Canada has long been one of the preferred places to complete film projects by foreign producers due to the various federal and provincial tax credits available. The Canadian government has been proactive in encouraging investment by domestic and foreign producers by instituting tax credits to help offset the cost of production. This has had a major positive impact on the domestic film production industry, which now has more than 127,700 employees, and an annual revenue of approximately $5.81 billion.
Given the benefits of being able to access these tax credits, AG Tax professionals have prepared a brief summary of the credits available to the film production industry. We have provided details on existing provincial tax credits, and also analyzed recent changes to them, so that film producing companies can plan their tax measures accordingly.
Canadian Film Tax Credits
- Canadian Film or Video Production Tax Credit (CPTC)
Qualifying Canadian-controlled film or video production companies may claim this refundable credit on qualified labour expenditures incurred for the production of a Canadian film or video production. The maximum claimed amount cannot be more than 60% of the production cost, net of any assistance.
CPTC allows a 25% credit (maximum credit available is therefore limited to 15% of production cost net of assistance) for these expenses. The primary objective of the Canadian Film or Video Production Tax Credit (CPTC) is to encourage Canadian programming and to stimulate the development of an active domestic independent production sector.
In order to access this credit your production must be certified as a “Canadian film or video production” by the Canadian Audio Visual Certification Office. Once this certificate is received it must be submitted with your annual tax return by your standard tax filing deadline. Co-productions involving foreign persons are able to claim this credit when co-produced under an official treaty. In the case of a co-production with a foreign entity you must still apply to CAVCO but the certificate will be issued via Telefilm Canada. A new certificate must be acquired for each production.
- Film or Video Production Services Tax Credit Program (PSTC)
Canadians as well as foreign-based film producers employing the services of Canadians may claim PSTC, a 16% tax credit for qualified Canadian labour expenses. In order to qualify, the corporation must be an eligible production having a permanent establishment in Canada primarily in the film or video production business, or servicing the film/video production business.
Additionally, the corporation claiming the tax credit should own the copyright of the film, or have a contract with the actual owner of the copyright, who should not be an eligible production corporation. The corporation must obtain an Accredited film or video production certificate from the Canadian Audio Visual Certification Office (CAVCO), which must meet minimum cost requirements (CAD$1,000,000 for a feature film; CAD$200,000 for a one-hour television episode; or CAD$100,000 for a 30-minute television episode). The production must be from a qualifying genre (talk shows, game shows, sporting events, awards shows, reality television etc. do not qualify).
One cannot claim the CPTC and PSTC for the same production.
Provincial or Territorial Tax Credits
All Canadian provinces and territories (except for Prince Edward Island) provide refundable tax credits or funding incentives ranging from 25% to 60%. These credits are offered to qualifying film/video production companies carrying out production in their region, and using labour from the related province/territory. This year some modifications have taken place.
Saskatchewan, and from 2015 onwards Nova Scotia, will be providing non-refundable credits to qualifying film producers/makers for using their locale or residents as employees. Meanwhile, Ontario has reduced its Production Services Tax Credit (OPSTC) from 25% to 21.5%, Computer Animation and Special Effects Tax Credit from 20% to 18%, and with regards to the ‘Film and Television Tax Credit (OFTTC)’ will no longer consider government equity investment in a production as a form of funding assistance.
With these provinces/territories modifying their tax credit structure negatively, British Columbia’s tax credit structure seems to be the most beneficial for film production companies. Qualifying film or television producers may claim a variety of film and television tax credits for producing eligible film/video in British Columbia. In BC there are 5 different credits, such are: a 33% basic tax credit, 6% regional tax credit, 6% distant location regional tax credit, film training tax credit, and 17.5% digital animation or visual effects (DAVE) tax credit. The credits are for domestic productions with qualifying levels of Canadian content.
That being said, at this time of the year when it is the high point of production with producers finalizing budgets, locations, and crew members, sudden changes in the availability of tax credits could jeopardize or delay the production plans. Budget/finance plays a crucial role in choosing a location, so production companies should consider meeting up with their tax advisors in order to reassure them that their tax plan has been structured well, or to address any changes that may be required due to changes in the tax credit system.
AG Tax LLP Can Help
If you wish to discuss this topic further, or have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
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