Information on Film Tax Credit for Canadian Independent Productions in Film and Television

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Canada’s film tax credit (by the way that includes productions in television and the rising category of digital animation) is becoming an intrinsically important method of financing independent productions in Canada.

When discussing these credits around Canadian Transfer 16mm Film to Digital Toronto productions with clients it seems increasing evident that three key factors are driving the tax credit issue. Let’s quickly recap what we believe those three factors are, and then let’s discuss your ability to monetize those tax credits into valuable cash flow and working capital.

First of all Canada’s credits slowly seem to have risen to the top of the popularity pile – there isn’t a day these days when we don’t read about U.S. states either considering lowering the state film tax credit, or in some cases abolishing them altogether. A very Fox news clip discuss the potential total abolition of film tax credits, which have long driven the industry to a certain degree. Secondly, the Canadian tax credit program on the other hand is considered more generous a better run. (We suspect that might be also because we only have 10 provinces as opposed to 50 different state laws around such credits!)

Another key factor is that after the 2008 world wide financial implosion debacle industries such as film, TV and animation are just slowly crawling back to normal, given the manner in which productions were financed previously.

As a general rule labour costs have traditionally been about 50% of a productions cost. By in essence having close to doubled the Canadian tax credits in provinces such as Ontario, Quebec and B.C. The current legislation in effect almost doubled when production tax credit per cent ages allowed was increased.

We don’t want to get into a Canadian geography lesson here, but the government also had the foresight to enhance the credits further for your production when you should outside of such major cities as Toronto, Vancouver and Montréal. As an example and case in point, we recently had a client develop a script around an Indian Bollywood type film – by shooting the project about 45 min west of Toronto in a suburban environment our clients tax credit situation was enhanced even further. More grant credit equals more cash flow and working capital for your production. The government appears to like the fact that about 250,000 people work in the industry in Ontario alone, and unlike the U.S. the Canadian government views the industry as an economic driver, not a cash drain.

Working with clients on various projects in film, TV and digital animation gives on an insight into how difficult and challenging it can be to put the financing of a film together. Pre production planning and financing is critical, as the current environment forces you to consider revenue solutions around theatrical release, DVD sales, cable and TV rights, etc.

Utilizing this type of financing allows you to enhance the overall equity, return and financial risk and reward around your project. The film tax credit should be utilized to generate cash flow to assist in completing your project, or in many cases, allowing you to start work on the next one. We are also amazed at when talking to owners and producers as to how long they have been planning certain projects, and the overall financial undertaking they need to invest in vis a vis their time.

Monetizing (i.e. financing) your tax credit will take away a lot of the uncertainty around your productions success. If you have an upcoming project in Canadian film, TV and digital animation speak to a trusted, credible and experienced film tax credit advisor in the area of tax credit breaks. Consider financing your credit to enhance the cash flow and return on capital in your project. That’s a solid film finance strategy!

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