WHAT IS ELIGIBILE FOR OIDMTC (ONTARIO INTERACTIVE DIGITAL MEDIA)
OIDMTC FAQ (Frequently Asked Questions)
The OIDMTC is jointly administered by the Ontario Media Development Corporation (OMDC) - an agency of the Ministry of Tourism, Culture and Sport - and the Canada Revenue Agency. Application is made to the OMDC 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 OIDMTC. 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.
What are the four types of products that can be claimed?
There are four types of products that can be claimed for the OIDMTC: non-specified products (formerly known as eligible products), specified products, digital games developed by qualifying digital game corporations and digital games developed by specialized digital game corporations.
What is the difference between non-specified and specified products?
Non-specified products are developed by the applicant for sale or licence to one or more arm’s length parties who have not previously entered into an arrangement with the qualifying corporation for development of the product.
Whereas, specified products are developed by the applicant under the terms of an agreement between the qualifying corporation and an arm’s length purchaser corporation for sale or licence by that purchaser to one or more arm’s length parties. Specified products are essentially developed under a fee-for-service arrangement.
Non-specified products receive a higher OIDMTC rate of 40% on eligible expenditures incurred after March 26, 2009 and a wider range of expenditures qualify, while specified products receive an OIDMTC rate of 35% on eligible expenditures incurred after March 26, 2009. (For relevant OIDMTC rates and eligible expenditures in a given time period, please refer to the chart on page 8 of the OIDMTC Guidelines).
PLEASE NOTE: whether it’s a non-specified or specified product, the applicant must develop 90% or more of the product in Ontario.
A qualifying digital game corporation carries on a business that includes the development of digital games AND incurs $1 million in eligible labour expenditures in a 36 month period on a digital game under an agreement with a purchaser corporation. Unlike non-specified and specified products, a digital game developed by a qualifying digital game corporation can qualify for the OIDMTC even if a) the corporation is responsible for developing less than 90% of the product, b) the product is not completed, and c) the corporation is related to the purchaser corporation for whom the product is being developed. Qualifying digital game corporations receive a 35% OIDMTC on eligible expenditures incurred after March 26, 2009.
A specialized digital game corporation carries on a business that includes the development of digital games, where either a) at least 80% of the total salaries and wages incurred by the corporation in the year for services rendered in Ontario are directly attributable to the development of digital games, or b) at least 90% of the corporation’s gross revenues for the year are directly attributable to the development of digital games; AND the company has incurred $1 million in eligible labour expenditures in the year on a digital game(s). Unlike non-specified and specified products, a digital game developed by a specialized digital game corporation can qualify for the OIDMTC even if a) the corporation is responsible for developing less than 90% of the product, b) the product is not completed, and c) the corporation is related to the purchaser corporation. Specialized digital game corporations can file annually and receive a 35% OIDMTC on eligible expenditures incurred after March 26, 2009.
What kind of products are eligible for the OIDMTC?
Digital games, e-learning products, online information and entertainment websites, such as online magazines or newspapers, which primarily inform, educate, or entertain are common categories. Applicants are welcome to submit different product types not listed here. If you are not sure if your product is eligible, please contact us at the number at the end of this document.
Are products like webinars, webisodes, or mobisodes eligible?
The streaming video/audio content policy has been re-evaluated, and products that are made up of more than 50% streaming video or audio content may now be eligible for the OIDMTC, as long as the user has a choice of information to be presented, and the sequence and form in which it is presented. For example, for a product to be eligible there must be more than one video clip or audio clip to choose from, and/or there is other content that the user can access in the form of text or image included in the product.
Is an online catalogue type of site developed in Ontario eligible?
To be eligible, a product’s primary purpose must be to inform, educate, or entertain. Therefore interactive digital media products that primarily present, promote or sell products or services are not considered eligible. The OMDC will interpret “primarily” to mean “more than 50%”.
Note that informing by presenting products and/or services for sale is considered promotional.
Is an online social networking site type of product eligible?
Often social networking websites are made up of user generated content, which can be an issue. To be eligible for OIDMTC, a specified or non-specified product must be 90% or more developed by the applicant, which rules out products with more than 10% user generated content in a product. Also, products whose primary purpose is interpersonal communications are not considered eligible.
How do I determine the product completion date?
The product completion date is the date when the product is shelf-ready, accessible, online, and/or available for exploitation. This date must be consistent with the product development documentation.
OMDC reviews the product as of this date to determine eligibility. Note that maintenance expenditures are not eligible for OIDMTC as they are not considered part of product development.
Is content required in the product as of the completion date to be eligible?
As of the product completion date, the product must contain content that presents information in at least two of text, sound, and images, and whose primary purpose is to educate, inform or entertain the user.
Can a new version of the same product be claimed?
OIDMTC is a content based credit, so a version of the product with different content can also be eligible, as long as the new version is significantly different. The difference can be the content, the underlying technology, or a combination of the two.
New versions of website products are restricted to being claimed only every two years.
Do different versions of a product need to be submitted as separate products in an OIDMTC claim?
Yes. Each version of a product that is developed for a specific platform should be submitted as separate product in an OIDMTC application, i.e. Product A (Android), Product A (iOS), Product A (Blackberry). Each version of a product should have separate cost allocations and may also have different start and completion dates.
Can a different language version of the same product be claimed?
No. If the only change between product versions is the language of the text, video, and/or audio, this is not considered a significant enough difference for OMDC to consider them to be separate products.
How do I demonstrate an online product was developed for sale or licensing?
There are different ways to demonstrate a product was developed for sale or licensing, such as a distribution or financing agreement, customer invoice, or by determination that the product is available to the public, i.e. available online.
OMDC considers a website product to be available for public license or use.
What is the best way to demonstrate a product’s Chain of Title?
- Trademark or copyright registration approval,
- Product development, licensing, or sales agreement, fully signed and dated,
- Employee or contractor agreement, fully signed and dated,
- Product Terms of Use documentation, or
- Domain name registration for a website product.
Please note that a letter from an Officer of the applicant corporation stating ownership is not sufficient chain of title evidence for OMDC.
Expenditures
What is considered 'government assistance' for the OIDMTC and therefore grinds the tax credit?
Government assistance includes government grants, subsidies forgivable loans, deductions from tax other than OIDMTC and investment allowances. These will reduce (‘grind’) the OMDC tax credit.
The following are not considered government assistance:
• Other tax credits such as Scientific Research & Experimental Development (SR&ED),
• Bona fide loans with a set repayment date, (See Canada Revenue Agency’s (CRA) Application Policy on Bona Fide Loan – FAS 2008-01 for more information), and
• Equity investments.
Note that labour deferrals (amounts not paid within 60 days of the tax year end) cannot be claimed for the OIDMTC for that tax year. However if it is paid within 60 days after the end of the subsequent tax year; the labour expenditures can be claimed in the subsequent tax year as part of qualifying expenditures.
We will want to see documentation of all the financial contributions to the development of a product, including loans, deferrals, and sponsorship amounts.
No. An applicant cannot include costs claimed for SR&ED activities, whether allowed by CRA or not, in the OIDMTC claim. Labour included in the OIDMTC claim must be for different activities than those claimed under SR&ED.
Are marketing /sales salaries or wages eligible to be claimed for OIDMTC?
Up to $100,000 in eligible marketing and distribution expenditures (which can include salaries and wages specific to marketing and distribution of a non-specified product), can be claimed once for a non-specified product. Marketing and distribution expenditures cannot be claimed for specified products, nor included in claims made by digital game corporations under sections 93.1 or 93.2.
Yes. Applicants must disclose all entities that worked on product development and all tasks undertaken to complete a product, even if the labour expenditures for that work was not included in the OIDMTC claim. The only exception to this requirement would be for those making an OIDMTC claim under section 93.2 as a Specialized Digital Game Corporation or under section 93.1 as a Qualifying Digital Game Corporation.
Please use the OIDMTC Expenditure template available on the OMDC website entitled Specified and Non-Specified Expenditures Breakdown and complete the section “Declaration of Other Development Labour Expenditures (Unclaimed/Ineligible)”.
What is CRA’s look-through approach and how it is applied to remuneration claimed for OIDMTC?
The CRA’s look-through approach limits the amount of remuneration that may qualify as a labour expenditure to the amount that would have been incurred by the qualified corporation had it directly employed the individuals. This approach is used when remuneration is paid to a self-employed individual, a taxable Canadian /Ontario based corporation, or a partnership carrying on a business in Ontario for the services of its employee(s). In applying this approach, the qualifying corporation must get from the service provider the amount of salary or wages paid to the employee. This amount should qualify as a qualifying remuneration amount for the development of eligible products claimed under the OIDMTC.
To read more about the CRA’s look-through approach, please see CRA Publication RC4164 (page 15), www.cra.gc.ca/E/pub/tg/rc4164.
What is the CRA’s 65% administrative position?
When the qualifying corporation engages a third party service provider with whom it deals at arm’s length (that is, with whom it is not related), the amount of salary or wages paid to the employee may not be available. Under such circumstances, the CRA will accept, as an administrative practice, 65% of the labour portion of an invoice amount as a reasonable estimate of the salary or wages paid to the employees that is directly attributable to the development of the product. The remaining 35% represents overhead and the service provider’s profit.
To read more about the CRA’s 65% administrative position, please see CRA Publication RC4164 (page 15), www.cra.gc.ca/E/pub/tg/rc4164.
Documentation
Do we need to submit all contractor agreements?
No. However, for specified and non-specified products we often request to see all multi-employee/multi-shareholder corporation agreements to help determine if the applicant developed all or substantially all (90% or more) of the product. Agreements and invoices for individuals and personal service/loan-out corporations may also be requested.
Contractor agreements that relate to marketing and distribution expenditures are generally not necessary, however, in certain circumstances they may be requested by a Business Officer.
Filing
Does OMDC provide Preliminary Assessments regarding the eligibility of products?
Due to the large volume of applications, the OMDC does not provide OIDMTC Preliminary Assessments. You can contact one of the OIDMTC Business Officers to ask specific eligibility questions. Business Officer contacts are listed in the OIDMTC Guidelines.
You can also email taxcredits@omdc.on.ca (preferred), or call us at (416) 314-6858 and ask to speak to the Business Officer who is on ‘Phone Duty’ for the Tax Credits Department. There is a different person on phone duty every day, and he/she will be happy to assist you.
How many applications should be submitted to OMDC and when do I apply to OMDC?
Only 1 application per tax year can be filed, which must contain all products completed in that tax year. For example, for a July 31, 2008 tax year end, an interactive digital media product completed on February 1, 2008 would be submitted in a 2008 tax year OIDMTC application, while a product completed on July 1, 2009 would be submitted in a 2009 tax year OIDMTC application.
Under section 93.1 qualifying digital game corporations can apply to the OMDC in the tax year that falls after the end of the 36 month period in which the applicant has incurred $1 million in eligible labour expenditures for any period of 36 months that ends in the tax year in respect of an eligible digital game.
Under section 93.2 specialized digital game corporations can apply to the OMDC at the end of the tax year in which the applicant has incurred - the minimum $1 million in eligible labour expenditures in respect of an eligible digital game or games.
Applications can be made for prior tax years, however the applicant may have to make a request to the Canada Revenue Agency (CRA) to amend a previously filed tax return. It is the applicants’ responsibility to ensure that they are within the time limits for requesting an amendment to the tax return for a previous tax year and are not statute-barred.
For more information go to the following link: http://www.fin.gov.on.ca/en/credit/mtc/faq.html.
For non-specified products, the applicant can claim up to $100,000 in eligible Marketing and Distribution costs per product. M&D costs can be claimed for the period 24 months prior to the completion date and 12 months after the completion date. If there are some eligible M&D costs that fall in a subsequent taxation year that relate to a non-specified product, the applicant should include those M&D costs in a separate OIDMTC claim for that subsequent taxation year.
For example, a non-specified product is claimed in the applicant’s 2012 taxation year and there are eligible M&D costs that are directly related to this product that fall in the 2013 taxation year. The applicant should prepare a separate 2013 OIDMTC application and include those M&D costs in a 2013 claim along with any other completed products eligible for the OIDMTC. Please note that when using the Online Application Portal there is an option to choose “Non-Specified (93) M&D Only” as a product type in these cases where you are claiming M&D costs only, for a non-specified product claimed in a previous OIDMTC application.
Should I withhold filing the Corporate Tax Return until I have received the OIDMTC Certificate?
No. File your tax return with the estimated OIDMTC amount as follows:
For tax years that ended on or before December 31, 2008, submit the Ontario CT23 Corporations Tax and Annual Return to the Ontario Ministry of Revenue (OMoR) along with the estimated OIDMTC amount. Once the Certificate of Eligibility is received from the OMDC, submit the Certificate of Eligibility (or copy) to the OMoR. Upon receipt of the Certificate of Eligibility, the OMoR will process the claim and forward the information electronically to the Canada Revenue Agency (CRA) for review and verification. You will receive your assessments and reassessments from the OMoR.
For tax years that end on or after January 1, 2009, file the T2 Corporation Income Tax Return along with schedule T2SCH560 “Ontario Interactive Digital Media Tax Credit (2009 and later tax years)” with the Canada Revenue Agency (CRA) along with the estimated OIDMTC amount. Once the Certificate of Eligibility is received from the OMDC, submit the Certificate of Eligibility (or copy) to the CRA. CRA will process the claim once they have received the OIDMTC Certificate of Eligibility as well as the T2 Corporation Income Tax Return and applicable schedules. You will receive your assessments and reassessments from the CRA.
Do I need to submit the "Ontario Declaration of Residency/Consent Forms" to the OMDC?
No, for OIDMTC the OMDC generally does not need to see the Ontario Declaration of Residency/Consent Forms as part of the review. We do require the list of names of all individuals working on the product, and the list of names and addresses of all remuneration individuals and companies being claimed.
However, we advise applicants to keep the Residency Declarations on file as the Canada Revenue Agency may ask to see them should they decide to conduct an audit of the claim.
Does the CRA allow the assignment of tax refunds to another corporation?
Under subsection 220(6) of the Income Tax Act a corporation may assign any amount payable under this Act. However, according to Subsection 220(7) the minister of National Revenue “is not required to pay to the assignee, the assigned amount.” As an alternative, the CRA will allow a qualifying corporation to redirect its tax refund, net of any taxes owing, to the mailing address of its choice, for example, a financial institution. However, a refund issued in this manner will still be issued in the name of the corporation.
Other Questions
Who should I contact in the Tax Credits Department with other questions or more detail?
If you have further questions, please e-mail info@mediafunds.ca, or call us at 416-628-0874 and ask to speak to one of our OIDMTC Consultants.
What is CRA’s role in the OIDMTC review process?
Please see the Administrative Process section of the OIDMTC Guidelines. Also see the following link which describes CRA’s role in the OIDMTC review process: http://www.fin.gov.on.ca/en/credit/mtc/faq.html.