YOUR COMPANY IS LOOKING FOR TAX CREDIT FINANCING!
FUNDING YOUR SR&ED / DIGITAL MEDIA TAX & FILM CREDIT
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Refundable tax credits in Canada. We're told that it's good to have a ' goal ' in business, and in the case of a tax credit loan for either your ' SR&ED' or ' FILM /TV or animation' credit might well be to finance that claim for Canadian businesses involved in r&d capital work and film and video production. Let's dig in on the financing of refundable tax credits.
THERE ARE TWO TYPES OF FINANCEABLE TAX CREDITS IN CANADA
Although we're talking about two separate government tax credits for separate aspects of Canadian business ( 1. Research 2. Media/Entertainment) both of these claims provide your company with the recovery of valuable cash flow/capital spent.
A TAX CREDIT LOAN ACCELERATES CASH FLOW
And our premise? It's simply that if you choose to finance either of these claims you're only doing one thing: Accelerating the benefits by recouping working capital faster. Now that's a goal to aspire to, right?
Although, as stated, we're talking about two different government programs there are some very strong similarities between the two. One of those is that they are both structured around federal and provincial co-operation.
Another example of similarity is that many producers/owners of media projects can also use the SR ED program to claim non-refundable credits. When it comes to the SR&ED (acronym for ' Scientific Research And Experimental Development ‘) credit any media project in any of the genres of film, TV and animation can file a claim around innovation they might have developed and spent capital on in areas of assets for film and TV (i.e. cameras, etc) or software in the evolving area of 3D as an example.
CO-PRODUCTION CREDITS IN FILM ARE ALSO FINANCEABLE CREDITS
When it comes to Media tax credits many owners or co-owners of productions are in fact partially non-Canadian in nature. A large majority of these productions are eligible for SR&ED and Film credits because they have an aspect of Canadian ownership, and are often domiciled under a legal Canadian special purpose entity, therefore becoming eligible for the ' SPEND' they make in Canada relative to the specific qualification of either of our two tax credits in question.
THE 'HOLLYWOOD NORTH' ANGLE
It, therefore, can't be a surprise that our proud Canadian nickname of ' HOLLYWOOD NORTH' continues to gain traction based on several underpinning fundamentals - a strong economy, robust tax credits a diverse geography and talent pool.
GOVERNMENT FUNDING FOR TAX CREDITS IS HUGE IN CANADA
In Canada the federal and provincial governments allocate Billions of dollars every year to both programs, funding thousands of projects in either SR&ED research/innovation of film, television and the merging Transmedia industry. In the case of the SRED program only privately owned (i.e. not public companies) are eligible to claim. The big guys seem to have their share of other benefits, right?
Speaking in broad terms both programs can generally deliver a non-refundable tax credit claim for your project in the 30-50% range. Again those are common claim amounts but vary from a technical term based on which tax credit it is, what province it originates in.
WHO PREPARES YOUR TAX CREDIT FILING
Both claims are typically prepared by an expert in either claim:
SR&ED = Sred Consultant
FILM/TV/ANIMATION= tax credit accountant
LET 7 PARK AVENUE FINANCIAL FINANCE YOUR COMPLETED CLAIM
Have we forgotten anything? We almost did. It's why business owners, financial managers, and production owners should consider financing your claim. It's simply all about accelerating cash flow.
HOW DO TAX CREDIT BRIDGE LOANS WORK?
Once again similarities arise. Credits are financed via bridge loans - no payments are made for the duration of the loan, and financing costs are deducted from the final claim cheque that comes from the government. Broadly speaking claims of non-refundable tax credits are financed at 70% of their value, providing valuable cash flow and working capital for companies (SR&ED) or Producers/owners (FILM. Labour expenditures are a large component of refundable tax credit claims.
CONCLUSION
Check out the benefits and ' next steps' in financing your tax credit by seeking and speaking to a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan needs in sr&ed, films, and digital media.
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Stan Prokop
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