- Best Practices
- Client Satisfaction
- Innovation Management
- Product Development
- Tax Credits
1. What is Interactive Digital Media?
Interactive Digital Media (IDM) is any kind of media with an interactive component. The most common examples we see are digital games, e-learning applications and courses and interactive online news and entertainment websites. To be eligible for the OIDMTC, an Interactive Digital Media product is defined as the primary purpose to educate, inform, or entertain, and achieves its primary purpose by presenting information in at least two of: (i) text, (ii) sound and (iii) images. It must also be interactive for the end user. Products with a primary purpose of presenting or promoting the products or services of the qualifying corporation are not eligible.
2. Who can claim the OIDMTC?
Any Canadian corporation (Canadian or foreign-owned) which produces an eligible product at a permanent Ontario establishment and files an Ontario tax return is eligible to claim some version of the OIDMTC.Only a company who has created all or substantially all of the IDM product (90% or more) is eligible to claim the credit. This rule means that if you farm out the development of a product completely to a subcontractor, you would not be eligible to claim. Unfortunately, it also means that if two companies jointly develop an IDM product, each contributing 50% of the development effort, neither party is eligible to make a claim.
3. What are the benefits of the OIDMTC?
The tax credit is calculated as a percentage of eligible expenditures for the development of a IDM product, which is comprised of production labour costs (salaries and contracts), plus marketing and distribution costs up to $100,000 (for “non-specified” products only).
For qualifying small corporations developing a product where they own the resulting IP (i.e. a “non-specified” product), the tax credit is 40% of eligible expenditures.
For qualifying small corporations developing a product where they are performing a fee-for-service and selling the resulting IP (i.e. a “specified” product), the tax credit is 35% of eligible expenditures.
There is a special version of the “specified” credit for video games made by a Qualified Digital Game Corporation or a Specialized Digital Game corporation (with payrolls over $1 million), which allows the claim to be filed annually (rather than in the year in which the product was completed) to provide more timely funding to accommodate long multi-year projects.
4. What is the OIDMTC claim process?
The OIDMTC is administered jointly by the Ontario Media Development Corporation (OMDC), an agency of the Ontario Ministry of Tourism and Culture, and Canada Revenue Agency (CRA).
The first step of the process is to file an application with the OMDC. This cannot be filed until the product is completed, and must be filed in respect to the fiscal year in which the project was completed. The application is filed via the OMDC application portal and includes information about your company and the project along with details about the amount of expenditure. The OMDC is responsible for reviewing your file and issuing a certificate of eligibility for the product; leading up to this review, your application is placed in the queue for review. It can take a few months to up to a year for the OMDC to review your file and issue the certificate, depending on the number of applications in the queue. Currently, the OMDC is facing significant backlog.
Once the certificate is issued, it must be filed along with your tax return (or an amendment to your tax return). At this stage, it is possible that CRA will review the file again to verify the validity and eligibility of the expenditures. Once reviewed by CRA and assessed, you will be issued a cheque from CRA.