Revenue Canada recently issued a series of questions and answers regarding the federal government’s tax credit programs that are available to the Canadian film industry.
Question 1: What tax credit programs are available to help the Canadian film industry?
Answer 1: The federal government offers two programs to help the film industry in Canada. They are the Canadian Film or Video Production Tax Credit ("FTC") and the Film or Video Production Services Tax Credit ("PSTC") programs.
Question 2: What is the purpose of the FTC program?
Answer 2: The primary objective of the tax credit is to encourage Canadian programming and to stimulate the development of an active domestic production sector. The FTC program gives a tax credit to all qualified producers of eligible productions, and eliminates the need for complex tax shelter schemes that reduce financial help for producers. Canadian control requirements ensure that the incentive is available only to Canadian controlled companies.
The FTC program gives a refundable tax credit of 25% of qualified labour expenditures incurred, after 1994, by a qualified corporation for the production of a Canadian film or video production. The maximum credit available is limited to 12% of production costs net of assistance. The qualified labour expenditures cannot be more than 48% of production costs net of any governmental or non-governmental assistance. You cannot claim the FTC for a production that gets a benefit under the PSTC program.
Question 3: What is the purpose of the PSTC?
Answer 3: The PSTC program was announced by the Minister of National Revenue and the Minister of Finance in a news release dated July 30, 1997. The legislation received royal assent in June 1998. The purpose of the PSTC is to give help to film and video productions produced in Canada where Canadian labour is used. This program complements the FTC program since it is open to both Canadian and foreign-owned companies. The intention of this program is to make Canada a more attractive place for film production and stimulate job growth in the Canadian film industry.
The PSTC gives a refundable tax credit of 11% of qualified Canadian labour expenditures incurred for an accredited production after October 1997. You cannot claim the PSTC for a production that also gets a benefit under the FTC program.
Question 4: Who administers these programs?
Answer 4: The film tax credit programs are co-administered by Canadian Heritage through the Canadian Audio-Visual Certification Office ("CAVCO") and Revenue Canada.
For the FTC program, CAVCO is responsible for issuing a Canadian film or video production certificate, which gives a claimant an estimate of the qualified labour expenditures for the FTC. For the PSTC program, CAVCO is responsible for issuing the accredited film or video production certificate for an accredited production.
Revenue Canada is responsible for reviewing film tax credit claims, assessing corporate income tax returns, and issuing timely refund cheques for the tax credit programs.
CAVCO and Revenue Canada jointly promote the tax-based incentives and help claimants as necessary.
Question 5: How does a corporation claim an FTC or a PSTC?
Answer 5: The first step to get a tax credit under either program is to get the appropriate certificate from CAVCO. For the FTC program, you have to get a Canadian film or video production certificate. For the PSTC program, you have to get an accreditation certificate for a film or video production.
The next step is to attach the appropriate certificate, or a copy, and Form T1131 "Claiming a Canadian Film or Video Production Tax Credit", or Form T1177 "Claiming a Film or Video Production Services Tax Credit" to the front of a completed T2 Corporation Income Tax Return. This will help Revenue Canada to quickly identify a claim.
Send the return and attachments to your Revenue Canada tax centre. On receipt, the tax centre will send your claim to your local tax services office. The tax services office will determine if a full review of your claim is necessary. Revenue Canada has specially-trained staff familiar with the film industry to review claims.
Question 6: How long does it take to get a refund?
Answer 6: Revenue Canada tries to issue any applicable refund cheque within 60 days for a complete claim that does not need a review, and to process a claim that needs review in 120 days.
Question 7: Did the 1999 federal budget propose income tax changes to either the FTC or the PSTC?
Answer 7: The 1999 federal budget did not have any impact on either of the tax credits. However, the film industry and Revenue Canada are consulting on ways to streamline and improve the film tax credit programs. The goal is to ensure a more collaborative approach to the administration of these incentives in support of the Canadian film industry.
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