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YOU ARE LOOKING FOR FILM TAX REFUNDS FINANCING FOR FILM

TELEVISION AND ANIMATION IN CANADA! 

Maximize Your Film's Budget: The Power of Canadian Tax Credits

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Introduction to Film Tax Credit Financing

Financing film tax refunds on Canadian productions is currently an integral part of the overall financing for projects in film, television, and animation in Canada. Those in the know are aware that typically a valid tax credit can be financing almost immediately after production has been completed.

Early Financing Through Tax Credits

An even more little known fact, (and we are surprised at the number of people that don’t know this) is that if your tax credit is certifiable and you are somewhat experienced in the industry your tax credit can actually be financing during your production, bringing much-needed cash flow and working capital to your project.

The Challenge of Sourcing Project Financing

When we meet with clients we are not of course surprised to hear that a large part of their total project involvement in the 3 key areas (film, TV, and digital animation) is spent on sourcing financing for their project. While the overall financing environment has improved considerably in  (and boy have those great government tax credit increases helped) it is still a challenge for most productions to cobble together financing for the entire project.

Options and Strategies for Production Owners 

There are, of course, a number of options and strategies available to owners of any particular production. Our focus here in our information is primarily the monetizing of the increased and generous tax credits that come in the form of non-repayable cheques from the government. Your ability to monetize, (we can say ‘cash flow ‘) those credits is a key part of the industry today.

Combining Tax Credit with Other Forms of Financing

Tax credit financing is usually done in conjunction with the other forms of financing in our three key focus areas. Those other types of financing of course include equity, pre-sales, etc.

Key Elements for Tax Credit Financing 

In order to finance your tax credit for film and television tax credit eligibility for certain production costs certain key elements must exist. The one key area to focus on is certification and eligibility, with criteria being a bit different, but essentially the same, depending on which proving your eligible production is domiciled in. Ontario and B.C. seem to garner most of the action...

 Setting Up for Success 

Owners that surround themselves with solid accounting and legal partners and who have a clean special purpose entity set up are 90% of the way there! What we are really saying is that if your production is eligible, and you have documented your bidets and costs carefully, and they are cleanly with a separate legal entity (preferable) you are safe to assume you can have your tax credit financed.

Working with Trusted Advisors

We strongly recommend that you work with someone who is a trusted, experienced and credible advisor in this area who will work with you to maximize the total dollars that you can derive out of your tax credit.

Naturally, a clean tax credit represents 100% of the dollars due to your production. To err on the side of safety and conservatism tax credits are generally financed at 50-80% loan to value. (There are exceptions on the upside and downside as always!). No payments are made on your financing, and final financing costs come out of the final receipt of funds from the government, with any additional balances left over due to your production of course.

Key Takeaways  

1. Nature and Importance of Film Tax Credits: Film tax credits in Canada are a significant part of the financing structure for film, television, and animation projects for funding eligible production costs -  They are essentially government incentives that reduce the cost of production, making them a critical element in the film production financial ecosystem.

2. Early Financing Through Tax Credits: A less-known aspect is that these tax credits can be used for financing production costs via a refundable tax credit based on budget calculations -  not only after the completion of a project but also during production. This early financing is crucial as it provides the necessary cash flow and working capital, enhancing the feasibility and financial stability of a project.

3. Combining Tax Credits with Other Financing Forms: Tax credits are typically part of a larger financing package that may include equity, pre-sales, and other funding forms for an eligible corporation -  Understanding how tax credits fit into this broader financial picture is vital for successful project financing in such areas as the animation and video production tax credit and the television tax credit - In Ontario for example  is a refundable tax credit based upon eligible Ontario labour expenditures incurred by a qualifying production company with respect to an eligible Ontario production.

4. Eligibility and Certification for Tax Credits: To leverage these tax credits, a production must meet certain eligibility criteria and obtain certification via a tax credit certificate. The criteria and process can vary depending on the province, and understanding these requirements is essential for accessing the credits.

5. Role of Trusted Advisors and Proper Management: The effective use of tax credits requires knowledgeable and experienced advisors and meticulous management of production budgets and costs. Ensuring clean and compliant financial management and having the right advisory team in place can significantly impact the successful financing of a project through tax credits.

Conclusion: Leveraging Tax Credit for Successful Productions

The ability to finance your production creatively, with the assistance of the monetization of your tax credit is a powerful strategy not available in all parts of the world, due in most part of course to the generous non-repayable credits the Canadian government as deemed for the industry. Utilize tax credit financing to improve the overall success of your projects.

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor.

 FAQ: FREQUENTLY ASKED QUESTIONS /  PEOPLE ALSO ASK  / MORE INFORMATION 

What are film tax credits in Canada?

Film tax credits in Canada are government incentives that reduce the cost of production for film, television, and animation projects. They are crucial for providing financial support and encouraging filmmaking in Canada. Where you begin principal photography and when you begin it is important.

What is the Canadian Film or Video Production Tax Credit

The Canadian Film or Video Production Tax Credit (CPTC) is a significant initiative designed to bolster the Canadian film and television industry. This program offers a fully refundable tax credit, which is calculated at a rate of 25% of the qualified labour expenditures. This financial incentive is aimed at enhancing the production quality and competitiveness of Canadian film and television content.

The administration of the CPTC is a collaborative effort between the Canadian Audio-Visual Certification Office (CAVCO) and the Canada Revenue Agency. Their joint management underscores the program's importance in fostering the growth of Canadian film and television programming. Moreover, the CPTC plays a pivotal role in nurturing an active and vibrant domestic independent production sector, thereby contributing to the cultural and economic landscape of Canada.

Eligibility for the CPTC is quite specific. To qualify, a production must either be a treaty co-production or another type of film or video production that satisfies the criteria set out in the Income Tax Regulations. These regulations are detailed and designed to ensure that the tax credit supports productions that contribute meaningfully to the Canadian film and television industry.

Can tax credits be used during production?

Yes, in Canada, film tax credits can be utilized not only after production completion but also during the production process. This early financing aids in providing necessary cash flow and working capital.



How do tax credits fit into overall film financing?

Tax credits are often part of a larger financing package that includes equity, pre-sales, and other forms of funding. They play a vital role in reducing the overall financial burden and enhancing a project's viability.



What is required to qualify for these tax credits?

To qualify for film tax credits, a production must meet specific eligibility criteria and obtain certification. The requirements vary by province, and understanding them is crucial for accessing the credits.


Why is professional advice important in managing tax credits?

Professional advice is key in managing tax credits effectively. Experienced advisors help ensure compliance with eligibility requirements and offer guidance on maximizing the financial benefits of these credits.


What factors influence the amount of tax credit a film can receive?

The amount of tax credit a film can receive depends on several factors, including the production's budget, location, and the specific tax credit program it qualifies for.


Are there different types of tax credits for different kinds of productions?

Yes, there are different tax credits available for various types of eligible productions, such as feature films, television series, and animation projects. Each category has its own set of qualifying criteria for a qualified labour expenditure as well as other expense categories.


How does the tax credit process impact a film's timeline?

The tax credit process for a fully refundable tax credit can influence a film's timeline, particularly in terms of budgeting and financial planning. An early understanding of tax credit eligibility can streamline the production schedule.


Can international co-productions qualify for Canadian tax credits?

International treaty co productions via a Canadian-qualifying production company can qualify for Canadian tax credits, provided they meet certain criteria, including involvement of Canadian production companies and adherence to treaty requirements.



Is there a risk that tax credit policies might change?

Like any government incentive, there is a possibility of changes in tax credit policies. Staying informed about policy shifts via the Canada Revenue Agency via income tax regulations is important for filmmakers and producers to adapt their financing strategies accordingly. A  video production business produced primarily for business / corporate or institutional-type projects does not qualify for tax credits.

What Expenditures Are Eligible?

Using Ontario as an example eligible Ontario labour expenditures include items such as salaries and wages paid to Ontario residents; as well as items paid for  personal service companies subject to tax in Ontario for the services of an Ontario resident, sole proprietors or freelancers subject to tax in Ontario partnerships

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