Entertainment and Media Tax Clip: Quebec enhances Production Services Tax Credit – Updated for Information Bulletin 2010-3 (February 19, 2010)

Enhancements to the Quebec Production Services Tax Credit and the Computer Animation Special Effects Tax Credit mean that these credits can be claimed on more types of expenditures. However, the qualified production categories have been restricted.

The Quebec Production Services Tax Credit (QPSTC) is a 25% refundable tax credit available to domestic and foreign-based production companies that produce film and television productions in Quebec. Productions that qualify for the QPSTC are also eligible for the Computer Animation and Special Effects Tax Credit (CASETC) if the company also performs eligible computer animation and special effects activities, or shoots in front of a chromatic screen. Quebec has enhanced these credits as follows:

1. The enhancements to the Production Services Tax Credit were originally announced in Information Bulletin 2009-3.

2. According to Information Bulletin 2009-3, the CASETC for general budget productions was to be 5% of qualified Quebec production costs if the main photography or recording work in Quebec was completed after June 12, 2009. Information Bulletin 2010-3 retroactively increases the CASETC to 20% of Quebec "qualified labour costs" for these productions.

3. The production budget for a general budget production must exceed:

• for a series of two or more episodes, or a series pilot for which the running time is:
  • 30 minutes or less, $100,000 per episode; or
  • over 30 minutes, $200,000 per episode; and
• for other productions, $1,000,000.

4. Qualified production costs are "all-spend" production costs incurred in Quebec, including the:

• "cost of qualified properties" that are attributable to the qualified production, e.g., to acquire or rent tangible properties (including software); and
• "qualified labour cost" (a broader concept than "qualified labour expenditures") that generally means "the wages or salaries, including the associated payroll taxes, that were incurred by the corporation...regarding an employee as well as the cost of any service contract, incurred by the corporation with a supplier of services" if certain criteria are met. "Qualified labour cost," unlike "qualified labour expenditures" does not require the employee or contractor to be resident in Quebec, unless the payments are made to a producer, an author, a scriptwriter, a director, a production designer, a director of photography, a music composer, a conductor, an editor, a visual effects supervisor, an actor (speaking role) and an interpreter.

However, the qualified production categories for these credits have been restricted to fiction films, documentary films of at least 30 minutes, and series of which each episode is at least 30 minutes (exceptions to the minimum time limit apply for documentaries intended for children under 13). Previously, educational games, quiz shows and contests for children under 13 years, variety shows and television magazines were also eligible.

Draft legislation implementing these changes is forthcoming.

PricewaterhouseCoopers Comments

Film and video producers will welcome these changes. They are intended to help Quebec continue to attract film and television productions.