Canada: Ontario Production Services Tax Credit

Tax credits are crucial to the film and television industry, and Ontario has been a particularly attractive location for productions since the beginning of its film and television tax credit program. In 201415, Ontario extended about $335 million in tax credits for film and television production services and computer animation and special effects. Ontario also makes grants through such agencies as the Ontario Media Development Corporation and the Northern Ontario Heritage Fund Corporation. The Ontario Superior Court decision in Rookie Blue Two Inc. (2015 ONSC 1618), which was unfavourable to the province, resulted in a retroactive change to the Ontario production services tax credit (OPSTC).

The court in Rookie Blue focused on the meaning of the word "from" in the requirement for the OPSTC that appears in section 92(5.3)(d) of the Ontario Taxation Act, 2007 (OTA). That rule had never been the subject of judicial consideration, and there were no comments on it in the provincial Hansard or in a budget before its enactment. The OPSTC was then a 25 percent refundable tax credit available to a qualifying corporation for an eligible expenditure incurred in respect of a film and television production. A qualifying corporation generally had an Ontario PE and carried out production activities in Ontario.

Rookie Blue Two Inc. was the production company for season 2 of the popular Canadian television show Rookie Blue. The company sought the OPSTC for scriptwriting expenditures: OTA section 92(5.3)(d) allows an OPSTC for the costs incurred for services "for the stages of production, from the final script stage to the end of the postproduction stage." Were the scriptwriting expenses incurred within this period? The parties agreed that the second (white) draft for a script is usually completed within a week of the commencement of filming of the related episode. However, the minister argued that a producer cannot film the episode—that is, cannot commence production—until the script is in place; consequently, expenses relating to the white draft of the script cannot be claimed under OTA section 92(5.3)(d).

The taxpayer argued that the phrase "from the final script stage" includes the creation of the entire final script, and thus the related expenses fall within the period eligible for the OPSTC. The court agreed that the word "from" was inclusive and thus encompassed the period after filming commenced and during which the white script was finalized; the white script is not finalized until after production starts and in fact "is rewritten, revised and amended throughout the shooting process."

The phrase "final script stage" is not an industry term. Moreover, the court said:

Earlier stages of writing that are part of the development or preproduction stages are clearly excluded from the tax credit calculation. In considering the legislative purpose or intention to facilitate Ontario production of television shows, however, it plainly promotes the statutory purpose to allow producers to include in their cost base for the tax credit, the portion of the writing costs that is incurred at, with, or as part of other production costs. If the Legislature had wished to exclude all writing costs from the tax credit, it could have done so by simple words. It either could have added a subsection to say so expressly, or it could have just changed the word "from" to "after"—a word it used in the very next subsection. Why would the Legislature use the phrase "final script stage" except to subdivide script writing into preproduction and production stages? If it did not find that a relevant distinction for the purposes of the tax credit, why refer to script writing at all in clause 92(5.3)(d)?

The 2015 Ontario budget, which was released in the month following the decision in Rookie Blue, is clearly designed to prevent other productions from claiming OPSTCs for writing expenses related to a script's white draft. The budget proposes "that the OPSTC be clarified to ensure that only expenditures incurred after the final script stage to the end of the postproduction stage [are] eligible for the [OPSTC]." The amendment will apply retroactively to expenditures incurred after 2009, when rates were increased from earlier levels. It is hoped that the legislation will also clarify the meaning of "final script stage."

The budget lowers the OPSTC rate to 21.5 percent as of April 23, 2015; the new rate is said to reflect the competitive Canadian dollar. Table 4.1 in the budget shows a projected $10 million saving in 201516 ($25 million in 201617 and 201718). The budget also provides that "a qualifying corporation's Ontario labour expenditures (including labour under a service contract) [will] have to amount to at least 25 per cent of total expenditures." Moreover, a qualifying corporation's expenditures incurred under a contract with a nonarm'slength party are now limited to amounts that would have been OPSTCeligible if the corporation had incurred the expenditures directly.

Originally published in Canadian Tax Highlights, Volume 23, Number 5, May 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions