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.
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.
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.
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.
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Our Software and Gaming R&D tax experts will quickly assess which of your activities are eligible for R&D tax credits. During this conversation we will highlight:
