January 15th, 2016
Ontario’s computer animation and special effects industry is a strong and well-established industry that continues to experience growth. Total revenues in the industry range between $170 million and $200 million every year, and in the 2007 these industries employed between 1,600 and 1,900 people across the province.
Most computer animation and special effects industries in the province are Canadian-owned and privately held. They also have a well-established pedigree, as most have existed for more than seven years. This said, in 2007, over 80% of organizations reported fiscal revenue of below $5 million. The long-term success of these industries requires a competitive strategy that can help these organizations stay relevant in the face of international competition, particularly from Asia.
Keeping jobs and revenue within Canada requires the necessary capital and talent for these organizations to develop their intellectual property while competing on higher margins and offering better services. This is why the Ontario provincial government offers the Ontario Computer Animation and Special Effects Tax Credit (OCASE). This refundable tax credit is available for expenses incurred by qualifying corporations regarding eligible computer animation and special effects activities.
OCASE considers corporations that are Canadian or foreign owned. In either case, the applicant must have a permanent establishment in Ontario and file their taxes in the province.
For the purposes of this tax credit, organizations may apply if they have a focus on animation or visual effects, post-production, or film and television companies. All organizations need to conduct computer animation or special effects activities.
Eligible production types
Eligible computer animation and special effects activities for this tax credit include modelling, designing, rendering, painting, lighting, compositing, and animating. They do not cover activities with a scientific research and experimental development purpose.
All activities should involve digital technologies. However, this does not cover subtitles, credit rolls, in-camera effects, audio effects, animation or visuals created entirely or primarily with editing activities, and animation or visual effects of a promotional nature for the production in question.
Applicants must conduct all activities Ontario. All work should have a direct tie to an eligible animation or visual effects purpose that is related to the eligible production.
All labour expenses must take place during the taxation year in question and paid during that year, or within sixty days of the taxation year’s end. There are two tiers of qualifying labour expenses:
The first covers salaries or wages paid to Ontario residents working directly on the approved activity or production executed by the company. These persons must report to the relevant permanent establishment that the company conducts its operations from to receive consideration.
The second covers freelancers who are either individuals, partnerships, or arms-length incorporated individuals, like other corporations, that have an impact on the production in question.
Tax credit amounts
There is no cap on eligible Ontario labour expenditures. OCASE calculates this tax credit as 18% of the eligible Ontario labour expenditures incurred by a qualifying corporation on or before April 23, 2015 and 18% of the eligible Ontario labour expenditures incurred after that time. OCASE only considers expenses directly related to approved computer animation or special effects activities.
Interested applicants must first gain approval from the Ontario Media Development Corporation, or the OMDC. To help you get your Certificate of Eligibility from the OMDC for this taxation year, contact INAC Services today. We can help your computer animation and special effects company get started on its next big project!