Ontario Creates and the Canada Revenue Agency (CRA) – Ontario Interactive Digital Media Tax Credit
Description:
The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit based on eligible Ontario labor expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation with respect to interactive digital media products.
Comments on Funding:
Funding on eligible Ontario labor expenditures and eligible marketing and distribution expenses incurred by qualifying corporations that develop and market their own products (known as “non-specified products”) is 40% tax credit.
Funding on eligible Ontario labor expenditures for products developed under a fee-for-service arrangement (known as “specified products”) is 35% tax credit.
Funding on eligible labour expenditures for qualifying digital game corporations and specialized digital game corporations is 35% tax credit. Eligible marketing and distribution expenses are capped at $100,000 per non-specified product.
There is no limit on the amount of eligible Ontario labour expenditures which may qualify and there is no per-project or annual corporate limits on the amount of the OIDMTC which may be claimed.
Eligibility:
The applicant must:
Corporations that are prescribed labour-sponsored venture capital corporations under the regulations made under the Income Tax Act (Canada) and corporations that are exempt from tax or are controlled directly or indirectly by a corporation exempt from tax are not eligible for the OIDMTC.
Additional eligibility criteria for qualifying digital game corporations:
Specialized digital game corporations are entitled to file an annual OIDMTC application and would not be required to contract with an arm’s length purchaser and do not have to meet the new 80/25 rule.
Corporations that are prescribed labour-sponsored venture capital corporations under the regulations made under the Income Tax Act (Canada) and corporations that are exempt from tax or are controlled directly or indirectly by a corporation exempt from tax are not eligible for the OIDMTC.
Applications Steps:
The applicant must:
Fees:
- The Administration Fee is calculated as 0.15% of the total final Eligible Expenditures. The minimum Administration Fee is $1,000 and the maximum is $10,000 per application.
- There is an additional filing fee of $100 for non-specified products that are only making a marketing and distribution claim for an eligible product that was previously certified, if the application for the marketing and distribution claim is received more than 18 months from the subsequent year-end following the year in which the eligible product was completed.
- There is a fee of $100 for amended Certificates.
Documentation Needed:
To claim the credit, the following documentation is needed:
OIDMTC document checklist:
- OIDMTC Application Form.
- Administration Fee and other fees if applicable.
- Incorporation documents for your company, including amendments.
- Corporate chart for Qualifying Corporation. Please complete and sign the Corporate Schedule for the applicant company for the fiscal year of the application with all the information requested on the form. If applying for an OIDMTC for non-specified and specified products, please provide a corporate chart for all associated companies (e.g. chart or schedule indicating the relationship between the applicant corporation and all associated corporations, including percentage of share ownership).
- Consolidated annual financial statements of your company for the current tax year.
- Chain of title documentation for each interactive digital media product included in the application (i.e. documentation of ownership rights to the product, for example, licensing agreements, rights agreements, domain name registration, co-production agreements, distribution agreements, where applicable).
For Convergent Websites based on film, TV or internet productions you must provide a copy of the IP license agreement with the entity (TV or Film producer) that owns the copyright in the eligible Film, TV or Internet production that the website is based on. The agreement should indicate that the rights to create the website using these copyrighted IP materials such as characters, story elements etc. have been granted to the applicant. For specified products, you must provide a fee-for-service agreement with the purchaser corporation. Documentation should clearly indicate ownership rights to the completed product.
- Description of product development: Design and technical specification documentation, where applicable, including a flow chart, functional design, a description of the user experience, storyboard, a list of technical requirements and specifications or script.
- Complete, detailed production schedule and timeline showing who did what and when (e.g. Gantt chart).
- Business and Marketing Plan including a description of the target audience/market and revenue model. Where possible, please include letters and or agreements that confirm interest and proposed terms from third-party distributors or equivalent. (Required for each interactive digital media product included in the application.)
- Proof of Revenue Generating Stream (required for all non-specified and specified products), including: copies of agreements with third-party digital distributors, publishers, advertising agencies, and digital retailers etc. that outline the terms of sale or license to arm’s length parties; any additional documentation to prove that the product has an eligible revenue generating stream.
If your product is a convergent website based on a film, TV or internet production please provide the license agreement with a TV broadcaster granting access to license the website. (see item 6) Ontario Creates may also request a copy of your General Ledger Revenue Accounts, or Sales Reports, that relate to products in your OIDMTC claim.
- List of names and roles (with brief description) of all individuals and companies working on the product(s) paid or unpaid. This list must also include unclaimed and ineligible individuals and companies working on the product(s). Please include addresses. You must use the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website.
- List of names and addresses of individuals who are not employees of your company that worked on product. You must use the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website. See section “Remuneration Addresses”.
- Financing plan/sources of financing for the interactive digital media product (required for each interactive digital media product included in the application).
- Financing contracts, if available (for all sources of financing for each interactive digital media product included in the application). Include copies of financing documents for government assistance/grants.
- For each product included in the application you must provide a copy of the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website.
- To expedite review of the 80/25 Rule please provide the following for each product claimed:
- For each Non-Specified product included in the application, you must use the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website which includes a schedule of actual and/or projected eligible Marketing and Distribution Expenses. The schedules should make a clear distinction between, and provide subtotals for marketing and distribution expenditures as they relate to specific eligible non-specified products.
- Please provide a copy of each completed interactive digital product or access to the version of the product as it existed when it was completed (including websites). Product should be shelf-ready or exploitable. The onus is on the applicant to provide an adequate copy of the completed product for Ontario Creates to review. Ontario Creates needs to review the version of the product being claimed, not a subsequent or earlier version of that product.
- A description of the product is required, including a description of how the product is accessed by the end user.
- If the product’s primary purpose is to educate child users under the age of 12, documentation must be provided to demonstrate this. Ontario Creates will review a copy of the product, development documentation, financing documentation and marketing materials, to make our assessment of the product’s primary purpose.
Please note: affidavits, or attestations will not suffice as evidence of eligibility criteria for the OIDMTC. All documentation should be contemporaneous with the time the product was developed and completed.
Other Things to Note:
There is an application deadline that requires your company to apply to Ontario Creates for an OIDMTC Certificate of Eligibility for specified and/or non-specified products by the day that is 18 months after the end of your company’s taxation year in which development of the eligible product(s) was completed.
When It Ends:
Ongoing
Deadline:
Rolling deadline