July 31, 2015
The 2015 Ontario Budget announced changes to reduce the OPSTC and OCASE tax credit rates for expenditures incurred after April 23, 2015.
The Ontario Government has heard the concerns of industry and has grandfathered the tax credit rates of 25% and 20% for the OPSTC and OCASE, respectively, for eligible expenditures incurred after April 23, 2015 and before August 1, 2016 for productions that meet the criteria outlined below.
A qualifying corporation’s Ontario production services tax credit for an eligible production shall be 25 per cent of its qualifying production expenditures incurred after April 23, 2015 and before August 1, 2016 if all of the following three criteria are satisfied:
A qualifying corporation’s Ontario computer animation and special effects tax credit shall be 20 per cent of its qualifying labour expenditures for expenditures incurred after April 23, 2015 and before August 1, 2016 if all of the following four criteria are satisfied:
The OPSTC and the OCASE are jointly administered by the OMDC and the Canada Revenue Agency (CRA). Application is made to the OMDC for a Certificate of Eligibility. In order to claim the OPSTC or OCASE, a qualifying corporation files its T2 return with the necessary schedule(s) and the Certificate of Eligibility with the CRA.
The administrative process for claiming grandfathering will follow this normal procedure. A qualifying corporation will file its T2 return with the necessary schedule(s) and Certificate of Eligibility together with documents supporting its grandfathering claim (i.e., the written agreement and if applicable, the notice of determination from the Minister of Tourism, Culture and Sport). The CRA will determine the total amount of eligible expenditures and the amount of tax credit that the qualifying corporation is eligible to receive, including whether the production qualifies for grandfathering.
Certificates of Eligibility issued by the OMDC include an estimate of the credit, which is subject to verification by the CRA. The estimate provided by the OMDC will be based on the revised tax credit rates and will indicate that a higher tax credit rate will be available if the production qualifies for grandfathering.
The OPSTC and OCASE rate changes and grandfathering were enacted on June 4, 2015 in the Building Ontario Up Act (Budget Measures), 2015 (Bill 91). Applicants should review the legislation directly for further details. The applicable tax credit guidelines will be updated on the OMDC website in the coming weeks to reflect the approval process for grandfathering.
For information on applying for a Certificate of Eligibility for the OPSTC and OCASE, please send an inquiry to email@example.com
The CRA administers both federal and Ontario corporate taxes. For questions relating to the filing of the OPSTC and OCASE tax credit claims, contact the CRA’s Film Services Unit of the Toronto Centre Tax Services Office at 416-973-3407 or 416-954-0542.
An applicant that does not have a written agreement that satisfies the specific criteria for grandfathering under the OPSTC or OCASE can request the opinion of Minister of Tourism, Culture and Sport as to whether another written agreement demonstrates that the applicant has made a significant commitment to production activities in respect of the production in Ontario. Such a request should only be made if the applicant does not have an agreement that otherwise satisfies the criteria.
The written agreement must be entered into before April 24, 2015 and be in respect of a qualifying expenditure for the eligible production with a person that deals at arm’s length with the applicant.
If a determination is made that the respective agreement does demonstrate such a commitment, a notice of determination will be provided to the applicant. The applicant must provide the notice of determination and the respective written agreement to the CRA.
For inquiries regarding applications to the Minister of Tourism, Culture and Sport, please contact Olive Collaco, Senior Policy Coordinator, Culture Division, at 416-212-9640.
For productions that commenced principal photography or key animation between August 1, 2015 and November 30, 2015, inclusive, but otherwise met the criteria listed for OPSTC and OCASE above, there will be a separate transitional mechanism outside of the Taxation Act. More information on the specifics of this program will follow in Fall 2015.