Entertainment Law - Tax Credits PDF

Entertainm ent Law Alicia Ramdeo Available Tax Credits in Canada/Ontario  Canadian Content Tax Credits: Canadian Film or Video Production Tax Credit (CPTC) & Ontario Film & Television Tax Credit (OFTTC)  Service Tax Credits: Film or Video Production Services Tax Credit (Fed PSTC) & Ontario...

Entertainm ent Law Alicia Ramdeo Available Tax Credits in Canada/Ontario  Canadian Content Tax Credits: Canadian Film or Video Production Tax Credit (CPTC) & Ontario Film & Television Tax Credit (OFTTC)  Service Tax Credits: Film or Video Production Services Tax Credit (Fed PSTC) & Ontario Production Services Tax Credit (OPSTC)  Other - Ontario Computer Animation & Special Effects Tax Credit (OCASE), Treaty Co-Productions & The Canada Revenue Agency Canadian Film or Video Production Tax Credit (CPTC) Details: Everything you need to know is in Note: the Guideline: https://www.canada.ca/en/canadi Eligible Production Cost = (Total an-heritage/services/funding/cavc Production Cost less deferrals less o-tax-credits/canadian-film-video- ineligible cost less assistance) x production/application-guidelines. 60% html#a5 Labour Based – up to 25% of What is assistance ? Qualified Labour Expenditure Production financing received from (QLE); public or private Canadian or foreign Administered by Canadian Audio sources, in the form of grants, Visual Certification Office subsidies, provincial tax credits, (CAVCO); forgivable loans or similar types of QLE is the lower of Net Labor funding Expenditures and the Eligible Production Costs  Salaries or wages Sole Proprietors Taxable Canadian Corporations (i.e. “Multishare” Corps – typically only 65% eligible) Loanout Corporations Partnerships (typically only 65% eligible) Canadian Film or Video Production Tax Credit (CPTC) Eligibility Criteria Qualified Corporation ProdCo or prescribed person controls Production company (ProdCo) or initial licensing (for 25 years). prescribed person owns Meets “shown in Canada” copyright for 25 years after requirement within 2 years of production is complete completion (Fair Market Value agreement with Canadian Eligible production genre Distributor, CRTC Licenced Minimum of 6 key creative broadcaster or other acceptable points online platform) Meets Canadian Producer Canadian distribution rights held by Control requirements Canadian entity for two years Meets certification deadlines following the completion of the Meets 75% Canadian Cost Production requirement ProdCo receives acceptable share of net revenues (25%)  What does sections 26-28 of the Investment Canada Act say? Qualified Corporation “Canadian” means: a. a Canadian citizen; Canadian-controlled taxable b. a permanent resident within the meaning of Canadian corporation (based on subsection 2(1) of the Immigration and Refugee Protection Act who sections 26-28 of the Investment has been ordinarily resident in CanadaFootnote8 for not more than one year after the time at Canada Act). which he or she first became eligible to apply Activities consist primarily of for Canadian citizenship;Footnote9 c. a Canadian government, whether federal, carrying on a Canadian film or provincial or local, or an agency thereof; or video production business, d. an entity that is Canadian-controlled, as determined under subsection 26(1) or (2) and through a permanent in respect of which there has been no determination made under any of subsections establishment in Canada 26(2.1), (2.11) and (2.31), or declaration made under subsection 26(2.2) or (2.32). Minimum of 6 key creative points Must be Canadian citizens or Permanent Residents (immigration definition, not tax resident) Require CAVCO personnel numbers  Two-step lead performer determination process: Identify all lead performers considering Time on Screen, Remuneration & Billing  Rank lead performers from Step 1 list by remuneration to determine First and Second Leads Documentaries can be eligible if they receive fewer than 6 points BUT all the key creative points must be allocated to Canadians Generally, all key creative positions must be occupied by Canadians for Productions funded by CMF or Telefilm Can still have a fully CANCON Production if certain key creative positions are unoccupied eg. Production without a second lead could be a “9 out of 9” production.  Canadian Producer Control All Producer roles must be held by Canadians unless exemptions granted for non-Canadians Producer, Coproducer and Line Producer MUST be Canadian Producer = central decision maker, responsible for acquisition of project and exercises control over development after underlying rights secured Creative aspects and Expenditures Production Financing Exploitation  Canadian Film or Video Production Tax Credit (CPTC) Certification Deadlines Must file CAVCO A + B or AB application CAVCO A = based on budget CAVCO B = based on actual cost No CAVCO A deadline CAVCO B submission deadline: 24 months from first tax yearend following principal photography Can be extended by 18 months to 42 months if a wavier is filed Additional 12 months COVID extension (must have incurred eligible labour in 2020 or 2021) Must be certified within 6 months of submission deadline  A note on copyright ownership Only the ProdCo or a Prescribed Person can own the copyright within 25 years of completion (refer to section 3.03 of Guidelines for definition of Prescribed Person). Essentially, must ensure that non- Canadians do not own copyright ! Ideally, ProdCo owns copyright to Production (tax liability issues otherwise) Ontario Film and Television Tax Credit (OFTTC) It is a Labour-based tax provincial credit equal to 35% of eligible Ontario labour expenditures; Administered by Ontario Creates https://www.ontariocreates.ca/tax-incentives/ofttc/ofttc-guidelines 10% “Regional” bonus increased tax credit rate to 45%; 5% First-Time Production Bonus on first $240K of costs (caps out at $12K); Same types of labour as CPTC but individuals must be resident in Ontario at the end of the calendar year prior to the commencement of principal photography; Unlike the CPTC, no “Eligible Production Cost” cap but assistance still grinds the labour base. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial- territorial-corporation-tax/ontario-provincial-corporation-tax/ontario-refundable-media-tax-credits/ ontario-film-television-tax-credit.html OFTTC Eligible Production Generally, must meet the same requirements as the CPTC plus the following:  85% of principal photography days must be in Ontario (documentaries are exempt)  95% of cost of post-production work must be carried out in Ontario  75% of final costs are Ontario-based  Must be “Shown in Ontario” within 2 years of completion  Individual Controlling Producer must be an Ontario resident (for the past two years prior to production)  Must include an Ontario Creates screen credit in the end credits acknowledging tax credit support (new requirement for all production with principal photography dates after Aug 24, 2023)  Unlike CPTC, Talk Shows are ineligible  OFTTC Certification Deadlines Same as CAVCO except the Part A is referred to as the “Certificate of Eligibility” and the Part B the “Letter of Confirmation” Production Services Tax Credit (PSTC) Typically, this route is taken by US Studios who hire Canadian/Ontario Producers to produce a production that they control on their behalf. -Sometimes Productions controlled by Canadian/Ontario Producers apply for service tax credits when they can’t meet some of the CANCON eligibility criteria There is both a Fed and Ontario PSTC In Class Exercise – Lets name a few!  PSTC ELIGIBILITY CRITERIA The applicant is the copyright hold or contracts directly with the copyright holder The Production does not fall under an excluded genre The Production meets the budget thresholds:  $1M for a film  $200K per episode if the runtime is over 30 min  $100K per episode if the runtime is under 30 min The applicant is an Eligible Production Corporation:  Taxable Canadian Corporation or Foreign-owned Corporation  Permanent establishment in Canada (Fed PSTC) and Ontario (OPSTC)  Primarily engaged in a film or video production business Must include an Ontario Creates screen credit in the end (no Federal Screen credit requirement) What is it? How much is it How else is it different? worth ? Qualified Canadian Two major differences This is a Federal between Fed PSTC and Tax Credit for Labour Expenditure CPTC eligible labour: Only Qualified Canadian x 16% labour performed in Labour Pop Qiz – what is is Canada by Canadian Expenditure on residents is eligible for for Ontario? the Fed PSTC productions that Qualified Canadian Only labour performed do not meet the Labour Expenditure after the final script CANCON stage is eligible (i.e. no requirements. is essentially total development labour) Canadian Labour Expenditure less Assistance  Resources CPTC https://www.canada.ca/en/canadian-heritage/services/funding/cavco-tax -credits/canadian-film-video-production/application-guidelines.html OFTTC https://www.canada.ca/en/revenue-agency/services/tax/businesses/topi cs/corporations/provincial-territorial-corporation-tax/ontario-provincial-c orporation-tax/ontario-refundable-media-tax-credits/ontario-film-televisi on-tax-credit.html https://www.ontariocreates.ca/tax-incentives/ofttc Federal PSTC https://www.canada.ca/en/canadian-heritage/services/funding/cavco- tax-credits/film-video-production-services.html OPSTC https://www.ontariocreates.ca/tax-incentives/opstc OCASE