For Canadian businesses in the digital media field, having access to capital to fund development is essential. From covering your basic overhead to pursuing more creative endeavours, expanding your capital stack allows you to develop a stable foundation for your operations.
While those involved in other kinds of research and development may be familiar with the Scientific Research and Experimental Development (SR&ED) program, it’s crucial for those in the Digital Media industry to be aware of the Interactive Digital Media Tax Credits offered provincially (often referred to as IDMTC). When available, combining digital media tax credits with SR&ED can be an extremely valuable way of extending your access to capital. At Easly, we’re proud to partner with Canadian businesses to ensure they’re able to finance SR&ED and digital media tax credit refunds to have access to capital when it matters most.
Below, we’ll explore the key aspects of digital media tax credits and the advantages of partnering with a trusted financing partner like Easly. Read on to discover more.
Which Provinces Provide Digital Media Tax Credits?
Before we take a closer look at some of the specifics of digital media tax credit programs, it’s important to note that not all provinces offer the tax credit. Unlike SR&ED, which is offered federally and in some provinces and territories, digital media tax credits are only offered at the provincial level and only in certain provinces. With that being said, as a large portion of Canada’s gaming, animation studios, and qualifying filmmaking companies are based in BC, Quebec and Ontario, eligible businesses are often likely to be located in provinces with available funding. The following provinces offer interactive digital media tax credits:
- British Columbia
- Newfoundland and Labrador
- Nova Scotia
- Alberta provided a digital media tax credit until 2019. Discussions for bringing it back are underway.
It’s also important to note that each province has its own specific guidelines and eligibility criteria. From educational software to video games and AR/VR products, the main requirements for eligibility are as follows:
- Products designed for educational, informational, or entertainment purposes
- Interactive usage intended for users
- Utilization of text, sound, and images to fulfill the above objectives
What ISN’T Eligible
Despite having fairly broad parameters for eligibility, not all forms of digital media qualify for digital media tax credits. Exclusionary content includes:
- Blogs or blogging platforms
- Search engines
- News, weather, financial market reporting, and public affairs platforms
- Social media platforms
- Video streaming applications
- Products primarily used for interpersonal communication and more
If you are unsure whether your project qualifies, you may wish to partner with a consultant to learn more.
For those who have projects that are eligible for both the SR&ED and digital media tax credit programs, you must be aware that it is unlikely that you will be able to receive the provincial credit for the same project within the same calendar year due to guidelines against capital stacking – note that federal SR&ED tax credits can still be claimed in conjunction with the provincial digital media tax credits. Take the time to learn what option may suit you best in the immediate future, and then plan accordingly for the long term. For those exclusively applying for digital media tax credits, the funding breakdown across regions is as follows:
- British Columbia: 17.5% of eligible salary and wages incurred in the tax year
- Ontario: 40% of expenditures, including marketing and distribution costs, or 35% of expenditures for products developed under a fee-for-service arrangement
- Newfoundland and Labrador: 40% of qualifying expenditures, including eligible salaries and 65% of eligible remuneration
- Quebec: 37.5% of eligible labour expenditures
- Nova Scotia: The lesser of 50% of qualifying expenditures or 25% of total expenditures
- Manitoba: 40% of eligible project costs
Finance Your Tax Credit Refund with Easly
At Easly, we know how important it is to have access to capital at all stages of your project. R&D and media development rarely wait for a convenient time to require funding. Financing your refund with a trusted lender like Easly can help alleviate the uncertainty of waiting for your refund and bring balance to your cash flow now. At Easly, we ensure you’re able to get your funding fast, with our underwriting team constantly reviewing applications and ensuring that approved clients receive their capital in as little as two weeks.
Learn more about the role SR&ED and IMDTC refund financing can play in your company’s growth by contacting Easly today.