In recent years, Canadian provincial governments have been supporting growth in the electronic media space by providing extremely attractive refundable tax credits to qualifying companies. Digital media incentive programs support the development of Canadian multimedia products, and have been growing in scope and size. These programs have been growing in both scope and size, due to the ongoing need to create high-tech employment in Canada.
At the moment, the most lucrative government incentive program is the Scientific Research and Experimental Development (SR&ED) program offered by the Canadian federal government. The SR&ED program is administered by the Canada Revenue Agency (CRA) and provided $3.5 billion in 2011 to Canadian businesses in the form of refundable and non-refundable tax credits. The purpose of the SR&ED program is to promote research and development of technology in Canada.
A company that is involved in the creation of multi-media digital media creation (such as interactive websites, movies, film, video gaming, digital special effects) could potentially qualify for both the SR&ED program, and various provincially-administered digital media business incentive programs. Whereas the SR&ED program focuses on the development of technology, digital media programs focus on the development of multimedia elements. For small businesses, tax credits from both SR&ED and digital media programs are often both refundable, which means that the refund will be received in the form of a cheque. This could potentially create substantial cashflows which can be used to fund the in-house development or growth of the company!
In Ontario, for example, the provincial government (through the Ontario Media Development Corporation- OMDC) administers the Ontario Interactive Digital Media Tax Credit (OIDMTC), and the Ontario Computer Animation and Special Effects (OCASE) Tax Credit. OCASE provides up to a 20% refundable tax credit for computer animation and special effects activities, whereas OIDMTC provides up to a 40% refundable tax credit for eligible Ontario labour expenditures related to the development of interactive multi-media products.
As of 2012, digital media tax incentive programs also exist in Quebec, British Columbia, Manitoba, Saskatchewan, Nova Scotia, and Prince Edward Island. These programs collectively cover a vast array of projects including, but not limited to special effects, digital animation, multi-media production, film development, and video game development. If your company is involved with, or will be investing in digital gaming, electronic media, or the production of multimedia content, ensure that you fully take advantage of all government incentives possible.