Tax Credits - What are they? A High Level Overview | One Stop Business
alright hello everyone and welcome to one-stop business workshop if you're joining us live thank you so much for your patience while we deal with some technical technical difficulties behind the scenes Monday's am i right anyway so I'm your moderator Dianna Chu I'm a compliance officer at Catco and if you don't know what Casco stands for no worries you will by the end of this presentation before we begin we wish to acknowledge those indigenous nations whose land we live and work on we are gathering online from all across the country and since flan acknowledgments are specific to each region we encourage you to visit the native land digital website to identify the first nations territories on which you are located this session is being presented to you from unceded territory of the Algonquin and is now back caret nation your presenter today is my colleague Heba Hirsch who will be giving a high-level overview of the federal tax credit programs available for the film and television industry if that is a senior tax credit officer who has worked at Capitol for 13 years I've had the pleasure of presenting with him but in the past and let me tell you not only is she knowledgeable but she can explain something as daunting as tax credit in a very clear manner so I'm very grateful that she is here with us today to present for us now this 30-minute presentation I know we started late but we'll still have the full 30 minute presentation our session I will begin with Hitler's presentation followed by some Q&A during which I'll be asking her questions that were provided during registration you can also email me your questions during the session at the email address in the invite now you will see that there is a lot of information in the presentation but do not worry a copy of the presentation will be made available afterwards and with that let's begin over to yubi thank you hello everyone and thank you for joining this session today due to the limited time constraints will not be able to go in-depth with regards to each topic but please keep in mind that the presentation that we are giving today the slides will be available online and there will be a lot more detail on each slide more than I will be able to cover as well as at the end of each slide on the bottom there is a link to our guidelines for more information so please do consult those before I begin we do know and we understand that the process may be a little overwhelming especially for first-timers or emerging producers but please do keep in mind that we are here to help please reach out to us whether it's questions about our guidelines or about the online system and we were doing our very best to guide you through it next slide so we'll begin with the million dollar question what is a tax credit so a tax credit is an amount of money that can be used to reduce taxes owed so we are the federal tax credit program that every pot not every province but there are provincial tax credits as well and some provinces do not offer tax credits but they offer different forms of funding like grants next slide to apply for the federal tax credit program you will be submitting an application with the Department of Canadian Heritage namely our office the Canadian audio-visual certification office better known as caf-co caf-co along with the Canada Revenue Agency Co administers two federal tax credit programs for the film and television industry the CPCC and the PFC see so this the first tax credit we'll be covering is the CPCC the Canadian film or video production tax credit it is a refundable tax credit worth 25 percent of the qualified labor expenditure for an eligible production applicants must be Canadian production companies so to reiterate this is the tax credit that is available for domestic companies the second Tax Credit the PSD see the film or video production services tax credits is a refundable tax credit worth 16 percent of the qualified Canadian labour expenditure for an eligible production the PS DC was created to be used by service production companies however it can also be used by domestic production companies if the C PTC requirements are not all met next slide so now we will be covering the eligibility requirements for the CPCC first production companies must be applying for two certificates the first certificate is the part a production certificate and the second certificate is the Part B certificate of completion it's important to note here that the part aid certificate on its own does unlock the tax credit with the CRA however it is also a requirement to apply for the Part B certificate of completion failure to apply for the Part B certificate of completion will result in the revocation of the part a certificate it's also important to note here that there is no deadline to apply for the part a certificate however there is a deadline or there are deadlines to apply for the Part B certificates the deadlines are determined according to the commencement of principal photography date as well as the corporation taxation year-end if anyone needs a clarification or perhaps an example of how those dates are determined you can ask you can email the moderator and I can give you an example of that next slide the production company must be a prescribed taxable corporation and a qualified corporation now in order to be a qualified corporation first a production must be incorporated and second the production must be primarily in the business of producing film and television productions now when we say I would like to highlight primarily here it's a production engages in other activities we recommend the incorporation of a one-off in order to avoid being disqualified there we have seen some confusion in the past where a production later may not be determined to have been primarily in the business of producing film and that could cause disqualification next slide please so the slide is pretty straightforward only the production company or a proscribed person may own copyright in the production and it must be demonstrated that the production company owns copyright for at least 25 years next slide production genres so our list isn't the negative you're either if you're not so you're eligible unless you are ineligible basically everything is eligible unless it is not the intelligible genres are generally content that would not be supported by public funds such as advertising or pornography next slide so key creatives and producer related personnel it's important to note that tomorrow my colleague Katia pretzel will be giving a presentation and she will go in depth with regards to key creatives and producer related personnel and overview that I will give you today is basically in order to be eligible for the CPT see a production must receive a sixth of a minimum of six out of ten points for key creatives and all producer related personnel must be Canadian with the exception of those receiving exemptions next slide so with respect to Canadian costs we do have a Canadian cost threshold of at least 75% of production costs so production costs at least 75% must be Canadian and at least 75% of post-production costs must be incurred in Canada these costs are determined using our breakdown of costs form which is a requirement with the Part B application and actually this form has now been incorporated within the application itself next slide exploitation a few key things to know about exploitation first and foremost the Canadian production company must be able to demonstrate that they are in initial control of exploitation of the production second point to consider it's very important there must be a written commitment from a serf to see licensed broadcaster or Canadian distributor to show the production in Canada within the two-year period from when the production is completed it's important to note here and there is a bit of confusion about this if you have any questions please do ask but I'll try my best to to clarify if the production is an online Orly production or if an online exhibitor is being used to satisfy the two-year commitment that that is okay as long as the next two requirements are also satisfied so first and foremost the online is the exhibitor must be on the list of acceptable online services available on our website that website is always being updated so please reference it and the second point which may be a bit confusing but it is actually simple so the online exhibitor exhibitor can be used to satisfy the chewier clause as long as their rights were secured through a Canadian distributor which means you cannot use a non Canadian distributor as an intermediary between the production company and the online exhibitor so basically rights begin with production company rights are passed on to the Canadian distribution company and then the Canadian distribution company can sign rights with an online exhibitor and the two-year clause can be satisfied that your commitment can be satisfied in this way next slide with regards to distribution two main points to consider first a distribution cannot be made in Canada by a non Canadian entity within the first two years from when the production is completed and second the Canadian production company must be able to demonstrate that they are retaining an acceptable share of revenues which would be at least 25 percent of net receipts next slide now we will move on to the PS TC and we will cover the eligibility requirements so first things first the PSC application must be submitted by the copyright owner or by someone they designate to apply on their behalf the PS with the PSC see there is only one certificate next slide production costs minimum so with the cpt C there is no minimum cost requirement however for the PS you see there are minimal costs departments if the production is a one-off the minimum class requirement would be 1 million Canadian dollars for a series or for a pilot of a series if the episode has a running time of less than 30 minutes the minimum cost would be 100 thousand dollars per episode and if the episode has a running time of more than 30 minutes the minimum cost would be two hundred thousand dollars in order in order to be eligible next slide once again with the ineligible genres so again we have a list of ineligible genres very similar to this CPT see the main difference here would be that talk shows remain ineligible under the PST see next slide to apply for the cpt C or the PSC C you must submit an online application which can be found on our website at www.tanahoy.com please keep in mind that applicants may be requested to provide additional information following the review of your application by Casto if your application meets all of the eligibility requirements a certificate will be issued electronically next slide following the the issue of certificates the certificate can be used to claim the tax credits with the CRA once again as I noted earlier the part for the CPG C the part a certificate does in fact unlock you tax credit however it is a requirement to apply for the Part B certificates and that would end the end of my presentation all right you Diana thank you so much thank you very much for that high-level overview of the cpt CMP STC so now this is where we'll start the Q&A portion of the session just a reminder to everyone if you have any questions you can email me at the address in your invitation I already see that we have some flowing in but we'll start from one that we received during registration so what are some easy or common ways someone could disqualify themselves from tax credits during production he talked to us about that sure so there are many common ways that we see for example missing application deadlines as I mentioned earlier the Part B certificate has application deadlines minimum can con points not met I didn't go into this but it isn't just minimum can con points so you have the production will have to receive six out of ten points however there are also delete performer or the second lead one of them has to be comedian sometimes we see that there is only one non canadian lead on a production this will disqualify the production 75 percent non Canadian costs or canadian costs not met so if the production exceeds more than 25% of non Canadian costs that can disqualify or definitely will disqualify the production ineligible genres a main one that we see it's advertising that part is a little bit confusing so many times productions are disqualified for that let's see corporation is not a qualified corporation so either the production company was not incorporated or the production company was not primarily in the business of producing film and television productions not having a CR to see licensed broadcaster or Canadian distributor on the production so once again it is important that if the production is being shown online that is being secured to a Canadian distributor or that there is also a CR to see licensed broadcaster on the production another point would be distribution in Canada by a non Canadian entity within the first two years so we also see that often and many times the non Canadian rights can begin after the two year period and then the production would not be disqualified I guess I feel a little like here yeah you mentioned earlier about the genre can be a bit confusing in the presentation and on each of our slides we do have your notice references you'll have references to the application guidelines and they'll be clear information for you there as well there's also information about a peer assessment program so sometimes if you're not sure if you read the definition and you think your of the the definition and of an indelible genre and you think that maybe your production could fall under it you can also use our PSS my service to sort of get a preliminary preliminary opinion to see if that is the case all right so second question we have here you mentioned earlier that at least 75% of production costs must be Canadian many documentaries use stock footage and due to consolidation most are owned by US or foreign companies with caf-co consider special dispensation for doctor to stock producers as it relates to stock footage and the 25 percent non Canadian cause for for production the answer is no and it is actually a requirement in the income tax regulation that the costs the non Canadian costs do not exceed 25 percent and as I said in my presentation that is determined through the breakdown of costs form actually stock footage it's specifically on line 67 of the breakdown of costs form so unfortunately there's no way around this one okay all right well thanks for asking anyways the next question do you have a list of festivals where shorts can be shown that would qualify for the tax credits and you maybe explain that a little bit okay so we do not have a list of festivals however this is similar to the online only or the online exhibitor point that I covered earlier so in order for a production to be shown in a festival and if that is going to be used to satisfy the commitment to have the production shown in Canada that is fine as long as those rights are secured through a Canadian distribution company again you must absolutely have a Canadian distribution company in between the production company and the festival rights otherwise if the production company's secure as the rights with the festival without that Canadian distribution company in the middle the production would be ineligible okay thank you let's see so I'm gonna read this one verbatim but we might need you might be one of those questions we might have to follow up with but we'll see regarding related party transactions are those only the transactions that are paid to shareholders of a single-purpose company and the parent company or do related party transactions also include any amount paid to an individual with the producer related title for example producers co-producers executive producers etc I believe that if I'm not sure I quite understand the question but yes like it it would have to like related party transactions it would have to be somebody who is related to the production company so for say producers coal producers but I feel like maybe we should follow up with this one afterwards just to make sure that we're clear on what they're asking sounds good let's see oh this one's interesting huh how many days are you allowed to shoot outside of Canada for a documentary or unscripted production so we don't have the limits on how many days you shoot as long as you keep in mind that you are not going over the 25 percent non Canadian cost threshold I'd like to note here actually the breakdown of costs form is a requirement with the Part B application however a piece of made a part a application and myself as an analyst and I'm looking through your application and I notice that you have a lot of shooting days outside of Canada I will most likely in any other analyst may request a breakdown of costs form to be filled in at the Part A stage just so we can make sure you are not going over that 25% non Canadian costs threshold okay okay so earlier you had mentioned that if somebody wants an example of deadlines for Part B certificates to let me know so we've got a taker so do you mind but I'm gonna I'm gonna write down for myself so let's say the commencement of principal photography date is September 1st 2019 and the taxation year-end is September 30th so what we'll do is we'll use the first date the first taxation year end date following the principle photography so principal photography September 1st the first taxation year end date following principal photography will be September 30th mm and I Jeane this is our golden date here we will be using this date to calculate or to determine your your deadlines so 24 months after this date would be 2021 September 30 2021 that would be the 24 month deadline by which the Part B application must be submitted if it is not submitted by that date you can submit it up until the 42 months deadline however you would have to file waivers with the CRA the Part B certificate must be issued by the 48 month deadline so it's you have 48 months to have the production actually certified not for you to submit afterwards so again our golden date here would be September 30th 2019 the first fiscal year end date following principal photography and from that date we would calculate your 24 months deadline and then your 48 month deadline I hope that was clear in the 42 month deadline also and the 42 month online yes perfect okay now oh this is okay well this might be a follow-up also but we'll see what you think are there examples of completed applications that newcomers can see to help understand the application I don't know no yes that's definitely taxpayer information however we are very helpful we're here to help please reach out to us if you have any questions and also like throughout the process once we receive an application I mean I've seen so many producers who were first-timers and they're confused throughout the process and by the time their application comes to meet and I request a few items that are missing the producers are confused and I help them through it so we're here to help we can't give you examples of completed applications but we have many examples in our head so we'll definitely no I mean with 13 years of experience you just kind of seen your share of it um we have a PSD C question okay well I think you already covered this but I guess I want clarification so you need to spend 1 million in order to qualify for PST see cause actually there's two different thresholds for the PSD C correct yes so if it's a one-off if it's so it's just one production the minimum cost me 1 million dollars if it is a series or a pilot so you can apply for just a pilot of a series if you're able to prove four that is just a pilot if the running time for each episode or the pilot is less than 30 minutes the minimum costs threshold would be 100,000 Canadian dollars and if the running time is over 30 minutes the minimum cost specials would be over two hundred thousand dollars or two hundred thousand dollars and that's per per episode per episode yes and not have a question about waivers how many years of waivers need to be filed in order I guess this is fora and case when someone missed a 24 month deadline and they want to be able to apply for the 42 months deadline so usually it is two waivers we ask that the waivers are being are filed anyway and we communicate with the CRA so sometimes you file a waiver and actually the waiver was not needed per se but CRA communicates that with us but two waivers monthly finals okay okay another questions it's in the subject is a multimedia company definition acceptable for production or does it need to be specifically video and film that's a bit of a vague question but what what I said in I cover this in the presentation that the production must be primarily in the in the business of producing film and video productions if it's a bit hazy that's why we recommend that you incorporate a one-off in order to avoid being disqualified okay you mentioned earlier about the having an online approved channel so we are getting a few questions about that they all can sort of summarize in this question is it possible to apply to add your own online channel to the list of caf-co food services list or do you need a distributor distributor relationship at arm's length - I guess you use the to utilize the Catco approved service lists so there's a so like I covered in my in my presentation I was trying to load something for a bit more details but it's not an issue so the list is available on our website and we are continuously updating that list we recommend that you check the list before you submit your application if you're online exhibitor is not on the list contact us and we were we will request a set of information and then if they are approved they will be added to that list so to answer your question yes we are continuously updating and if you're online exhibitor is not on there they can get on there you just have to contact us first and then the second part of the question you still need a distributor there's a distributor relationship you could be at arm's length for you to use the online service as a to satisfy the two-year clause no so the Canadian distributor just must be a Canadian distributor it does not matter what relationship the production company has with the Canadian distribution company as long as they are a Canadian distribution company okay so someone has a very generic question or question I guess we didn't touch upon it in our presentation it he wants to know what about ko ko ko ko ko' productions that's that's the only question so me generally I guess they can go to the telefilm website who find out more information about starting a co-production definitely so when we are presented with a co-production we we cannot put the production's here before we receive apart a stage the preliminary recommendation from telephone and then at the Part B stage the final recommendation from telephone so yes my answer would be definitely to consult telephone with regards to co-productions okay if anybody has any more questions please keep them coming I think I'm there we've addressed most of them if somebody does want some more clarification on the point about distributor so here can you clarify the point about the distributor having to be Canadian I think this goes beyond before even your 13 years at casco but we'll see for sample if the production is Canadian and the online broadcast platform is Canadian but the distributor that connects a production to the online platform is non Canadian would that render the production ineligible for certification yes most definitely so a non Canadian distribution company cannot again cannot be used as an intermediary between the production company and the online exhibitor regardless of whether the online exhibitor is Canadian or not so production company must be Canadian Canadian distribution company must be Canadian the online exhibitor actually can be non Canadian as long as they are only exhibiting the production and not distributing it but the Canadian distribution company must absolutely be a Canadian company otherwise it will disqualify the production okay we have one last question and I think this will be a great way to end the presentation so how can people how can some right now we're in pandemic everybody's working from home it's hard to guess I went on the phone so what's the best way for someone to reach to talk to somebody at caf-co I know we have our email address is that a the first start to get someone on the phone or what should I do so definitely send us an email the emails are being forwarded to analysts or for whomever needs it so we have our JP Oates who'll go through the emails our jr. program officers who go through the email and they will send them to to whoever needs to respond in a way generally we're very responsive so yes please do email us any questions that you have okay perfect and actually just one last question someone wants to get clarification in terms of that we have earlier we touch upon the having online acceptable service and having a distributor they want to know if they can be their own distributor and distribute their production using the online channel okay so they cannot it's very important to end with this because I've seen this happen and the reason they cannot is because then they would not be a qualified corporation in order for them to be a qualified corporation they must be primarily in the business of producing film and television productions so they can't be 5050 production and distribution they have to be a production company and then the distribution company must also be primarily in the business of distributing so you've definitely need me to separate entities for that a production company cannot self distribute this will disqualify the production could a production company have a related distribution come if there's two separate entities there's a production company and a distributor owned by the same producer so as long as they they could be related entities however they have to be separate entities a production company must be incorporated to produce and then a distribution company must be used for distribution they can be owned by the same individual that is not a problem okay well thank you very much for that and I think that is our thirty minutes thank you very much for all your questions and for the clarification there as well and thank you before explaining to us a tax read and taking your time today to answer all these questions your audience and once again there will be some follow-up resources on the CBC writes CBC Business and writes website so there'll be more information there there's also be contact information there presentation full of the slides and and applicable references to the guidelines with even more information we'll be there for your for your reading pleasure we hope you found today's session useful and that you'll be able to join us again for another CBC or one-stop business workshop session sessions continue each weekday after 2 p.m. at 2 p.m. Eastern Time assuming there's no technical difficulties until July 3rd as if I had mentioned our colleague Katja will be presenting tomorrow she will be diving into cap Coast point system and what we consider as assistance that's 2:00 p.m. tomorrow we'll see you there and have a great day thanks bye-bye you you you you you
2021-02-11 22:57
