Recent Changes to the Ontario Taxation Act
Do you receive Production Services Tax Credits? Recent changes to the Taxation Act (Ontario) (the “Act”) may increase the refundable tax credit that an Ontario producer is eligible to receive under the Ontario Production Services Tax Credit (“OPSTC”) by expanding the categories of labour costs included in the calculation of the cap on qualified production expenditures (“QPE”).
What does this mean for Ontario Production Companies?
The OPSTC enables qualifying production companies to receive a tax credit of 21.5% of their QPE, which is generally calculated as the sum of labour, service contract and tangible property expenditures.
Changes to the method of calculation
Prior to March 25, 2020, the day the legislative changes came into force, the method for calculating a production’s cap on QPE included the salary and wages of the production company’s employees, service contract expenditures that related to salary and wages, and reimbursements for labour expenditures paid by the production company to its parent corporation. Payments made to freelance contractors were excluded from the calculation of the cap on QPE.
Updates include payments to Freelance Contractors
The recent amendments to the Act now include remuneration paid to freelance contractors paid under a service contract in calculating a production’s cap on QPE. This change is retroactive to April 23, 2015.
Outcome of the changes for Corporations
By broadening the categories of labour costs that are eligible to be included in the QPE cap calculation, the cap on QPE will be higher, in some circumstances, resulting in an increase in the amount that the qualifying corporation is eligible to receive under the OPSTC.
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Edwards PC, Creative Law is a boutique law firm provides legal services to Music, Film, Animation, TV, Digital Media, Game, and Publishing industry clients. For more info and blogs, please visit www.edwardslaw.ca
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* This article is for general informational purposes only and is not to be construed as legal advice. Please contact Edwards PC, Creative Law or another lawyer, if you wish to apply these concepts to your specific circumstances.