Canada has truly become one of the major centres for film and television production in the world. This attraction to Canada has been fueled by significant contributions to project budget financing primarily through three factors:

  1. The value of the Canadian dollar relative to the U.S. dollar;
  2. The development and creation of no less than sixteen different federal and provincial tax credit and economic incentive programs; and
  3. Access to other investment dollars through treaty arrangements and investment partnerships.

With an average production in Canada expecting financing assistance from a combination of these factors, it is easy to see why some production companies have found the whole aspect a bit confusing. Adding to the confusion is the willingness of several financial institutions in Canada and abroad to lend funds against the prospect of future incentive payments and the additional reports and information that they may require.

This summary is meant to serve as an overview of item (b) above, and provide a producer with a brief understanding of the various incentives that exist across Canada without dwelling on the inherent complexities that are sure to arise when one attempts to review legislation put together by ten different governments, each attempting to make their legislation better defined.

For further information on film tax credits and financing films in Canada, contact:

Warren W. Nimchuk E-mail: warren.w.nimchuk@ca.pwcglobal.com
Rick M. Griffiths E-mail: rick.m.griffiths@ca.pwcglobal.com
from the Media and Entertainment Group of PricewaterhouseCoopers LLP.

THE CANADIAN FILM OR VIDEO PRODUCTION TAX CREDIT

This federal credit was introduced effective January 1, 1995, and is delivered through the format of a refundable income tax credit. Accordingly, it has two delivery agencies, Revenue Canada and the Minister of Canadian Heritage through the office of the Canadian Audio Visual Certification Office ("CAVCO"). The two agencies work in tandem; CAVCO certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of credit is 25% of eligible labour, to a maximum of 12% of total production costs. Total production costs are reduced by provincial tax credits, and any other form of grant or non-repayable assistance.

Eligibility

The credit is available only to Canadian controlled taxable corporations whose primary business is the production of Canadian films and videos.

The film and video projects must have a minimum of Canadian content as established through a point test by CAVCO. At least 75% of the production costs must be paid to Canadian individuals or companies, and at least 75% of the post-production must be done in Canada

The corporation must own the copyright for at least 25 years, and the film or video must be broadcast in Canada within two years of completion. Since entitlement is based on copyright ownership, a corporation may only claim a credit equal to the proportional interest in the copyright. Equity ownership by anyone other than certain prescribed persons and persons primarily in the business of production of Canadian films and videos will disqualify any entitlement to credits by all copyright owners.

Applicable Fees

The fee for this credit is the greater of 0.0576% of the production costs and $200. An additional $200 is payable if a pre-application (referred to as Part A) approval is requested.

THE CANADIAN FILM OR VIDEO PRODUCTION SERVICES TAX CREDIT

This federal credit was introduced effective November 1, 1997, and is delivered through the format of a refundable income tax credit. It has the same two delivery agencies as the Canadian Film or Video Production Tax Credit, Revenue Canada and CAVCO. The two agencies again work in tandem; CAVCO certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of credit is 11% of the Canadian labour expenditure with no maximum limit.

Canadian labour expenditures are reduced by any provincial tax credits, or any other form of grant or non-repayable assistance.

Eligibility

The credit is available only to taxable corporations with a permanent establishment in Canada whose primary business in Canada is the production of films and videos.

The corporation must own the copyright while the production occurs in Canada, or must have contracted directly with the copyright holder for the provision of production services where the copyright owner themselves would not qualify for the credit.

The production cost for a single production must be at least Cdn $ 1 million. The production cost per episode for a pilot or series with a running time of less than 30 minutes must be at least Cdn $100,000. The production cost per episode for a pilot or series with a running time of 30 minutes or more must be at least Cdn $200,000.

Applicable Fees

The fee for this credit is $5,000, with a rebate available where the aggregate credit related to a production is less than $25,000. The minimum fee after rebate is $1,000.

BRITISH COLUMBIA FILM INCENTIVE

This British Columbia provincial tax credit was introduced effective April 1, 1998, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the British Columbia Ministry of Finance and Corporate Relations through the office of British Columbia Film. British Columbia Film certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of the basic credit is 20% of qualified British Columbia labour, to a maximum of 9.6% of total production costs.

A regional credit of 12.5% of qualified British Columbia labour is available in addition to the basic credit where 85% of the principal photography occurs and the production office is located outside of the Vancouver area.

A training credit of 3% of qualified British Columbia labour to a maximum of 30% of the amount paid to trainees is available in addition to the basic credit.

Eligibility

The credits are available only to British Columbia controlled taxable Canadian corporations whose primary business is the production of Canadian films and videos and which have a permanent establishment in British Columbia.

The film and video projects must have a minimum of Canadian content as established through a point test by CAVCO. At least 75% of the production costs must be paid to British Columbia individuals or companies, and at least 75% of the post-production must be done in British Columbia.

The corporation must own at least 50% of the copyright for at least 25 years, and the film or video must be broadcast in Canada within two years of completion. Since entitlement is based on copyright ownership, a corporation may only claim a credit equal to the proportional interest in the copyright. Equity ownership by anyone other than certain prescribed persons and persons primarily in the business of production of Canadian films and videos will disqualify any entitlement to credits by all copyright owners.

Applicable Fees

The fee for this credit is the greater of 0.05% of the production costs and $200. An additional $200 is payable if a pre-application (referred to as Part A) approval is requested.

BRITISH COLUMBIA PRODUCTION SERVICES TAX CREDIT

This British Columbia provincial tax credit was introduced effective June 1, 1998, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the British Columbia Ministry of Finance and Corporate Relations through the office of British Columbia Film. British Columbia Film certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of credit is 11% of the qualified British Columbia labour expenditure with no maximum limit. British Columbia labour must have been resident in British Columbia in the year prior to the year of production.

Eligibility

The credit is available only to taxable corporations with a permanent establishment in British Columbia whose primary business in Canada is the production of films and videos.

The corporation must own the copyright while the production occurs in British Columbia, or must have contracted directly with the copyright holder for the provision of production services where the copyright owner themselves would not qualify for the credit.

The production cost for a single production must be at least Cdn $ 1 million. The production cost per episode for a pilot or series with a running time of less than 30 minutes must be at least Cdn $100,000. The production cost per episode for a pilot or series with a running time of 30 minutes or more must be at least Cdn $200,000.

Applicable Fees

The fee for this credit is $5,000, with a rebate available where the aggregate credit related to a production is less than $25,000. The minimum fee after rebate is $1,000.

ALBERTA FILM DEVELOPMENT PROGRAM

This Alberta grant program was introduced effective October 8, 1998, and is delivered through the format of a non-recoupable grant. The delivery agency is the Alberta Foundation for the Arts ("Foundation"). The Foundation receives applications and is the final authority on whether a grant is to be provided. Funds are issued directly by the Foundation upon completion of the project and receipt of a project cost report.

Amount of Grant

The amount of grant is 20% of the production costs spent in Alberta, to a maximum of 10% of the total production costs. The maximum project grant is $500,000. An eligible corporation may receive grants for several projects up to a cumulative total of $500,000 in one fiscal year. A dramatic series applicant may make two applications for the series in one fiscal year, for a total of $1,000,000. The grant maximum restrictions are not applied to related or associated corporations as a group.

Eligibility

The grant is available only to Alberta controlled Canadian corporations with a permanent establishment in Alberta whose primary business in Canada is the production of films and videos.

A minimum of 75% of all corporation salaries and wages must be paid in Alberta to qualified Alberta residents. A qualified Alberta resident must have been resident in Alberta in the year prior to the year of production.

The project must be supported by a Canadian broadcast licence or distribution agreement. While there are no specific copyright provisions at present, it is understood that copyright must be owned until meeting the distribution requirements.

Applicable Fees

At present there is no fee for application or receipt of this grant.

SASKATCHEWAN FILM EMPLOYMENT TAX CREDIT

This Saskatchewan tax credit was introduced effective January 1, 1998, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the Saskatchewan Minister of Finance through the office of Saskfilm and Video Development Corporation ("Saskfilm"). Saskfilm certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of basic credit is 35% of the eligible Saskatchewan labour expenditures, to a maximum of 17.5% of the total production costs. Eligible Saskatchewan labour must be resident in Saskatchewan on the last day in the year in which the production expense occurred. In some cases the residency requirement may be waived.

A regional credit of 5% of the total Saskatchewan production cost is available in addition to the basic credit where an eligible corporation has its fixed base of operations in Saskatchewan and more than 40 kilometers from Saskatoon or Regina. 

Eligibility

The credit is available only to Saskatchewan controlled Canadian taxable corporations with a permanent establishment in Saskatchewan whose primary business in Canada is the production of films and videos.

The corporation must pay a minimum of 25% of its wages and salaries to Saskatchewan residents.

There is no requirement for the corporation to own copyright.

Applicable Fees

At present there is no fee for application or receipt of this tax credit.

MANITOBA FILM AND VIDEO PRODUCTION TAX CREDIT

This Manitoba tax credit was introduced effective January 1, 1997, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the Manitoba Minister of Finance through the office of Manitoba Film & Sound Recording Development Corporation ("MF&S"). MF&S certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of the credit is 35% of the eligible Manitoba labour expenditures, to a maximum of 22.5% of the total production costs. Eligible Manitoba labour must be resident in Manitoba on the last day in the year in which the production expense occurred. In some cases the residency requirement may be waived.

Eligibility

The credit is available only to Canadian taxable corporations with a permanent establishment in Manitoba and with assets of less than $50 million, whose primary business in Canada is the production of films and videos.

The corporation must pay a minimum of 25% of its wages and salaries to Manitoba residents for work done in Manitoba, except in the case of documentaries for which there is no resident labour requirement.

There is no requirement for the corporation to own copyright.

Applicable Fees

At present there is no fee for application or receipt of this tax credit.

ONTARIO FILM AND TELEVISION TAX CREDIT

This Ontario tax credit was introduced effective June 30, 1996, and is delivered through the format of a refundable income tax credit. It has gone through several levels of enhancement, most recently in the May 4, 1999 Ontario budget proposals. It has two delivery agencies, the Ontario Ministry of Finance and the Ontario Film Development Corporation ("OFDC"). OFDC certifies that the applicant is eligible to apply for the credit, and the Ontario Ministry of Finance processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of this credit is 20% of qualified Ontario labour, to a maximum of 9.6% of total production costs. An enhanced rate of 30% is available on the first $240,000 of qualified Ontario labour for first-time producers. Ontario labour must have been resident in Ontario in the year prior to the year of production, and prior to November 1, 1997 certain annual maximum limitations existed for the amount of credit that could be claimed by an associated group of corporations.

Eligibility

The credits are available only to taxable Canadian corporations whose primary business is the production of Canadian films and videos and which have a permanent establishment in Ontario. As well, the individual producer of the production must have been resident in Ontario for two years prior to the year of production.

The film and video projects must have a minimum of Canadian content as established through a point test by CAVCO. A proposal in the May 4, 1999 provincial budget would see the point test reduced to a score of 6 from the present requirement of 8 effective for productions starting their principal photography after May 4, 1999. At least 75% of the production costs must be paid to Ontario individuals or companies, and at least 75% of the post-production must be done in Ontario.

The project must be supported by a Canadian broadcast licence for broadcast in Ontario or distribution agreement with an Ontario-based distributor. While there are no specific copyright provisions, it is understood that copyright must be owned until meeting the distribution requirements.

Applicable Fees

The fee for this credit is the greater of 0.05% of the production costs and $100, to a maximum of $3,000. An additional $100 is payable if an interim estimate letter of approval is requested.

ONTARIO PRODUCTION SERVICES TAX CREDIT

This Ontario tax credit was introduced effective November 1, 1997, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, the Ontario Ministry of Finance and the Ontario Film Development Corporation ("OFDC"). OFDC certifies that the applicant is eligible to apply for the credit, and the Ontario Ministry of Finance processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of credit is 11% of the qualified Ontario labour expenditure with no maximum limit. Ontario labour must have been resident in Ontario in the year prior to the year of production.

Eligibility

The credit is available only to taxable corporations with a permanent establishment in Ontario whose primary business in Canada is the production of films and videos.

The corporation must own the copyright while the production occurs in Ontario, or must have contracted directly with the copyright holder for the provision of production services where the copyright owner themselves would not qualify for the credit.

The production cost for a single production must be at least Cdn $ 1 million. The production cost per episode for a pilot or series with a running time of less than 30 minutes must be at least Cdn $100,000. The production cost per episode for a pilot or series with a running time of 30 minutes or more must be at least Cdn $200,000.

Applicable Fees

The fee for this credit is the greater of 0.05% of the production costs related to the

production in Ontario and $100, to a maximum of $5,000. An additional $100 is payable if an interim estimate letter of approval is requested.

ONTARIO COMPUTER ANIMATION AND SPECIAL EFFECTS TAX CREDIT

This Ontario tax credit was introduced effective June 30, 1997, and is delivered through the format of a refundable income tax credit. It has also gone through various levels of enhancement, most recently in the May 4, 1999 Ontario budget proposals. It has two delivery agencies, the Ontario Ministry of Finance and the Ontario Film Development Corporation ("OFDC"). OFDC certifies that the applicant is eligible to apply for the credit, and the Ontario Ministry of Finance processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of this credit is 20% of qualified Ontario labour, to a maximum of 9.6% of the net cost of eligible computer animation and special effects activities. Ontario labour must have been resident in Ontario in the year prior to the year of production, and have been paid salary or wages directly attributable to eligible activities. Effective for expenditures after May 4, 1999, the proposals in the recent provincial budget would now include 50% of amounts paid to non-employees for eligible services.

Eligibility

The credits are available only to taxable Canadian corporations which perform eligible computer animation and special effects activities for eligible productions and which have a permanent establishment in Ontario.

There is no requirement for the corporation to own copyright.

This credit may be claimed in conjunction with either the Ontario Film and Television Tax Credit or the Ontario Production Services Tax Credit.

Applicable Fees

The fee for this credit is the greater of 0.05% of the prescribed costs of the eligible computer animation and special effects activities and $100, to a maximum of $5,000. An additional $100 is payable if an interim estimate letter of approval is requested.

QUEBEC FILM AND TELEVISION PRODUCTION TAX CREDIT

This Quebec tax credit was introduced effective December 18, 1990, and is delivered through the format of a refundable income tax credit. It was the first film tax credit introduced in Canada, and remains still today one of the most beneficial. It has two delivery agencies, the Quebec Ministère des Finances and the Société de développement des entreprises culturelles ("SODEC"). SODEC certifies that the applicant is eligible to apply for the credit, and the Quebec Ministère des Finances processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of this credit is 33 1/3% of qualified Quebec labour, to a maximum of 15% of total production costs. Quebec labour must have been resident in Quebec in the year prior to the year of production. A production or series maximum limitation of $2.5 million of tax credit exists. The credit increases to 45% of qualified Quebec labour, to a maximum of 20.25% of total production costs where a French language content criteria is met.

Eligibility

The credits are available only to taxable Canadian corporations whose primary business is the production of Canadian films and videos and which have a permanent establishment in Quebec. As well, the individual producer of the production must have been resident in Quebec for two years prior to the year of production.

The film and video projects must have a minimum of Canadian content as established through a point test essentially the same as the one used by CAVCO. Certain key production roles must be filled by individuals who have been resident in Quebec for at least two years prior to the year of production. At least 75% of the production costs must be paid to Quebec individuals or companies, and at least 75% of the post-production must be done in Quebec.

The project must be supported by a Canadian broadcast licence for broadcast in Quebec or distribution agreement ensuring Quebec distribution. While there are no specific copyright provisions, it is understood that copyright must be owned until meeting the distribution requirements.

Applicable Fees

The fee for this credit is $1.50 per $1,000 of Quebec production costs.

QUEBEC PRODUCTION SERVICES TAX CREDIT

This Quebec tax credit was introduced effective February 12, 1998, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, the Quebec Ministère des Finances and the Société de développement des entreprises culturelles ("SODEC"). SODEC certifies that the applicant is eligible to apply for the credit, and the Quebec Ministère des Finances processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of credit is 11% of the qualified Quebec labour expenditure with no maximum limit. Quebec labour must have been resident in Quebec in the year prior to the year of production.

Eligibility

The credit is available only to taxable corporations with a permanent establishment in Quebec whose primary business in Canada is the production of films and videos.

The corporation must own the copyright while the production occurs in Quebec, or must have contracted directly with the copyright holder for the provision of production services where the copyright owner themselves would not qualify for the credit.

The production cost for a single production must be at least Cdn $ 1 million. The production cost per episode for a pilot or series with a running time of less than 30 minutes must be at least Cdn $100,000. The production cost per episode for a pilot or series with a running time of 30 minutes or more must be at least Cdn $200,000.

Applicable Fees

The fee for this credit is $3.00 per $1,000 of qualified labour on the first $1.5 million of labour, and $1.50 per $1,000 on amounts in excess of $1.5 million. The minimum fee is set at $350.

QUEBEC COMPUTER ANIMATION AND SPECIAL EFFECTS TAX CREDIT

This Quebec tax credit was introduced effective March 26, 1997, and is delivered through the format of a refundable income tax credit. It has also gone through various levels of enhancement, most recently in the March 31, 1998 Quebec budget. It has two delivery agencies, the Quebec Ministère des Finances and the Société de développement des entreprises culturelles ("SODEC"). SODEC certifies that the applicant is eligible to apply for the credit, and the Quebec Ministère des Finances processes the provincial income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of this credit is 11 2/3% of qualified Quebec labour for claims relating to the Quebec Film and Television Production Tax Credit, and 20% of qualified Quebec labour for claims related to the Quebec Production Services Tax Credit. Quebec labour must have been resident in Quebec in the year prior to the year of production, and have been paid salary or wages directly attributable to eligible activities.

Eligibility

The credits are available only to taxable Canadian corporations which perform eligible computer animation and special effects activities for eligible productions and which have a permanent establishment in Quebec.

This credit is claimed in conjunction with either the Quebec Film and Television Production Tax Credit or the Quebec Production Services Tax Credit.

Applicable Fees

There are no additional fees for this tax credit.

NOVA SCOTIA FILM INDUSTRY TAX CREDIT

This Nova Scotia tax credit was introduced effective January 1, 1995, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the Nova Scotia Minister of Finance through the office of Nova Scotia Film Development Corporation ("NFSD"). NFSD certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of the credit is 32.5% of the eligible Nova Scotia labour expenditures, to a maximum of 16.25% of the total production costs. Eligible Nova Scotia labour must be resident in Nova Scotia on the last day in the year prior to the year in which the production expense occurred.

Eligibility

The credit is available only to Canadian taxable corporations with a permanent establishment in Nova Scotia and with assets of less than $25 million, whose primary business in Canada is the production of films and videos.

The corporation must pay a minimum of 25% of its wages and salaries to Nova Scotia residents for work done in Nova Scotia.

There is no requirement for the corporation to own copyright.

Applicable Fees

At present there is no fee for application or receipt of this tax credit.

NEW BRUNSWICK FILM TAX CREDIT

This New Brunswick tax credit was introduced effective June 13, 1996, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the New Brunswick Minister of Finance through the office of Film New Brunswick ("FNB"). FNB certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of the credit is 30% of the eligible New Brunswick labour expenditures, to a maximum of 15% of the total production costs. The amount of credit is 40% of the eligible New Brunswick labour expenditures, to a maximum of 20% of the total production costs for first time productions. An additional credit of 35% is paid on the amount by which a current year’s eligible labour expenditures exceeds the expenditures of the prior year, to a maximum of 17.5% of the total production costs. Eligible New Brunswick labour must be resident in New Brunswick on the last day in the year prior to the year in which the production expense occurred. In some cases the residency requirement may be waived.

There is an annual tax credit maximum of $1 million per project, and $2 million per associated group of corporations.

Eligibility

The credit is available only to Canadian taxable corporations with a permanent establishment in New Brunswick and with assets of less than $25 million, whose primary business in Canada is the production of films and videos.

The corporation must pay a minimum of 25% of its wages and salaries to New Brunswick residents for work done in New Brunswick.

There is no requirement for the corporation to own copyright.

Applicable Fees

At present there is no fee for application or receipt of this tax credit.

NEWFOUNDLAND / LABRADOR FILM INDUSTRY TAX CREDIT

This Newfoundland / Labrador tax credit was introduced effective January 13, 1999, and is delivered through the format of a refundable income tax credit. It has two delivery agencies, Revenue Canada and the Newfoundland Minister of Finance through the office of Newfoundland and Labrador Film Development Corporation ("NLFDC"). NLFDC certifies that the applicant is eligible to apply for the credit, and Revenue Canada processes the income tax return, performs any verification deemed necessary, and then processes a payment for the refund.

Amount of Credit

The amount of the credit is 40% of the eligible Newfoundland / Labrador labour expenditures, to a maximum of 25% of the total production costs. Eligible Newfoundland / Labrador labour must be resident in Newfoundland / Labrador on the last day in the year in which the production expense occurred. In some cases the residency requirement may be waived.

There is an annual tax credit maximum of $1 million per project, and $2 million per associated group of corporations.

Eligibility

The credit is available only to Canadian taxable corporations with a permanent establishment in Newfoundland / Labrador and with assets of less than $25 million, whose primary business in Canada is the production of films and videos.

The corporation must pay a minimum of 25% of its wages and salaries to Newfoundland / Labrador residents for work done in Newfoundland / Labrador.

There is no requirement for the corporation to own copyright.

Applicable Fees

At present there is no fee for application or receipt of this tax credit.

The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.

While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor.

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization.