Ontario interactive digital media tax credit

The Ontario interactive digital media tax credit is a refundable tax credit based on qualifying expenditures incurred for eligible products and eligible digital games by a qualifying corporation during a tax year.

For expenditures incurred after April 23, 2015, the credit focuses on entertainment products and educational products for children under 12. Certain products, such as search engines, real estate databases, or news and public affairs products are excluded.

The rules that exclude promotional products have been strengthened. Products that were started before April 24, 2015, and that are no longer eligible for the credit are eligible for relief for expenditures incurred before April 24, 2015.

For products that are certified after April 23, 2015, including those waiting for certification, 80% of total labour costs for eligible products have to be attributable to qualifying wages and qualifying remuneration paid to individuals or to corporations that carry on a personal services business. As well, 25% of total labour costs for eligible products have to be attributable to qualifying wages of employees of the qualifying corporation. This new 80/25 test does not apply to large digital game corporations (qualifying digital game corporations and specialized digital game corporations).

• Qualifying expenditures
• Eligible corporations
• Claiming the credit

Qualifying expenditures

The credit applies to the following situations:

• all qualifying corporations that develop and market their own eligible products (non-specified products) are eligible to claim a credit equal to 40% of expenditures;
• qualifying corporations that develop eligible products under a fee-for-service arrangement (specified products) are eligible to claim a credit equal to 35% of expenditures;
• a 35% credit is available to:
  • qualifying digital game corporations that incur a minimum of $1 million of eligible Ontario labour expenditures over a 36-month period for fee-for-service work done in Ontario for an eligible digital game; and
  • specialized digital game corporations that incur at least $1 million of Ontario labour expenses per year in developing eligible digital games. A specialized digital game corporation generally would have at least 80% of Ontario payroll or 90% of annual gross revenues directly attributable to developing digital games.

For all eligible products, qualifying expenditures include Ontario salaries and wages incurred in a tax year that are directly attributable to the eligible product and paid within 60 days of the end of the tax year.

For eligible products that are not specified products, the qualifying expenditures also include marketing and distribution expenditures (maximum $100,000 per eligible product for all tax years) incurred in a tax year that are directly attributable to the product and paid to certain persons and entities within 60 days of the end of the tax year.

The amount of eligible remuneration expenditures that a corporation can claim is 100%. It includes amounts paid to other taxable Canadian corporations for services rendered by its employees. Corporations that develop specified products are also able to claim these expenditures.

Qualifying expenditures are reduced by any government assistance reasonably related to these expenditures (some exceptions apply – see Schedule 560).

Eligible corporations

You can get a certificate of eligibility from the Ontario Media Development Corporation. To be eligible for the credit, a corporation must meet certain criteria, including:

• be a Canadian corporation
• have completed development on or developed an eligible interactive digital media product at a permanent establishment in Ontario, as described in subsection 93(16) of the Taxation Act, 2007 (Ontario)
• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) for the tax year
• not be controlled directly or indirectly, in any way, at any time in the tax year, by one or more corporations, all or part of whose taxable income was exempt from tax under section 57 of the Corporations Tax Act (Ontario) or Part III of the Taxation Act, 2007 (Ontario)
• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year

In addition, a qualifying digital game corporation or a specialized digital game corporation must also meet the following criteria:

• be a corporation that carries on, through a permanent establishment in Ontario, a business that includes developing digital games
• not be a corporation the primary activity of which is to provide the services of a single individual and all the issued and outstanding shares of the capital stock of which are owned by that individual

Claiming the credit

Before claiming the credit, send a completed Ontario Media Development Corporation (OMDC) application form to the OMDC. If the product or digital game is eligible, the OMDC will issue a certificate indicating the estimated amount of the tax credit. Only one certificate of eligibility is issued for all of the eligible products or digital games for the tax year. You must apply online to the OMDC.

To claim the credit, file the following with your T2 Corporation Income Tax Return for the year:

• a certificate of eligibility (or copy) issued by the OMDC; and
• a completed Schedule 560, Ontario Interactive Digital Media Tax Credit, for each eligible product or each eligible digital game.

If you file your return electronically, send a paper copy of the certificate of eligibility issued by the OMDC to the appropriate Film Services Unit (FSU). The location of the production corporation’s books and records usually determines which FSU will handle the review of your claim.

If you file a paper return, send the return and required attachments to your tax centre.

On line 462 of Schedule 5, Tax Calculation Supplementary – Corporations, enter the total amount of the credit you are claiming.

The CRA will not begin to process the media tax credit claim until it receives all of the required documentation. A claim is considered to be complete when all of the above documentation is filed with the CRA.

For more information on the credit, see Schedule 560, section 93 of the Taxation Act, 2007 (Ontario), and After you file your claim.

Forms and publications

• Schedule 560, Ontario Interactive Digital Media Tax Credit
• Schedule 5, Tax Calculation Supplementary – Corporations

Government partners

• Ontario Ministry of Finance
• Ontario e-Laws

Date modified:

2017-04-20