Ontario Interactive Digital Media Tax Credit
Program Responsibility:Ontario Media Development Corporation, administered jointly with the Canada Revenue Agency
Program Description:The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit based on eligible Ontario labour expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation to create eligible interactive digital media products in Ontario. The OIDMTC is calculated as:
- 25% of eligible expenditures
- 30% of eligible expenditures for “qualifying small corporations” (applies to qualifying expenditures of eligible products and not specified products, please see below for all the definitions).
A qualifying corporation generally is a Canadian corporation (that is Canadian or foreign-owned), that develops an eligible product at a permanent establishment in Ontario operated by it, and is not exempt from income tax.
A qualifying small corporation is a corporation that meets these criteria and had during the preceding taxation year (on an associated company basis) neither annual gross revenues in excess of $20 million nor total assets in excess of $10 million.
There are two types of products for which the OIDMTC may be claimed: eligible products and specified products.
Eligible products are interactive digital media products whose primary purpose is to educate, inform, or entertain, and achieve this purpose by presenting information in at least two of the following forms: (i) text, (ii) sound and (iii) images. This includes (but is not limited to) games, educational products and informational products. Operating system software is not eligible for the tax credit, nor are products whose primary purpose is to present, sell or promote the qualifying corporation or its products or services.
Specified products are interactive digital media products that are developed under a fee-for-service arrangement, under the terms of an agreement between the qualifying corporation and an arm's length purchaser corporation for the purpose of sale or license by the purchaser to one or more persons who deal at arm's length with the purchaser. All or most of the product must be developed in Ontario by the qualifying corporation. The contract can be entered into before March 23, 2006, however the development of the product must be completed by the qualifying corporation after March 23, 2006.
Eligible Labour Expenditures
Eligible labour expenditures are 100% of salaries and wages for employees incurred after June 30, 1998 and 50% of remuneration incurred after May 4, 1999 paid to arm's length persons who are not employees. "Persons" may include individuals, partnerships and corporations.
For specified products, qualifying expenditures are restricted only to wage amounts which were incurred by the corporation after March 23, 2006 on account of salaries and wages of its Ontario employees.
Eligible labour expenditures must be paid to individuals resident in Ontario at the end of the calendar year prior to the calendar year in which the services were rendered. The labour expenditures must also be directly attributable to the development of the eligible product.
If the product is completed after March 25, 2008 eligible expenditures would include those incurred in the 37-month period ending at the end of the month in which development of the product is completed. For products completed before March 26, 2008 eligible expenditures would include those incurred in the 25-month period ending at the end of the month in which development of the product is completed. The labour expenditures must also be paid in the taxation year or within 60 days after the end of the taxation year, and paid for services rendered at a permanent establishment in Ontario.
Eligible Marketing Expenditures
Up to $100,000 of eligible marketing and distribution expenditures related to an eligible product that is not a specified product can be included. Eligible marketing and distribution expenses are those incurred after May 2, 2000, and are limited to those incurred in the 24-month period prior to the completion of the eligible interactive digital media product, and those incurred in the twelve months following the completion of the product. Expenditures that have already been claimed as eligible Ontario labour expenditures cannot be claimed as marketing and distribution expenditures.
OIDMTC facts and figures (courtesy of SRED Unlimited)
(The information is taken from http://www.investinontario.com)