Digital Media Tax Credits

Refundable digital media tax credits can be claimed in addition to SR&ED tax credits. Digital media tax credits support the development of Canadian multimedia products with the primary purpose of educating, informing, or entertaining.  The programs have been growing in scope and size, and can provide significant cashflow to facilitate the in-house development of digital media products.  Each province offers unique incentives. 

Ontario Interactive Digital Media Tax Credit (OIDMTC)

Offered by the Ontario Media Development Corporation (OMDC), the OIDMTC is a refundable tax credit for companies developing interactive digital media products. The interactive digital media product must have the primary purpose to educate, inform or entertain, and present information in at least two of the forms text, sound, and image. Examples of recognized digital media products are games, educational and informational products.

The credit offered by the OMDC is calculated as 40% on Ontario labour costs and eligible marketing and distribution expenses for “non-specified” (or not developed under a fee-for-service arrangement) interactive digital media products, and 35% for “specified” products (under the terms of agreement between the qualifying corporation and an arm’s-length purchaser corporation for the purpose of sale or license by the purchaser).

Ontario Computer Animation and Special Effects (OCASE) Tax Credit

OCASE is a refundable tax credit offered to companies with computer animation and special effects activities.

OCASE is calculated as 20% of Ontario labour costs.

British Columbia Interactive Digital Media Tax Credit

The British Columbia IDMTC is a refundable tax credit offered to companies developing interactive digital media products in British Columbia between August 31, 2010 and September 1, 2015. Similar to the OIDMTC, an interactive digital media product is defined to have the primary purpose to educate, inform or entertain, and presents information in at least two of the forms text, sound, and image.

The BC IDMTC is calculated as 17.5% of eligible salary and wages.

British Columbia Digital Animation or Visual Effects (DAVE) Tax Credit

The BC DAVE tax credit program provides refundable tax credits on digital animation or visual effects activities that qualify for BC’s Film and Television or Production Services tax credits. Digital animation is defined as animation created primarily with digital technology. Visual effect is defined as the special effect inserted into production post-filming by digitally augmenting or manipulating visual imagery on film, tape and/or 2D or 3D elements generated on the computer.

The DAVE credit is calculated as 15% of BC labour costs. 

Quebec Production of Multimedia Titles

The Production of Multimedia Titles program offers a refundable tax credit to corporations producing multimedia titles in Quebec. A multimedia title includes titles produced in an electronic medium, run using interactive software and presenting information in three of the four forms of text, sound, still images and moving images. Most titles produced for commercial distribution, as well as commissioned products, are eligible. Related titles such as digital animation films tied to a multimedia title can be eligible as long as the principal exceeds $1 million.

Multimedia titles can fall into two categories: (1) titles produced outside of commission, produced for commercial markets, and (2) other multimedia titles. The tax credit is calculated as follows: for category (1) 30% of labour costs, plus a 7.5% bonus for French-language versioning, and for category (2) 26.25% of labour costs.

Eligible production work includes the entire production cycle, from designing to perfecting, and 36 months of marketing following final version date. Eligible labour costs include Quebec salaries and wages for eligible employees of the multimedia producer and non-arm’s-length sub-contractors, along with 50% of amounts paid to arm’s-length subcontractors.

Manitoba Interactive Digital Media Tax Credit

The Manitoba IDMTC is a refundable tax credit offered to companies developing and producing interactive digital media products in Manitoba. The product must be approved by the Department of Innovation, Energy and Mines.

The tax credit is calculated as 40% of Manitoba labour costs, to a maximum of $500,000.

Nova Scotia Digital Media Tax Credit

Nova Scotia’s DMTC is a refundable tax credit for the development of an interactive digital media product. Like the OIDMTC, the interactive digital media product must have the primary purpose to educate, inform or entertain, and presents information in at least two of the forms text, sound, and image.

The tax credit amount is calculated as the lesser of 50% of eligible Nova Scotia labour costs, or 25% of total expenditures made in Nova Scotia. In addition, Nova Scotia offers a 10% geographic area bonus on labour (or 5% on total expenditures) for products developed outside of the Halifax Regional Municipality.

Prince Edward Island Video Game Labour Rebate (VGLR)

PEI’s Video Game Labour Rebate provides a rebate to game studios producing video game titles based on eligible labour costs. The PEI GamePlan program offers quarterly payments of the rebate based on actual payroll records to enable cash-flow during the game development cycle.

More Information about SR&ED and Digital Media Tax Credits

Companies undertaking projects involving technological uncertainties are often eligible for both the SR&ED program and digital media tax credits. For more information, contact NorthBridge for a free consultation.