Design, E-business & Multimedia Tax Credits
Canada is home to thousands of digital innovation giants as well as fast growing SMBs and start-ups. It is no wonder innovators are flocking here for easy access to the next generation of design and development talent. Multiple provinces offer lucrative tax incentives for interactive digital and innovation businesses to support this rapid growth and encourage investments in the country. These incentives are primarily aimed to strengthen and sustain the multimedia, e-business and design industries.
For each of the available tax incentives comes their own list of criteria, timelines, and eligibility. In addition to maximizing these tax credits individually, it is important to have a comprehensive strategy to allocate spending in the right provinces, but also one that integrates these tax credits such as SR&ED or federal and provincial grants.
Our extensive industry knowledge of tax credits means we’re here to help you build a solid strategy and action plan. We’ll set you up for success and help you maximize the appropriate federal and provincial programs to get you the support your business needs.
Depending on where your business is located, there are several activities that may qualify:
- Digital game development, development of interactive digital media products i.e. mobile games / applications, gaming kiosks, virtual augmented reality experiences.
- Development of participatory e-learning products and educational software / edutainment products.
- Marketing / distribution of eligible IDM products.
- Fashion design.
- Industrial design.
- Programming, software development, development of software automating business processes.
- Film and video production.
- Animation, visual effects, and post-production.
Digital Media Tax Credits Available per Province
Below are the best provinces for digital media tax credits that support growth and innovation in Canada:
E-business Tax Credit (CDAE)
The e-business tax credit is exclusive to Quebec. This program provides a 30% tax credit up to $25,000 per eligible employee to firms specializing in certain areas of information technology. We have been a pioneer of the program, having submitted claims since its inception, and our teams have constant interactions with Investissement Québec to map the evolution of the program’s eligibility context. This program is constantly evolving in order to keep pace with technological developments. Its regularly adjusted criteria, and its permanent nature since 2015 have led to a change of direction, with e-business having previously been an incentive in the past to now becoming a fully established program subject to the same control requirements as other tax credits.
Multimedia Tax Credit
The Multimedia Tax Credit is a refundable tax credit that allows applicants to recover up to 37.5% of eligible labour expenditures in Quebec. This multimedia tax credit is designed for corporations that develop digital products. Multimedia titles must include interactivity and contain at least three of the following elements: text, audio, images and animation. Video images are considered as only one media element.
To claim this tax credit, corporations must be based in Quebec and focused on creating qualifying multimedia titles, such as video games, educational software, or training simulators.
Design Tax Credit
This program, exclusive to Quebec, provides a tax credit of up to 24% for eligible design activities. This program contains 2 panes: a fashion design pane and an industrial design pane. This program is routinely used by industrial companies, since it allows them to fund activities that could be considered routine under SR&ED and would therefore not be eligible as part of a SR&ED claim.
Recent developments to the SR&ED program have made the Design Tax Credit program increasingly attractive to Canadian Design companies. Ayming offers both all inclusive and a la carte services to help you benefit from the Design Tax Credit while continuing to maximize your other funding such as SR&ED or Grants.
Deduction for Innovative Manufacturing Corporations
This tax deduction, effective January 1, 2017, is commonly referred to as the “Patent Box”. It is intended to reduce taxable income by taking into account income derived from innovation. The relative novelty of this program, as well as its impact on the innovation strategy of your company, requires the use of experts like Ayming who can assist you in the preliminary phases of the program (innovation strategy, intellectual property, SR&ED) as well as the downstream phases (maximization of deduction calculation, audit defense).
Ontario Interactive Digital Media Tax Credit (OIDMTC)
To ensure these companies can create jobs in STEM-related fields (science, technology, engineering, and mathematics), the provincial government provides tax incentives like the Ontario Interactive Digital Media Tax Credit (OIDMTC). This tax credit allows companies to claim up to 40% of eligible Ontario expenditures, including their development labour and up to $100,000 in marketing and distribution costs. Industry associations like Interactive Ontario provide additional support and networking opportunities to further assist companies.
The British Columbia Interactive Digital Media Tax Credit (IDMTC)
The British Columbia Interactive Digital Media Tax Credit (IDMTC) aims to provide these companies with additional cash flow, allowing them to claim 17.5% of eligible salary and wages incurred in the tax year. The BC digital media industry is also bolstered by the support of groups like DigiBC, Vancouver ACM SIGGRAPH and BC Interactive.
Nova Scotia offers companies a digital media tax credit to claim 25% of total expenditures, or 50% of eligible labour and marketing & distribution expenses. In addition to the tax credit, Nova Scotia companies can also benefit from payroll rebates, R&D tax credits, and training incentives.
Common Industry Challenges
Due to the dynamic landscape of digital media tax incentives, it can be overwhelming for businesses trying to determine their eligibility or develop their applications for rebates. When navigating through the landscape and trying to understand all the elements, many are faced with the following questions:
- How can I take advantage of these tax credits in addition to SR&ED?
- How do I ensure that all claimable time and expenditures are accounted for?
- How do I identify eligible projects and activities?
- What happens if my province’s program is eliminated in the coming years?
- If my program isn’t in the Tax Act, how can I know what protocol I need to follow?
- What if I also want to apply for government grants?
- For design tax credit there is a specific challenge linked to the diplomas of the designers: it’s harder if they are from outside Quebec.
When looking to apply for digital media tax credits it is imperative you develop a strategy to not only capture these returns but also potential funding from SR&ED or other government funding programs. Using a partner like Ayming who can help you understand the intricacies of each program but also support you with a comprehensive plan to incorporate all potential government funding will be the key to your success.
Management of the entire complaint process, from the identification of eligible activities and employees, to the defense of the file during the audit. Working with you end-to-end in order to reach your goals.
A la carte service (pay only for what you need)
This service allows more experienced companies to call on Ayming’s expertise on specific issues. Thus, we offer: Technical Writing, Financial Preparation and Forms Production, Quality Control of Claim to Maximize Opportunities and Audit Stimulation/Assistance. Our À la Carte Services can be a great fit for companies who want the ability to customize the services they receive and get support in specific areas of the claim process.
Other Tax Credits and Special Mandates
If there is another tax credit or deduction for which you have questions or the need for expertise, do not hesitate to contact us. Our expert knowledge reaches beyond the categories mentioned above, and we will be pleased to assist you.
Why Ayming as your trusted Partner?
Ayming secures $1.5 billion annually for its clients, and here are just a few more reasons why partnering with us can provide substantial financial benefits to your company:
- 1,100+ R&D experts serving our clients globally.
- We handle all communications with the various government agencies, resulting in minimal effort required from you – at no extra charge.
- Ayming Canada’s highly experienced delivery teams boast over 200+ years of combined tax credit experience and over 50+ years of combined grants experience, meaning you partner with true subject matter experts who are invested in your success.
- With Ayming, clients do not have to wait for the government agencies to process their tax credit applications in order to receive money immediately. Ayming has an exclusive fund of $150 million which provides accelerated access to your funding through our attractive financing offer.
- Our proprietary artificial intelligence (AI)-driven database of grants provides real time access to thousands of programs, including a custom snapshot of all federal and provincial grants currently available to your specific business.
- We are able to double the funding we bring to our clients with our combined tax credit and grants offer.
- Ability to service companies of all sizes, including early-stage and start-ups with our proprietary SR&ED Express offer.