Ontario Offers Three Tax Credits for Film and Television

The OFTTC is a refundable tax credit based upon eligible Ontario labour expenditures incurred by a qualifying production company with respect to an eligible Ontario production. The OFTTC is generally “harmonized” with the Canadian Film or Video Production Tax Credit.

How Much Is The Tax Credit?
The OFTTC is generally calculated as 35% of the eligible Ontario labour expenditures incurred by a qualifying production company with respect to an eligible Ontario production. An enhanced credit rate of 40% on the first $240,000 of qualifying labour expenditure is available for first-time producers. Productions that are shot in Ontario entirely outside of the Greater Toronto Area (GTA), or that have at least five location days in Ontario (or in the case of a television series, the number of location days is at least equal to the number of episodes), and at least 85% of the location days in Ontario are outside the GTA, receive a 10% bonus on all Ontario labour expenditures incurred for the production. Wholly animated productions which create at least 85% of key animation in Ontario outside of the GTA qualify for the regional bonus.

Who Is Eligible?
A qualifying production company is a Canadian corporation which is Canadian-controlled, has a permanent establishment in Ontario, and files an Ontario corporate tax return. In addition, the individual producer of the production must have been an Ontario resident for tax purposes at the end of both of the two calendar years prior to commencement of principal photography.

What Types of Production Are Eligible?
An eligible Ontario production is a production which:

  • has six Canadian content points (unless it is an official treaty co-production)
  • is predominantly shot and posted in Ontario (Note: There are exceptions for documentaries, interprovincial co-productions and international treaty co-productions)
  • spends at least 75% of its total final costs on Ontario expenditures
  • if for television, is suitable for a minimum 30-minute time slot (except children’s programming)
  • has an agreement with an Ontario-based distributor or a Canadian broadcaster to be shown in Ontario within two years of completion (broadcast must occur between 7:00 p.m. and 11:00 p.m., except for children’s programming)
  • is not in an excluded genre (such as news or current affairs, talk shows, game shows, sports shows, awards shows, fundraising shows, reality television)

What Expenditures Are Eligible?
Eligible Ontario labour expenditures consist of:

  1. Salaries and wages paid to Ontario residents;
  2. Remuneration paid to:
    a) corporations that are personal service companies subject to tax in Ontario for the services of an Ontario resident,
    b) sole proprietors or freelancers subject to tax in Ontario,
    c) partnerships, for the services of a partner subject to tax in Ontario, and
    d) taxable Canadian corporations with a permanent establishment in Ontario for the services of their employee(s) who are Ontario residents; and
  3. Reimbursements by a wholly-owned production company to its parent company for labour expenditures, as above, that were paid by the parent company on behalf of the production company.

Ontario residents are individuals who were resident in Ontario for tax purposes at the end of the calendar year prior to commencement of principal photography. The labour expenditures of a corporation for the purposes of the OFTTC must be reasonable and must be included in the cost of the production.
Labour expenditures must not only be incurred but must also be paid in the taxation year (or within 60 days after the end of the taxation year) for which they are being claimed.
Eligible labour expenditures include those incurred from the production commencement time (PCT) until the end of post-production. Productions can claim eligible labour expenditures as early as two years prior to the commencement of principal photography. This may include labour expenditures for script development.

How to Determine Production Commencement Time (PCT)?
To determine the PCT date, the applicant must take the earlier of a) or b):
a) the commencement of principal photography (PP);

b) the latest of:
i) the date the first labour expenses for script material were incurred by the applicant (or their parent corporation);
ii) the date the applicant (or their parent corporation) acquired the property on which the production is based;
iii) two years before commencement of principal photography

How Is The Credit Administered?
The OFTTC is jointly administered by the Ontario Media Development Corporation (OMDC) – an agency of the Ministry of Tourism, Culture and Sport – and the Canada Revenue Agency. Application is made to the OMDC for a certificate of eligibility, which the production company files with the Canada Revenue Agency together with its tax return in order to claim the OFTTC. The amount of the credit, net of any Ontario taxes owing, will be paid to the qualifying corporation. If the qualifying corporation does not owe any taxes, the full amount will be paid out.

The Ontario Production Services Tax Credit (OPSTC) is a refundable tax credit based upon eligible Ontario labour and other production expenditures incurred by a qualifying corporation with respect to an eligible film or television production.
The OPSTC requirements are generally “harmonized” with the federal Film or Video Production Services Tax Credit administered by the Canadian Audio Visual Certification Office of the Department of Canadian Heritage (CAVCO) and Canada Revenue Agency (CRA). For information on the federal credit contact CAVCO at 1-888-433-2200 or CAVCO.

How Much Is The Tax Credit?
The OPSTC is calculated as 21.5% of all qualifying production expenditures incurred in Ontario. A qualifying corporation’s Ontario labour expenditures, including Ontario labour paid under an eligible service contract, must be at least 25% of the qualifying production expenditures claimed for taxation years that commence after April 23, 2015. The OPSTC can be combined with the federal Film or Video Production Services Tax Credit of 16% of qualified Canadian labour expenditures. There are no per-project or annual corporate tax credit limits.

Who Is Eligible?
A qualifying corporation is a Canadian or foreign-owned corporation which carries on a film or video production, or production services business, at a permanent establishment in Ontario, files an Ontario corporate tax return and owns the copyright in the eligible production, or contracts directly with the copyright owner to provide production services to an eligible production.

What Types of Production Are Eligible?
An eligible production must exceed a minimum production cost and must not be in an excluded genre. In addition, a production that receives an Ontario Film and Television Tax Credit (OFTTC) is not eligible for an OPSTC.
The production cost must exceed $1 million (Cdn.), except in the case of a series consisting of two or more episodes, or a pilot for such a series. In the case of a series or pilot, the cost for each episode which has a running time of less than thirty minutes must exceed $100,000 (Cdn.) and the cost for episodes with a longer running time must exceed $200,000 (Cdn.).

The production must not be in an excluded genre: news, current events or public affairs programming; a program that includes weather or market reports; talk shows; productions in the nature of a game, questionnaire or contest; a sports event or activity; a gala presentation or awards show; a production that solicits funds; reality television; pornography; advertising; or a production produced primarily for industrial, corporate or institutional purposes; nor must it be a production for which public financial support would be contrary to public policy.

What Expenditures Are Eligible?
Qualifying production expenditures are incurred in Ontario and include eligible wages, eligible service contracts and eligible tangible property expenditures, such as equipment, studio rentals and computer software.
Eligible production expenditures are expenditures paid to companies and partnerships which have a permanent establishment in Ontario and to Ontario-based individuals (individuals resident in Ontario at the end of the calendar year prior to the commencement of principal photography and at the time the payments were made).

The expenditures must also be reasonable in the circumstances, directly attributable to the production, and incurred for the stages of production after the final script stage to the end of postproduction. Expenditures must be incurred in the taxation year, paid in the taxation year or within 60 days after the end of the taxation year, and paid for services provided in Ontario.

How Is The Credit Administered?
The OPSTC is jointly administered by the Ontario Media Development Corporation (OMDC) – an agency of the Ministry of Tourism, Culture and Sport – and the Canada Revenue Agency. Application is made to OMDC for a certificate of eligibility, which the production company files with the Canada Revenue Agency together with its tax return in order to claim the OPSTC. The amount of the credit, net of any Ontario taxes owing, will be paid to the qualifying corporation. If the qualifying corporation does not owe any taxes, the full amount will be paid out.

The OCASE Tax Credit is a refundable tax credit based on eligible Ontario labour expenditures incurred by a qualifying corporation during a taxation year with respect to eligible computer animation and special effects activities. The OCASE Tax Credit may be claimed on eligible expenditures in addition to the Ontario Film and Television Tax Credit (OFTTC) or the Ontario Production Services Tax Credit(OPSTC).

How Much Is The Tax Credit?
The OCASE Tax Credit is calculated as 18% of the eligible Ontario labour expenditures incurred by a qualifying corporation with respect to eligible computer animation and special effects activities. There is no cap on eligible Ontario labour expenditures.

Who Is Eligible?
A qualifying corporation is a Canadian corporation that is Canadian or foreign-owned, has a permanent establishment in Ontario and files an Ontario corporate tax return. Qualifying corporations may include animation or visual effects houses, post-production houses and film and television production companies which perform eligible computer animation and special effects activities.

What Types of Production Are Eligible?
Eligible productions are productions created for commercial exploitation, which are not in an excluded genre, or for which financial support would be contrary to public policy. Where all eligible expenditures on the production are incurred after April 23, 2015, the production must also have received an OFTTC or OPSTC certificate to be eligible for the OCASE tax credit.

What Activities Are Eligible?
Eligible computer animation and special effects activities are those carried out in Ontario directly in support of the production of eligible animation or visual effects for use in eligible productions.

Eligible animation or visual effects means animation or visual effects created using digital technologies but does not include:

  • audio effects
  • in-camera effects
  • credit rolls
  • subtitles
  • animation or visual effects all or substantially all of which are created by editing activities, or
  • animation or visual effects for use in promotional material for the eligible production

Eligible computer animation and special effects activities include designing, modelling, rendering, lighting, painting, animating and compositing but do not include activities that are scientific research and experimental development.

What Expenditures Are Eligible?
Qualifying labour expenditures are
a) salaries and wages (i.e., amounts paid to employees) directly attributable to eligible activities carried on by the qualifying corporation, that are paid to Ontario residents (individuals resident in Ontario at the end of the previous calendar year) who report to a permanent establishment of the qualifying corporation in Ontario at which the eligible activities are carried out;
b) freelancers who are individuals, partnerships, or arm’s-length incorporated individuals (such as corporations).

The labour expenditures must be incurred in the taxation year for which they are being claimed and paid in the taxation year or within 60 days after the end of the taxation year.

How Is The Credit Administered?
The OCASE Tax Credit is jointly administered by the Ontario Media Development Corporation (OMDC) – an agency of the Ontario Ministry of Tourism, Culture and Sport – and the Canada Revenue Agency. Application is made to OMDC for a Certificate of Eligibility for the taxation year, which the qualifying corporation files with the Canada Revenue Agency together with its tax return in order to claim the OCASE Tax Credit. The amount of the credit, net of any Ontario taxes owing will be paid to the qualifying corporation. If the qualifying corporation does not owe any taxes the full amount will be paid out.

 

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