Ontario Production Services Tax Credit (OPSTC)
What Is It?
The Ontario Production Services Tax Credit (OPSTC) is a refundable tax credit based upon Ontario qualifying production expenditures (labour, service contracts and tangible property expenditures) incurred by a qualifying corporation with respect to an eligible film or television production. The OPSTC requirements are generally “harmonized” with the federal Film or Video Production Services Tax Credit administered by the Canadian Audio Visual Certification Office of the Department of Canadian Heritage (CAVCO) and Canada Revenue Agency (CRA). For information on the federal credit contact CAVCO at 1-888-433-2200 or CAVCO.
How Much Is The Tax Credit?
The OPSTC is calculated as 21.5% of all qualifying production expenditures incurred in Ontario. A qualifying corporation’s Ontario labour expenditures, including Ontario labour paid under an eligible service contract, must be at least 25% of the qualifying production expenditures claimed. The OPSTC can be combined with the federal Film or Video Production Services Tax Credit of 16% of qualified Canadian labour expenditures. There are no per-project or annual corporate tax credit limits.
Who Is Eligible?
A qualifying corporation is a Canadian or foreign-owned corporation which carries on a film or video production, or production services business, at a permanent establishment in Ontario, files an Ontario corporate tax return and owns the copyright in the eligible production, or contracts directly with the copyright owner to provide production services to an eligible production.
What Is An Eligible Production?
An eligible production must exceed a minimum production cost and must not be in an excluded genre. In addition, a production that receives an Ontario Film and Television Tax Credit (OFTTC) is not eligible for an OPSTC.
The production cost must exceed $1 million (Cdn.), except in the case of a series consisting of two or more episodes, or a pilot for such a series. In the case of a series or pilot, the cost for each episode which has a running time of less than thirty minutes must exceed $100,000 (Cdn.) and the cost for episodes with a longer running time must exceed $200,000 (Cdn.).
The production must not be in an excluded genre: news, current events or public affairs programming; a program that includes weather or market reports; talk shows; productions in the nature of a game, questionnaire or contest; a sports event or activity; a gala presentation or awards show; a production that solicits funds; reality television; pornography; advertising; or a production produced primarily for industrial, corporate or institutional purposes; nor must it be a production for which public financial support would be contrary to public policy.
What Expenditures Are Eligible?
Qualifying production expenditures are incurred in Ontario and include eligible wages, eligible service contracts and eligible tangible property expenditures, such as equipment, studio rentals and computer software.
Eligible production expenditures are expenditures paid to companies and partnerships which have a permanent establishment in Ontario and to Ontario-based individuals (individuals resident in Ontario at the end of the calendar year prior to the commencement of principal photography).
The expenditures must also be reasonable in the circumstances, directly attributable to the production, and incurred for the stages of production after the final script stage to the end of postproduction. Expenditures must be incurred in the taxation year, paid in the taxation year or within 60 days after the end of the taxation year, and paid for services provided in Ontario.
How Is The Credit Administered?
The OPSTC is jointly administered by Ontario Creates - an agency of the Government of Ontario - and the Canada Revenue Agency. Application is made to Ontario Creates for a certificate of eligibility, which the production company files with the Canada Revenue Agency together with its tax return in order to claim the OPSTC. The amount of the credit, net of any Ontario taxes owing, will be paid to the qualifying corporation. If the qualifying corporation does not owe any taxes, the full amount will be paid out.
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*PLEASE NOTE: CANADA REVENUE AGENCY (CRA) ADMINISTERS BOTH FEDERAL AND ONTARIO CORPORATE TAXES. THE CRA IS THE FIRST POINT OF CONTACT FOR ALL CORPORATE TAX ENQUIRIES (1 800 959-5525).
Note: This sheet is a general guide and may not be relied upon in order to determine eligibility or the amount of an anticipated credit. Please consult the OPSTC legislation and regulation for further details.
FAQs as of November 2018
This version of the FAQs have been updated to provide CRS's guidelines on determining residency status.
Numbering may have changed.
Frequently Asked Questions
1. Are productions that are only exhibited on online platforms eligible for the OPSTC?
Productions that are only exhibited online through a service which provides content to the end user for a purchase, license or subscription fee are eligible for the credit. Examples of such over-the-top streaming services are Netflix, Crave, Amazon Prime and Hulu.
2. Does Ontario follow CAVCO Public Notice 2017-02 which defines ineligible genres and Public Notice 2017-03 which defines advertising for purposes of federal film or video production tax credit programs?
Yes, Ontario Creates uses these definitions in determining if a production is an excluded production by virtue of being one of the genres listed in the OFTTC and OPSTC Regulation (O. Reg 37/09) section 27(2) h and section 31 paragraph 4, or section 90(11) of the Taxation Act, 2007 for OCASE. While Ontario Creates uses the same definitions, Ontario Creates will conduct our own assessment of a production’s genre.
3. Has there been any change to the treatment of talk shows for the purposes of the Ontario tax credits?
Talk shows have always been and continue to be ineligible for all Ontario tax credits, including the OFTTC, OPSTC, OCASE and OIDMTC. Talk shows are only eligible for the federal credit, the Canadian Film or Video Production Tax Credit administered by CAVCO, where principal photography began after February 16, 2016. Talk shows are not eligible for the federal Film or Video Production Services Tax Credit administered by CAVCO.
4. If my qualifying labour expenditures are less than 25% of my Qualifying Production Expenditures, am I still eligible for the OPSTC?
Yes, however, your production’s qualifying production expenditures will be capped at no more than 4 times your qualifying labour expenditures. Labour expenditures include salary and wages and labour paid under an eligible service contract.
5. When are eligible expenditures incurred?
They must be incurred for the stages of production after the final script stage to the end of post-production. In order to be qualifying production expenditures for a corporation’s taxation year, the expenditures must be incurred in the taxation year, paid in the taxation year or within 60 days after the end of the taxation year.
6. How do I determine residency?
Under film and television tax credits, eligible labour expenditures are based on residency in Ontario for purposes of the provincial credits, and residency in Canada for purposes of the federal credits. CRA provides guidelines to assist companies in determining whether individuals are resident in Canada. An individual may be a “factual resident” or a “deemed resident” of Canada. Factual residents of Canada are those who have established significant residential, economic and social ties to Canada. They are subject to Canadian and provincial/territorial income tax on worldwide income throughout the year. Labour expenditures paid to factual residents may qualify for both federal and provincial film and media tax credits. CRA’s guidelines have a list of documents that are evidence of strong ties to Canada for purposes of establishing if someone is a factual resident of Canada. For more information see Residency status determination. The same principles can be applied in determining if an individual is Ontario-based individual or a resident of another Canadian province.
This is distinguished from “deemed residents” who have not established significant ties in Canada but were in Canada for 183 days or more in a calendar year. They are subject to Canadian income tax on worldwide income throughout the year and are subject to federal surtax instead of provincial tax. For more information see Residency status determination. Labour expenditures paid to “deemed residents” may qualify for federal film and television tax credits but do not qualify for provincial film and television tax credits.
7. If I lease a location for shooting in Ontario, either directly from the property owners or via an agent or broker, will those expenditures be eligible tangible property expenditures under the OPSTC?
To qualify as an eligible tangible property expenditure, an expenditure must meet all of the conditions set out in subsection 92(5.7) of the Taxation Act, 2007. This includes the condition that the expenditure must be paid to a person or partnership that is ordinarily engaged in the business of selling or leasing tangible property of the type of tangible property acquired or leased by the corporation. Whether a person or partnership is “ordinarily engaged in the business” is determined on an objective basis by weighing all of the facts and circumstances of the particular business. The person or partnership selling or leasing the tangible property must be ordinarily engaged in the business of selling or leasing the particular property and the use of an agent or broker by the corporation claiming the tax credit or by the person or partnership selling or leasing the property is not relevant in making this determination.
8. What is considered ‘assistance’ and therefore grinds the tax credit?
Assistance includes grants, subsidies and forgivable loans. These will reduce (‘grind’) your tax credit. However, the 2015 Ontario Production Services and Computer Animation and Special Effects Transitional Fund is not considered assistance for the purposes of the OFTTC, OPSTC or OCASE.
Bona fide loans with a set repayment date, other tax credits, licence fees and equity investments are not considered assistance.
Sponsorships may be considered assistance if there does not appear to be an exchange of benefits (such as cash or goods) at fair market value between the producer and the sponsor.
Labour deferrals reduce the amount of labour that can be claimed for the OFTTC and OCASE tax credit. Deferrals for non-labour costs do not. The OPSTC is based on qualifying production expenditures (QPE) which is broader than just labour. Deferrals of qualifying production expenditures reduce the amount of QPE that can be claimed for the OPSTC.
We will want to see documentation of all the financial contributions to a production, including loans, deferrals and sponsorship amounts.
In April 2017, CRA posted an application policy to provide stakeholders in the film, video and television production industries with an overview of the legislation related to the definition of assistance. The application policy addresses various forms of financing and provides guidance to stakeholders to help them determine whether an amount would be considered assistance for purposes of calculating the Canadian Film or Video Production Tax Credit (CPTC) and the Film or Video Production Services Tax Credit (PSTC). The policy also applies to similar provincial tax credits that are co-administered by CRA such as OFTTC, OPSTC and OCASE.
9. Does crowdfunding impact a production’s tax credit?
Crowdfunding will not impact a production’s eligibility for a tax credit. However, depending on the type of crowdfunding model utilized, it may be treated as assistance. In April 2017 CRA posted an application policy on various forms of financing and how to determine if they were assistance. The policy also dealt with three crowdfunding models: donation, lending and investment. The donation model is the one that producers might be most likely to use where there are small gifts/items provided by the producer to the contributor based on tiered levels of donation. In accordance with CRA’s application policy the donation model of crowdfunding would be treated as assistance.
CRA Application Policy
10. Does the timing of an OFTTC or OPSTC Certificate of Eligibility impact OCASE?
Yes. For purposes of OCASE, an eligible production is one that has already been issued an OFTTC or OPSTC Certificate of Eligibility. If you are a producer that will be applying for OFTTC or OPSTC and you have performed eligible animation or visual effects activities so you plan on applying for OCASE, you may wish to consider staggering your applications. Applicants for the OFTTC/OPSTC may apply to Ontario Creates as early as the first day of principal photography or key animation. OCASE applicants may only apply to Ontario Creates at the end of their fiscal year. If you have applied promptly, you will have your OFTTC/OPSTC Certificate of Eligibility in hand and it won’t hold up your OCASE application. Likewise, you may have contracted vendors to provide animation or visual effects services on your production. The processing of OCASE applications by those vendors for their work will be held up pending the processing and certification of your OFTTC/OPSTC. Producers are encouraged to communicate with their visual effects and animation suppliers as to when they file their OFTTC/OPSTC claims.
11. What is the tax credit administration fee?
The OPSTC administration fee is calculated as 0.15% of eligible expenditures for the application. There is a minimum fee of $5,000 per application and a maximum fee of $10,000 per application.
There is an additional filing fee of $100 applied to applications for Certificates of Eligibility received more than 24 months after the end of the first fiscal year in which principal photography began. Where a year-end has not been included in the application, the additional fee will be applied to applications submitted more than 24 months after the start of principal photography. As well, there is a fee of $100 for each Amended Certificates.
12. Where can I get more information?
If you have further questions, please contact the phone duty line by e-mail email@example.com or call us at 416-642-6659.Please leave a detailed message including your name, company, phone number and the file about which you are inquiring. There is a different person on phone duty every day, and he/she will respond to your email or call within one business day.