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Digital media tax credits spawning cottage industry in Ontario

By Chris Bennett, Tudor Carsten, Michael R. Coburn, Sarah Dale-Harris, Pablo Guzman, Danielle (Dani) Lemon, Chris Metcalfe and David Spratley

Recall: Ontario has a tax credit of 35 or 40% for work done by companies (regardless of country of origin) using Ontario-based labour (and certain other expenses). These credits are charmingly called Ontario Interactive Digital Media Tax Credits (OIDMTCs). We discussed here that there are certain requirements to qualify for the credit.

A couple of clarifying points: there are eligible products and specified products that qualify for OIDMTCs. Eligible products are what you'd normally think about being eligible, like interactive games or websites and the credit is 40%; while specified products relate to the work done, perhaps by an external firm like yours, to produce "eligible products" and have credit rate of 35%. As between the firm producing and the firm selling the eligible product, the rights to the OIDMTC may (or should) be decided in your service agreement.

Importantly: these are refundable tax credits, meaning pre-profit firms can take advantage of them just as much as those in the black.

Also, while you can go back in time to catch past work, there's a limit to how far back you can go, namely 37 months.

For interested companies, there are accountants, like SBLR, who can assist in applying for the OIDMTC (no small feat) and financial institutions, like the Knowledge-Based Industries group at RBC, who would consider financing your endeavours.

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Full post as published by Video Game Law Blog on February 15, 2010 (boomark / email).