On February 18 2003 Canadian Finance Minister John Manley tabled the federal Budget in the Canadian House of Commons, announcing changes to the film or video production services tax credit and the Canadian Television Fund (CTF). For those who rely on CTF financing for domestic production, the Budget will give cause for concern.
The services credit, which is a labour-based tax credit aimed at encouraging foreign production in Canada, provides a refundable tax credit equal to 11% of qualified Canadian labour expenditures. This credit is available to Canadian and foreign-controlled corporations that carry out business in Canada and either own the copyright in an accredited production or have contracted directly with the copyright owner of an accredited production to provide production services. The Budget increased the credit rate to 16% of qualified Canadian labour expenditures incurred after February 18 2003.
No changes were announced to the Canadian film or video production tax credit (the so-called 'content credit’), which continues to provide a refundable tax credit of 25% on qualified labour expenditures rendered in connection with Canadian film or video productions produced by eligible Canadian controlled corporations. However, mention was made in the Budget that the federal government will continue to consult with the domestic film industry to develop criteria for streamlining the delivery of the content credit tax refund. The federal government also intends to continue these consultations with a view to ensuring that the structure and operation of the content credit are appropriate to achieve the intended support for domestic film and video productions.
Finally, the Budget reduced the federal government's annual contribution to the CTF by 25%. The Department of Canadian Heritage's contribution will now be C$75 million a year over the next two years. The reduction comes at a critical moment for Canadian producers as the CTF is commencing its annual, month-long evaluation of funding applications for dozens of new and renewed productions.
For further information on this topic please contact Tara Parker at Goodmans LLP by telephone (+1 416 979 2211) or by fax (+1 416 979 1234) or by email ([email protected]). The Goodmans LLP website can be accessed at www.goodmans.ca.