The Digital Media Tax Credit Guide For Gaming Companies In Canada (IDMTC)

Amount: up to 40% tax credit on qualifying wages/salary.

Interactive Digital Media Tax Credits targeting the gaming industry in particular, have the following broad requirements:

  • Participating firms must register with the provincial ministry of finance for the tax years for which credits are being claimed.
  • Claimants should be taxable Canadian corporations with permanent residency in the province for which credits are being sought.
  • Absence of conflict/redundancy with other credit programs.
  • The company must have qualifying net eligible salaries and wages.
  • Companies must have a certain scale.

British Columbia – IDMTC

Tax Credit on Qualifying Wages/Salary: 17.5%

Eligibility Criteria

  • Registered with the BC Ministry of Finance for the tax year for which tax credits are being claimed.
  • Has a permanent establishment in BC at all times during the tax year.
  • Is a taxable Canadian corporation.
  • $100,000 to $2,000,000 of qualifying salary/wage expenses if an exclusively gaming-related company.
  • Over $2,000,000 of qualifying salary/wage expenses.
  • Has not filed the tax credit late (>18 months after the end of the tax year.
  • Has not applied for the provincial SRED tax credit for the tax year.
  • Is not a labour-sponsored or small business venture capital corporation (See other exclusions in Part 3).
  • Can attach the T2 Corporation Income tax return to the application.

Ontario – OIDMTC

Tax Credit on Qualifying Wages/Salary: 35%

Eligibility Criteria

  • Registered with the Ontario Ministry of Finance for the tax year for which tax credits are being claimed.
  • Has applied for and received a certificate of eligibility from “Ontario Creates”
  • Is a taxable Canadian corporation.
  • Can attach the T2 Corporation Income tax return to the application.
  • The corporation developed, started developing or completed the development of an eligible product or digital game at a permanent establishment in Ontario operated by the company.
  • The company wasn’t controlled by a company or companies whose taxable income is exempt under section 57 of the Corporations Tax Act (Ontario) or Part III of the Taxation Act, 2007 (Ontario).
  • The company is not a prescribed labour-sponsored venture capital corporation.
  • To make a claim under Section 93.1 as a Qualifying Digital Game Corporation, your company has to have incurred a minimum of $1 million in Ontario labour directly attributable to the development of a single game over a three year period.

Quebec

Tax Credit on Qualifying Wages/Salary: 26.25 – 37.5%

Eligibility Criteria

  • Company has an establishment in Quebec and produces eligible multimedia titles.
  • Must have a valid initial qualification certificate issued by Investissement Quebec certifying that the title being produced satisfies all requirements.
  • The title being developed must “include an appreciable quantity of three of the following four types of data in digital form: text, sound, fixed images and animated images. However, a title will be deemed to satisfy this condition if it is intended for customers with a disability” or “is produced on electronic media and controlled by software that allows for interactivity”.
  • The title must feature a French version and this version must at least be equivalent to the versions produced in other languages (exclusions for vocational training titles apply).
  • Work completed must be deemed to be eligible production work as it concerns interactive and digital gaming production: “50% of amounts paid to a subcontractor dealing at arm’s length with the multimedia producer for the execution of eligible production work in Québec.”

Nova Scotia – DMTC

Tax Credit on Qualifying Wages/Salary: 17.5%

Eligibility Criteria

  • Must be a taxable Canadian corporation.
  • Corporation must have a “permanent establishment” in Nova Scotia; a fixed place of business in the province, assets in the province to develop the product, and personnel in the province who can contract on behalf of the corporation.
  • The content being produced must be “interactive” and primarily intended to educate, inform or entertain users.
  • The company must not be a labour sponsored venture capital corporation under the federal Income Tax Act.
  • The content must achieve its primary purpose of presenting at-least two of three formats: text, sound or images.
  • “Projects with budgets above $500,000 require an audited cost report; budgets in excess of $100,000 but equal to or less than $500,000 require a review engagement report; and budgets equal to or less than $100,000 require an affidavit certifying the final cost report. These affidavits must be notarized.”

Newfoundland & Labrador – IDMTC

Tax Credit on Qualifying Wages/Salary: 40%

Eligibility Criteria

  • It primarily carries on the business of interactive digital media development.
  • It has a permanent establishment in the province of Newfoundland & Labrador
  • It is incorporated under the Corporations Act or an Act of the Parliament of Canada or another Canadian province.
  • All or part of its income is not exempt from taxation under Part I of the federal Income Tax Act; and
  • Holds a valid registration certificate under the IDM program.

Prince Edward Island

Tax Credit on Qualifying Wages/Salary: 25%

Eligibility Criteria

Applicants must submit the following:

  • Business Plan Marketing Plan Project.
  • Feasibility or Market Study.
  • Competitive Analysis.
  • Resume.
  • If the application concerns a study, please provide the consultant’s proposal(s) and the study’s terms of reference. (Costs should be supported by written quotations.)
  • Outline the history and description of your business.
  • Existing businesses are required to provide detailed Financial Statements for the previous two years.
  • New businesses and businesses planning expansions are required to submit complete business plans.
  • List all shareholders and key management personnel.
  • Describe the proposed project or activity in relation to the products and/or services delivered by your company.
  • Describe the economic benefits to your organization and to Prince Edward Island.
  • Provide detailed information on the estimated costs of the proposed project or activity. (Cost estimates should be supported by written quotations.)
  • Outline all financial sources and provide appropriate contact information. (For example, lending institutions, banks, government loans and/or grants).
  • Describe the size and capacity of your existing facility in relation to the proposed activity.

Manitoba – MIDMTC

Tax Credit on Qualifying Wages/Salary: 40%

Eligibility Criteria

Applicants must submit the following:

  • Business Plan Marketing Plan Project.
  • Feasibility or Market Study.
  • Competitive Analysis.
  • Resume.