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7 Park Avenue Financial
South Sheridan Executive Centre
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Suite 301
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
The digital media tax credit in Canada allows Canadian firms to maximize their efforts in the exciting world of digital media. Recent changes will dramatically affect which firms can qualify for those refundable interactive credits in Ontario in particular. Let's dig in.
One way to look at the 'OIMTC' is to view it as a financial tool that allows your firm or project to be financially successful, if only because work in this area is both capital , and people, intensive. Governments, and in particular the Ontario government have supported this sector... shall we say... big time. That has allowed Canadians to gain international prominence for work in digital and transmedia efforts.
The work done in this area of entertainment allows Canadian firms and projects to be recognized and capitalize on individual projects. The work done inside the digital media tax credits allows firms and projects to maximize revenue and gain critical acclaim.
As we shall soon see, many firms ( but not all, as we shall soon see ) that apply for the credit are early-stage firms and cannot qualify for any other type of financing, much less Canadian chartered bank loans or credit facilities. They need the financing acquired under ' OIMTC' credits to attract human capital and stay competitive with international competitors.
Smaller firms, in particular, have trouble achieving financing solutions for their work and traditional VC or Private Equity financing is more often than not totally unavailable in this sector of the market, even though out of some tiny companies emerge some major firms over time. Experts tell us that Canadian firms generate over 4 Billion dollars in digital media revenue in recent years.
What types of firms are in this sector and qualify for Digital interactive media credits? They include those in film, social media, mobility offerings, gaming, etc.
A CHANGE HAS COME IN ONTARIO: Recently introduced legislation in Ontario's province has dramatically changed who can qualify for the Digital Media Tax Credit. That change has mandated that the credit can only be utilized for ' entertainment/educational products for children under 12 years old '! This has eliminated many applicants such as newspapers, mfg companies, insurance firms, and yes... even banks! Who has utilized the program for developing ' apps ' and other digital media offerings?
The digital interactive tax credits provide an approximate 40% refundable credit on all work such as labor and marketing. In 2014 the Ontario govt paid out almost 90 million dollars of this tax credit... with that number seeming to grow all the time! Industry experts in Ontario indicate that amt may be cut in half. The credit though remains very competitive with those offered in Quebec and B.C.
So what's our bottom line? Simply that even though the game rules have changed in interactive credits, particularly in Ontario, these credits are still 100% financeable. Financing for refundable interactive credits is structured as a bridge loan, with an advance of approx 70% of the total credit you have received. No payments are made for the loan duration, and the loan is collapsed when the govt sends your refund chq.
If you're interested in financing OITMC tax credits, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your refundable tax credit financing needs.
Stan Prokop
