British Columbia released a Budget on March 2, 2010, which
introduced several measures to maintain and enhance B.C.'s
competitiveness in the film and digital media sectors. Other
jurisdictions have recently implemented incentives targeting these
same industries. For example, in 2009, both Ontario and Quebec
augmented their Production Services Tax Credits by expanding the
base upon which the credits are calculated. B.C. has responded by
enhancing existing tax credits and introducing a new tax credit
directed at digital media.
The video games industry and service productions, particularly
with respect to animation and visual effects laden movies, will
receive the largest benefit from these changes.
BC Interactive Digital Media Tax Credit
Budget 2010 introduces a new BC Interactive Digital Media tax
credit in the amount of 17.5% of qualifying B.C. labour used to
develop qualifying interactive digital media projects. It is
available for projects beginning after August 2010 and is
specifically directed at products that educate, inform or entertain
an individual, and thus is of particular interest to the video game
Production Services Tax Credit
Budget 2010 increases the B.C. Production Services Tax Credit
rate to 33% from 25% of eligible labour expenditures, thereby
increasing the tax credit percentage amount rather than expanding
the base beyond labour. It is available to production companies
with permanent establishments in B.C., for productions with
qualifying principal photography beginning after February 2010.
Additional regional, distant location regional, training and
digital animation and visual effects tax credits continue to be
available in certain circumstances.
Film Incentive BC Tax Credit
The Film Incentive BC tax credit (often referred to as the
indigenous tax credit) is a 35% tax credit that is available to
qualifying Canadian-controlled production companies with a
permanent establishment in B.C. Budget 2010 increases the cap for
labour expenditures from 48% to 60% of total production costs,
which matches the federal Canadian Film or Video Production Tax
Credit cap. Again, principal photography must begin after February
Digital Animation or Visual Effects ("DAVE") Tax
The DAVE tax credit provides refundable tax credits for
qualifying productions in respect of digital animation or visual
effects activities. The DAVE tax credit operates in addition to the
Production Services Tax Credit and the Film Incentive BC tax
credit. Budget 2010 increases the DAVE tax credit from 15% to
17.5%, for productions with principal photography beginning after
February 28, 2010.
In spite of the fact that the rate applicable to the Film
Incentive BC tax credit is not changing, some indigenous Canadian
films which were buttressing up against the labour expenditure cap
will benefit from these changes. It is possible that for some film
and television productions the B.C. Production Services Tax Credit
could exceed the Film Incentive BC tax credit. In this case,
producers can claim on a hybrid basis, claiming the
"indigenous" credit federally and the
"services" credit in B.C.
The Budget 2010 changes, which were initially announced in a
Ministry of Finance news release on February 3, 2010, have already
been welcomed by the film and digital media industries, and will
help B.C. to continue to remain competitive internationally in both
the traditional film and television production and the emerging
digital media sectors.
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