Video Game Software Publishing R&D Tax Credit

What is the Video Game Development Tax Credit?

The Video Game Development Tax Credit (VGDTC) was created to incentivize video game development in Canada by providing a refundable tax credit to Canadian-controlled corporations developing video games that are generally considered cultural products. The VGDTC is administered by the Canadian Audio-Visual Certification Office (CAVCO) of the Department of Canadian Heritage.

To be eligible for the VGDTC, a corporation must be incorporated under the laws of Canada or a province. The company must also have carried out video game development activities in Canada and file its tax return with the Minister of National Revenue for the taxation year. Eligible expenses for the VGDTC include labor costs incurred for video game development activities and qualified marketing and distribution expenses.

The publishing of video game software is a rising industry in Canada. Video game development studios have more than doubled in the last five years. The tax credit, which has helped make Canada an attractive destination for video game makers and firms looking to profit from the industry’s earnings, handles the growth.

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Game Developer R&D Funding

As the video game industry expands, more and more developers are looking for ways to fund their projects and publish games. In-game advertising is one option that is gaining popularity.

While in-game advertising can be a great way to raise money for game development, the adverts must be placed in a way that does not interfere with the gameplay.

This entails embedding advertising into actual gaming while remaining unnoticeable to the player’s experience. For example, in exchange for a certain amount of funding, a game creator may allow a corporation to insert its logo in a prominent spot.

Another option for financing game development is distributing video games through digital platforms. In recent years, mobile video game production, more commonly called smartphone video games, has become popular, with many people of all ages playing mobile video games daily.

While some major companies produce and can self-fund their game development projects, many smaller developers rely on outside investment to create new mobile games. As a result, there has been a corresponding increase in the amount of money being invested in mobile video game production. This has enabled video game publishers to capitalize on sales and generate revenue at lower production costs.

Private investors, venture capitalists, and government grants are all sources of game development funding. Each option offers its benefits and drawbacks, but they can all be valuable funding sources for the right project.

This allows developers to reach a wider audience and generate industry revenue through sales of the game software. It is also worth remembering that video game production is an expensive process, and it is not always possible to recoup development costs only through game sales. As a result, many developers rely on government financing to help cover development expenses.

The Canadian government also offers support services for game developers through the Canada Media Fund (CMF), established by the Department of Canadian Heritage and the Canadian cable sector as a public-private partnership. It provides support services and funding for developing, producing, and promoting Canadian content, including video games. To be eligible for funding from the CMF, developers must be Canadian-controlled companies.

AAA Title Development Tax Credit

The AAA Title Development Tax Credit was established to promote Canada’s industry operations and video game software development. The credit is offered to Canadian-controlled firms engaging in qualified video game production activities, such as creating, producing, or programming and selling these games to a third party. The credit could also be used to offset the costs of marketing and promoting a video game in Canada.

The credit is equal to 30% of the corporation’s qualified expenses for the tax year, up to a maximum credit of $3 million. By reducing some of the costs connected with the production of video game software, the credit is designed to stimulate industry operations and investment in Canada. The credit might, for example, be used to cover the price of hiring Canadian programmers, artists, or developers.

To be eligible for the credit, a corporation must be Canadian-controlled, and at least 75% of the corporation’s employees must be residents in Canada.

Video Game Research and Development

Video game software publishers produce video games in many formats. Operators usually make and distribute game designs, documentation, installation, and technical services, although other operators are only involved with the publication.

Video game publishers can now host grand titles like movie releases, leading the way for consumer purchasing. The growth in mobile gaming production is related to increasing mobile broadband connections and smartphone usage.

R&D is one of the most important aspects of video game creation to create new ideas and enhance old ones. To stay ahead of the market and continue to make creative and successful games, video game developers must have a strong R&D department.

R&D takes many different forms in the video game industry:

  1. Developers may perform market research to establish the types of games consumers prefer.
  2. They could develop prototypes of new game mechanics or gameplay features to test.
  3. They may improve their games’ graphics and music to make them more immersive and engaging.

R&D is critical for video game makers that want to stay ahead of the curve and continue to produce high-quality games, regardless of the form it takes.

How We Can Help

The Software Development Tax Credit allows companies planning to innovate to get a tax credit from the government for their research and development costs. Boast is a platform that helps companies estimate their claims throughout the year to complete their claim more efficiently, accurately, and with a larger refund. Boast’s engineers and accountants have helped clients maximize their R&D Tax claims through its proprietary software platform with less time and audit risk. Use Boast to get the most out of your R&D Tax claim.

Automated R&D Tax Credits for Software Development

  • Payroll
  • Accounting
  • Jira
  • Github

The Boast platform gathers data from your technical and financial systems to identify and categorize eligible projects, time, and expenses—estimating along the way instead of only at the end—and getting you more money, faster, for less time, and risk.

  • Time Tracking
  • Cash
  • Audit Evidence
  • Tax Forms

Customer Success Stories

cyberspline sred example

Cyberspline Advances the Virtual Reality Gaming Experience Through Innovation

akitig agri-tech sred example

Akitig Creates the Future of Agri-Tech Through Innovation and Investment in R&D

NVBC

British Columbia Tech Companies’ Growth and Innovation Accelerated by Partnership between NVBC and Boast

Frequently Asked Questions

A:
The CPPTC is a federal tax credit available to Canadian film or video productions that are generally considered cultural products. The VGDTC is specifically for video game development and has a higher credit rate than the CPPTC. In addition, the VGDTC allows expenses such as marketing and distribution to be eligible, while the CPPTC does not.
A:
You can apply for the VGDTC by completing Form T1135, Video Game Development Tax Credit Application. This form must be filed with your income tax return for the taxation year in which you incurred the eligible expenses.
A:
The deadline for applying for the VGDTC is May 31 of the year following the taxation year in which you incurred the eligible expenses.
A:
To apply for the VGDTC, you will need to submit documentation to support your application, including:
  • A detailed description of the video game development activities that were carried out in Canada;.
  • A copy of the game's script;
  • A development schedule; and.
  • Proof of eligible expenses, such as invoices and contracts, and other relevant information.
A:
Video game software publishing is an important part of the video game development process. It includes several different activities, from marketing and distribution to support and maintenance. Publishers are responsible for making sure that games are available to consumers and providing ongoing support after they have been released.? 6. What are some of the key things to keep in mind regarding video game software publishing? Some of the key things to keep in mind when it comes to video game software publishing include:
  • Understanding the target market for your game;
  • Having a solid business plan; and
  • Being aware of the different channels through which games can be distributed.
R&D helps creators in staying ahead of the competition and produce high-quality games. Many studios would struggle to keep up with the current trends and technologies if they did not invest in R&D. R&D also assists creators in developing more immersive and interesting games by upgrading graphics and audio.
"R&D helps us accelerate our innovation. When you’re an early-stage company building in a new market, speed is critical. We’re very grateful for the R&D incentive program and the dedicated support and guidance from Boast."
CHRISTIAN KARRER, PLANTIGA VP FINANCE AND STRATEGY

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