Don’t Forget About Ontario’s Refundable Media Tax Credit
If your business develops interactive digital media products in Ontario, you may qualify for a refundable tax credit. The Ontario Interactive Digital Media Tax Credit is worth 35 or 40% of eligible labour, marketing, and distribution expenses.
If your company develops and markets its own products, it generally receives a 40% credit. Digital game corporations and companies that develop products under a fee-to-service arrangement receive the 35% credit. In general, companies that develop digital games, mobile apps, and e-learning products for children typically qualify for this credit. Companies that make operating software usually don’t qualify.
To understand how the credit works, consider this example:
- Your company has $1 million in eligible expenses and falls into the 40% category.
- You receive a refundable tax credit of $400,000, meaning it can cover your tax bill and possibly result in a refund.
- If your business owes $350,000 in tax, it receives a $50,000 refund.
To apply for this credit:
- Your company must obtain an eligibility certificate from the Ontario Media Development Corporation.
- Your company must send the certificate to the Film Services Unit that covers your area.
- Your company must pay the application fee, which, as of 2018, is 0.15% of your eligible expenses.
- The minimum fee is $1,000, and the maximum is $10,000.
- Your company should apply within 18 months of the last day of the tax year in which you completed the project.
- If you apply after that deadline, there is an additional $100 fee.
To encourage the production of media in Ontario, the CRA offers a special tax credit. The credit requires a bit of additional paperwork, so you can’t just claim it on your corporate tax return. It’s a generous credit, and if you think you might be eligible, it’s worth checking out.
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