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CANADA REVENUE AGENCY FILM AND TAX CREDIT INCENTIVES
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Tax credit incentives in Canada play a key role in financing ' media ' projects in film, TV, and digital animation. Given the somewhat limited access for independent producers to specialized Canadian chartered bank financing, how and where do independent film financiers play a role in getting our project fully financed? Let's dig in.
SPECIALIZED TAX CREDIT FINANCING
Specialized loan funding and media financing comes a lot easier if the producer/owner has a bit of an inside track via the following information. Not only did the 2008-2009 worldwide recession take manufacturing, technology and service industries down, it also slowed down the ability of the entertainment industry and production companies for the access to capital it needed. Almost no hedge fund firms, angel investors, or VCs in Canada offer film tax credit or equity/debt finance solutions. This forces project owners to work even hard to access capital.
DIFFERENT TYPES OF FINANCING TO COMPLETE YOUR PROJECT
There are different players the owners/producers must deal with to get a project fully financed. They include equity investors, the project owners themselves, government funding, and niche financiers specializing in pre-sale, distribution, and gap financing.
Projects that can access film, TV and digital media animation finance solutions require a strong focus, experience, and the ability to forge relationships with independent film financiers to pull a full financing package together.
DO BANKS FINANCE TAX CREDITS FOR INDEPENDENT PRODUCTIONS
Producers that are not well known, just starting or focusing on smaller projects, generate very little interest from the bank film financing sector. In fact, to our knowledge, some of the Canadian banks do not participate at all when it comes to proven strategies such as tax credit financing.
CANADIAN PROVINCES ARE POPULAR LOCATIONS FOR TALENT IN FILM AND MEDIA
In Canada, provinces such as Ontario, B.C., and Quebec garner most of the tax credit ' action. ' Using digital interactive media projects as an example, Canada has become a hotbed of workers with talent and skills and technological savvy when it comes to working on media-related projects in film, television and interactive media.
REFUNDABLE TAX CREDITS
While tax credits often can finance up to 30-50% of a project, independent film financiers can provide bridge loans, distribution financing, and print and advertising (‘P&A") finance.
Critical to accessing support from an independent film financier is the ability to pull a team together. That team can be internal or external, and the expertise there will save you two things - time... and money! Typically that team will include a tax credit accountant and a lawyer or law firm.
WHY IS CANADA SO POPULAR IN TAX CREDIT FUNDING
Refundable tax credits account for a large portion of the billions of dollars of revenue and employment from media and film. The credits are a combo of federal and provincial, provincial, of course, depending on where your project is produced, filmed, etc.
THE ROLE OF YOUR TAX CREDIT ACCOUNTANT IS KEY
The tax credit accountant will maximize your claim, as well ensuring its approval and viability for financing. (Often, an' opinion letter ' is provided by the film tax accountant verifying the calculations in your claim)
Depending on what province you've chosen to domicile, your tax credit in different percentages are applied to your refund for your total 'spend.' The tax credit is, simply speaking, a ' point system' whereby you get or lose points based on Canadian content, foreign involvement, whether the producer is Canadian, where you film, etc.
Two quick clarifications: Partial foreign ownership of your projects is called a 'co-production' and must be validated upfront. Where you film or produce gives you what’s known as a ' Regional Credit. '
CONCLUSION
Independent film financiers also like ' slates. ' That's a group of projects that lowers the volatility risk of entertainment. Each project typically in Canada is a separate legal entity.
Tax credits that are cash flowed work best when you've got good advice and good people working your deal. If you are looking for independent film financiers in Canada to finance tax credits and other parts of a project, seek out and speak to a trusted, credible and experienced Canadian business financing advisor for your film and tv projects.
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Stan Prokop
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