Ontario computer animation and special effects tax credit

The Ontario computer animation and special effects tax credit is a refundable tax credit equal to 18% of the qualifying labour expenditures for eligible computer animation and special effects activities, incurred by a qualifying corporation in a tax year for an eligible production after April 23, 2015. The rate was previously 20%.

For expenditures incurred after April 23, 2015, and before August 1, 2016, the rate of the credit is still 20% if all of the following criteria are satisfied:

• Before April 24, 2015, the corporation entered into at least one written agreement for a qualifying labour expenditure for the eligible production with a person that deals at arm’s length with the corporation and any of the following criteria are satisfied:
  • the agreement is for digital animation or digital visual effects for use in the eligible production;
  • the agreement shows, in the opinion of the minister of Tourism, Culture and Sport, that the corporation has made a significant commitment to production activities related to the eligible production in Ontario.
• Before August 1, 2015, the corporation notified the Ontario Media Development Corporation in writing of its intent to apply for a certificate of eligibility for the eligible production.
• Before August 1, 2016, the corporation applied to the Ontario Media Development Corporation for a certificate of eligibility for the eligible production.
• Principal photography or key animation for the production started before August 1, 2015.
  
• Qualifying expenditures
• Eligible corporations
• Claiming the credit

Qualifying expenditures

Qualifying labour expenditures equal the corporation's Ontario labour expenditures for the tax year less any assistance reasonably related to these expenditures, other than excluded government assistance.

The Ontario labour expenditures are the sum of the salaries and wages and the remuneration incurred in a tax year that are directly attributable to computer animation and special effects activities performed in Ontario and paid to certain persons or entities, within 60 days of the end of the tax year.

Eligible corporations

You can get a certificate of eligibility from the Ontario Media Development Corporation. To be eligible for credit, a corporation must meet certain criteria, including:

• be a Canadian corporation
• perform eligible computer animation and special effects activities for the eligible production at a permanent establishment in Ontario for the tax year
• not be exempt from tax under Part III of the Taxation Act, 2007 (Ontario) for the tax year
• not be controlled directly or indirectly, at any time in the tax year, in any way, by one or more corporations, all or part of whose taxable income is exempt from tax under section 57 of the Corporations Tax Act (Ontario) or Part III of the Taxation Act, 2007 (Ontario)
• not be a prescribed labour-sponsored venture capital corporation at any time in the tax year
• for productions starting after April 23, 2015, receive the Ontario production services tax credit or the Ontario film and television tax credit

Claiming the credit

Before claiming the credit, send a completed Ontario Media Development Corporation (OMDC) application form to the OMDC. If the production is eligible, the OMDC will issue a certificate indicating the estimated amount of the tax credit. Only one certificate of eligibility is issued for all of the eligible productions for the tax year. You must apply online to the OMDC.

To claim the credit, file the following with your T2 Corporation Income Tax Return for the year:

• a certificate of eligibility (or copy) issued by the OMDC
• a completed Schedule 554, Ontario Computer Animation and Special Effects Tax Credit, for each eligible production

If you file your return electronically, send a paper copy of the certificate of eligibility issued by the OMDC to the appropriate Film Services Unit (FSU). The location of the production corporation’s books and records usually determines which FSU will handle the review of your claim.

If you file a paper return, send the return and required attachments to your tax centre.

On line 456 of Schedule 5, Tax Calculation Supplementary – Corporations, enter the total amount of the credit you are claiming.

The CRA will not begin to process the media tax credit claim until it receives all of the required documentation. A claim is considered to be complete when all of the above documentation is filed with the CRA.

For more information on the credit, see Schedule 554, section 90 of the Taxation Act, 2007 (Ontario), and After you file your claim.

Forms and publications

• Schedule 554, Ontario Computer Animation and Special Effects Tax Credit
• Schedule 5, Tax Calculation Supplementary – Corporations

Government partners

• Ontario Ministry of Finance

• Ontario e-Laws

Date modified:

2017-04-20