Ontario Enhances Digital Media Tax Credits for Large Game Developers

From Mediacaster Magazine

Ontario's Fall Economic Statement forecasts continued economic challenges, punctuated by multi-billion dollar deficits over the foreseeable future.  Yet specialized game developers who create eligible interactive digital media games in Ontario may have cause for celebration.
Through proposed enhancements to two key refundable tax credits, the government says it is helping to strengthen the competitiveness of the provincial entertainment and creative industries, seen as important components of the new knowledge-based economy.

The 2009 Budget proposed to significantly enhance the Ontario Interactive Digital Media Tax Credit is available to qualifying corporations for expenditures related to the creation, marketing and distribution of eligible interactive digital media products.  The government is also proposing to streamline support for large, specialized game developers and strengthen Ontario's competitiveness for investment in this sector.

The Ontario Production Services Tax Credit is a 25 per cent refundable tax credit for qualifying labour expenditures available to corporations for qualifying foreign and domestic film and television production services in Ontario.  This credit would be expanded to include additional qualifying production expenditures incurred in Ontario after June 30, 2009, including eligible service contracts as well as the purchase or rental of qualifying tangible properties, such as equipment and studios.

Industry analysts said the latest changes position Ontario well to become a centre of excellence for the development of digital media by allowing specialized game developers to claim the tax incentives annually.

Ontario's 2009 Economic Outlook and Fiscal Review enhanced the 35% Ontario Interactive Digital Media Tax Credit for large game developers, retroactive March 27, 2009, it describes

Effective March 27, 2009, certified game developers that incur at least $1 million of Ontario labour expenditures per year in the development of eligible interactive digital media games can claim a 35% Ontario Interactive Digital Media Tax Credit on Ontario salaries and wages. A certified game developer generally would have at least 80% of Ontario payroll or 90% of annual revenues attributable to interactive digital media game development.

This measure was announced in Ontario's 2009 Economic Outlook and Fiscal Review. It replaces a 2009 Ontario budget proposal that had extended the OIDMTC to digital media game developers that incur a minimum of $1 million of eligible labour expenditures over a 36-month period for fee-for-service work done in Ontario in respect of an eligible product.

Background
The OIDMTC is a refundable tax credit that is based on eligible Ontario labour expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation with respect to an interactive digital media product:
with a primary purpose of educating, informing or entertaining, and must achieve its primary purpose by presenting information in at least two of: text, sound and image; or that is developed under a fee-for-service arrangement.

The proposed OIDMTC rates, effective for qualifying expenditures incurred after March 26, 2009, are:
40% for all qualifying corporations that develop and market their own eligible products; and 35% for corporations that develop eligible products under a fee-for-service arrangement.

For more film, video and digital media incentives, see PricewaterhouseCoopers', "The Big Table of Film and Video Incentives" and "Big Table of Digital Media and Animation Incentives," at www.pwc.com/ca/bigtable.