The government of Canada provides tax credits for digital media projects such as game development, educational software, animated simulators and more. Digital media tax credits are offered for qualifying companies permanently located in British Columbia, Manitoba, Ontario, Quebec, Nova Scotia, and Prince Edward Island as well.
At Boast Capital, we focus on helping companies claim the British Columbia Interactive Digital Media Tax Credit (IDMTC).
British Columbia’s Interactive Digital Media Tax Credit
IDMTC came into effect September 1, 2010 to stimulate revenue and job creation within the digital media industry in British Columbia.
According to the BC Ministry of Finance, there were 28 registrants in 2011-12. In 2012-13 there were 49, and at the end of January 2014 the Ministry had already received 52 applications for the current fiscal year.
What Can You Claim?
IDMTC provides a refundable 17.5% tax credit on eligible salary and wages involved in creating interactive digital media (IDM) products. The credit is fully refundable but is first applied to income tax payable.
A qualifying IDM product should be designed to be used interactively by an individual and consist of a combination of files that are digitally integrated and are intended to be operated together. Qualifying products must also either educate, entertain, or inform using at least two of the following: text, sound, and/or images. Examples of eligible IDM products includes:
Entertainment (or edutainment) software
Simulators, such as driving a car
Blogs, online magazines and newspapers, slideshows, videos or presentations that are not made to be used interactively do not qualify.
Who Can Claim IDMTC?
Companies permanently located in British Columbia can claim the tax credit. Other provinces have their own digital media tax credit programs and must apply separately.
When Should You Submit a Claim?
Similar to the SR&ED tax credit, your deadline to file IDMTC is 18 months past fiscal year end.
IDMTC Expires in 2015
The tax credit expires September 1, 2015 so there is just over a year left to take advantage of this short-lived benefit.
Video game developers and organizations including DigiBC are working hard to prolong the IDMTC. DigiBC’s president, Howard Donaldson held a townhall meeting in February to continue the tax credit and increase the amount raised. He argues that, for every person working in video games, “two additional jobs are created with vendors that contribute to the creation of games and businesses that support developers.” The Vancouver-Fairview MLA argues that “studies have shown that tax credits bring in more revenue than they distribute, and they increase employment in related industries.”