Entertainment and Media Tax Clip: Ontario enhances its Interactive Digital Media Tax Credit for large game developers - Updated for Ontario Bill 218 (December 18, 2009)

Retroactive to March 27, 2009, Ontario Bill 218, which received royal assent on December 15, 2009, allows certified game developers who incur at least $1 million of Ontario labour expenditures annually in the development of eligible interactive digital media games, to claim a 35% Ontario Interactive Digital Media Tax Credit (OIDMTC) on Ontario salaries and wages. Certified game developers typically attribute at least 80% of their Ontario payroll or 90% of annual revenues to interactive digital media game development.

Announced in Ontario's 2009 Economic Outlook and Fiscal Review, the measure is an addition to a 2009 Ontario budget proposal (also implemented by Bill 218) that extends the OIDMTC to digital media game developers who incur a minimum of $1 million of eligible labour expenditures over a 36-month period for fee-for-service work done in Ontario in respect of an eligible product.

Background

The OIDMTC is a refundable tax credit that is based on eligible Ontario labour expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation with respect to an interactive digital media product:

  • With a primary purpose of educating, informing or entertaining, and that achieves its primary purpose by presenting information in at least two of: text, sound and image; or
  • That is developed under a fee-for-service arrangement.

The OIDMTC rates in Bill 218, effective for qualifying expenditures incurred after March 26, 2009, are:

  • 40% for all qualifying corporations that develop and market their own eligible products; and
  • 35% for corporations that develop eligible products under a fee-for-service arrangement.

PricewaterhouseCoopers Comments

This measure demonstrates Ontario's commitment to the importance of the growing digital media sector. The 35% credit will reduce the after-tax cost of developing interactive digital media games in Ontario for large game developers, making the province an even more attractive place to carry on these activities.