s) of the producer who are Canadian residents
Taxable Canadian corporations for the services of their employee(s) who are Canadian residents
Loan-out corporations or personal services corporations for the services of a Canadian resident, subject to certain restrictions
Partnerships for the services of a partner who is a Canadian resident
Reimbursements by a wholly-owned production company to its parent company for qualifying labour expenditures that were paid by the parent company on behalf of the production company
A producer's labour expenditure for the purposes of the CPTC must be reasonable in the circumstances and directly attributable to the production.
Can The PSTC Be Combined With Other Tax Credits? While the PSTC can be claimed in conjunction with complimentary provincial tax credit programs, it cannot be combined with a claim for the federal refundable CPTC available to qualifying domestic Canadian content production.
COMPLEMENTARY PROVINCIAL TAX CREDIT PROGRAMS In many provinces, provincial tax credits and incentive programs provide an additional source of funding for qualifying film and television productions. In a number of provinces, these provincial incentives are boosted by incentive credits and bonuses for regional production and training initiatives. In most cases, provincial tax credits can be combined with federal tax credits to augment the total benefits available to domestic and foreign productions produced in Canada. As is the case with Federal film tax credit programs, Provincial film tax credits are refundable to the extent the credit exceeds the producer's Canadian income tax payable.
Moreover, recognizing the importance of stimulating the domestic employment market for skilled animation, special effects and digital media workers, provincial governments in Ontario, British Columbia and Quebec have legislated refundable tax credits for eligible computer animation and special effects activities, as well as interactive digital media products.
Assistance provided at the provincial level changes from time to time due to industry pressure on government to remain competitive with foreign tax credit programs. As well, competitive pressures between provinces result in some degree of jockeying at a provincial level. As one province enhances its film and television program, the remaining provinces are pressured to boost their support of film and television industries.
The attached chart provides a brief overview of the various provincial film and television tax credit programs as they exist on February 1, 2009. Please consult the applicable provincial funding agencies at the links provided on pages 9–11 for full particulars, limitations and restrictions applicable to these provincial tax credit programs.
CANADIAN CONTENT PROGRAM RECOGNITION FOR CO-VENTURES Canada is currently a party to over 50 international treaties setting rules and procedures for Official Co-Productions with other nations qualifying those productions, or the Canadian component of those productions, as domestic productions for the CPTC and other Canadian public sector financing initiatives. However, no co-production treaty exists or is anticipated with the United States of America.
Having said this, both Official Co-Productions and other qualifying co-ventures may still be eligible for Canadian content program recognition, as designated by the Canadian Radio-television and Telecommunications Commission (CRTC).
The CRTC is the Canadian agency responsible, among other things, for the administration of the Broadcasting Act (Canada), and the licensing of Canadian broadcast undertakings. In the licensing of broadcast undertakings, the CRTC assures a voice for Canadian content programming by mandating defined levels of Canadian programming during various hours of the broadcast day. Moreover, the CRTC mandates minimum expenditure requirements on Canadian programming by Canadian pay and specialty television channels. In many cases then, CRTC "Canadian content" designation is advantageous in negotiating Canadian broadcast licenses and in garnering greater Canadian broadcast license fees.
Clearly, film and television productions that qualify for the CPTC meet the Canadian content criteria administered by both CAVCO and the CRTC. However, programming that does not qualify for the CPTC, like programming seeking to take the benefit of the PSTC, may still achieve designation as "Canadian" for CRTC purposes if it qualifies as produced pursuant to a Co- Venture under the CRTC's guidelines.
In order to qualify as a CRTC recognized Canadian co-venture, the following thresholds must be met:
A Canadian producer must have an equal measure of decision making responsibility over the creative elements of production;
The Canadian producer must have both entrepreneurial and financial risk by retaining the obligation to provide 50% of the financing and 50% of the profits;
The Canadian producer does not have to own the copyright;
An expenditure test must be met:
In the case of a co-venture with a U.S.-based partner, 75% of the production costs must be spent to or for Canadians, and 75% of processing and final preparation must be paid to or for Canadians; or
In the case of a co-venture with any other foreign partner, 50% of the production costs must be spent to or for Canadians, and 50% of processing and final preparation must be paid to or for Canadians; and
A Canadian content points test must be met:
In the case of a co-venture with a U.S.-based partner, at least six CRTC points must be achieved; or
In the case of a co-venture with any other foreign partner, at least five CRTC points must be achieved.
Slightly varied criteria apply to co-venture production packages (i.e., co-ventures for more than one production undertaken by a Canadian and a foreign producer).
Canadian content points are as follows:
> At least one of the director or the screenwriter must be Canadian, and at least one of the two lead performers must be Canadian.
USEFUL LINKS Canadian Film or Video Production Tax Credit (CPTC) http://www.pch.gc.ca/cavco
Alberta Film
Alberta is considered the ultimate destination for film television and commercial production. Offering unparalleled diversity, Alberta has garnered more Academy Award nominations than any other production centre in Canada. The Alberta Film Development Program is a formula grant that provides producers with a contribution of up to 29% of all eligible production expenditures made in the province (equivalent to a labour tax credit of 36 -53%) Available to local, national and international producers, the grant increases with Albertan ownership and the employment of Albertan key creative personnel. This government guaranteed grant is accepted at face value by most financial institutions. Alberta also continues to be the only Canadian province without provincial sales tax.
Calgary Film Commission
Productions in the Calgary region can access provincial and federal programs providing eligibility requirements are met. Contact us for details.
British Columbia Film Commission
British Columbia Tax Credits
The British Columbia Production Services Tax Credit (PSTC) encourages film, television and animation production in BC and can be accessed by a broad range of foreign productions.
There are four components:
1. The basic PSTC tax credit is 18% 25% of accredited qualified BC labour expenditures effective January 1, 2005 December 31, 2007.
2. The new REGIONAL tax credit is 6% of accredited qualified BC labour expenditures.
3. The new DISTANT Location tax credit is 6% and is added to the regional tax credit for principal photography done outside of the Lower Mainland Region, north of Whistler and east of Hope, excluding the Capital Regional District.
4. The new DIGITAL ANIMATION or VISUAL EFFECTS tax credit is 15% of accredited qualified BC labour expenditures.
British Columbia Film:
Columbia Shuswap Film Commission
Greater Victoria Film Commission
Northern British Columbia Film Commission
The Province of BC offers an 18% rebate on BC labour and the Canadian government offers a 16% rebate on Canadian labour. The province also offers an additional 6% rebate on BC labour for those projects that film outside of Vancouver.
Okanagan Film Commission
Productions in British Columbia can access a variety of provincial and federal tax credit programs and if eligibility requirements are met, a producer can combine them to access exceptional savings.
Vancouver Island North Film Commission
Film on Central or Northern Vancouver Island, Gulf Islands or BC Coast and take advantage of the new Distance Regional Tax Credit and the higher Production Services Tax Credit!
Manitoba Film & Sound
The Manitoba Film & Video Production Tax Credit returns up to 55% of local labour costs - this based on a 45% base rate, plus a 5% Frequent Filming Bonus and a 5% Rural Bonus. Producers are eligible for the 5% Frequent Filming Bonus by shooting their third production in Manitoba in two years and to access the Rural bonus, producers must shoot 50% of their Manitoba shooting days 35km from the centre of Winnipeg.
New Brunswick Film
40% Labour Tax Credit
Nova Scotia
Tax credit calculated at 50% of eligible Nova Scotia labour costs for productions that occur in the Halifax region or 60% of eligible labour costs for those that occur in other regions of the province. An additional 5% frequent filming bonus to companies for a third project that commences principal photography within a two-year period.
Ontario
Hamilton Film Office, Ontario, Canada
See Province of Ontario Web Site for all of the details.
Ontario Media Development Corporation
Recently enhanced is the Ontario Production Services Tax Credit (OPSTC), a 25% credit that now covers all eligible Ontario spend on film and television productions. The federal Government offers an additional tax credit of 16% on Canadian labour expenditures that can be bundled with the Ontario tax credit for even more savings.
The Ontario Film and Television Tax Credit (OFTTC) is a 35% credit for domestic and certified international treaty film and television productions, with the federal Government offering an tax credit of 25% for Canadian labour expenditures.
If you have a computer animated or VFX production, you may be eligible for an additional 20% tax credit (called OCASE) on eligible labour expenditures. That’s on top of the existing OFTTC or OPSTC.
With NO individual caps per production and NO limit on the number of productions that can access our credits, you know up front how much to expect.
www.omdc.on.ca
Toronto Film and Television Office
Quebec
Quebec Film & Television Council
Figures that speak for themselves: 25% all-spend + 20% + 16%...
Quebec’s new ALL-SPEND Production Services Tax Credit is actually a CASH REBATE, the first of its kind in Canada:
a) ALL expenses incurred in the province are admissible, including labor, equipment, purchases or rentals, transport, catering…basically EVERYTHING!
b) There’s also a 20% tax credit bonus on labour expanded for all GREEN-SCREEN and VFX shots.
c) Add to that the federal 16% tax incentive, net of any assistance, of eligible labor expenditures within Canada.
d) Total: a potential 43% cash-back on everything you’ve spent in Quebec.
e) No prescribed limit, no minimum, no limited fund, no sun-set clause, no re-sellable credits, no limitations whatsoever…just wide-open, simple and straightforward!
Saskatchewan
SaskFilm & Video Development Corporation
The Saskatchewan Film Employment Tax Credit Program (SFETC) is one of the most comprehensive and competitive tax incentive programs available in the world.
Offering a tax credit of up to 55% of eligible labor on each individual project with no content or copyright restrictions, the program continues to be user-friendly, production-oriented and is designed to encourage film and television production in Saskatchewan. Unlike other tax credit programs, Saskatchewan's incentives are available for each production, without obligation to film additional projects in the province to qualify for an additional rebate. There are no financial caps per production and program applications are processed swiftly in the interests of the producer. Saskatchewan is also home to a state of the art production facility – the Canada Saskatchewan Production Studios.
Yukon
Yukon Film & Sound Commission
NOTE - Yukon's Program is a REBATE and not a tax credit. Yukon Funds are delivered to the production within 8 weeks of receiving all required accounting
Yukon Spend Rebate
Television programs, television movies (Movies of the Week), documentaries and feature films (but not commercials) are eligible for a rebate of up to 25% of Yukon spend, provided criteria are met.
Training Rebate
Productions (not commercials) are eligible for a rebate of up to 25% of wages paid to individuals providing on-set training (techniques and equipment) to eligible Yukon labour.
Travel Rebate (Available to productions not accessing the Yukon Spend Rebate)
Commercials productions are eligible for a 50% rebate on travel costs to a maximum of $10,000 or 10% of Yukon spend.
We also have a Training Rebate rebate available. Call for more info
