Do You Qualify for the Ontario Interactive Digital Media Tax Credit?
The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a government funding program that provides financial support to software and digital application developers within the province. It entitles eligible interactive digital media developers to recover a portion of labour and marketing/distribution expenses attributable to both specified and non-specified products.
These Ontario Creates tax credits will help companies recover up to 35-40% of expenses for eligible Ontario interactive digital media projects.
To qualify for funding through the Ontario Interactive Digital Media Tax Credit, software developers must be established in the province and use Ontario-based labour. Additionally, projects must be focused on digital games, mobile applications, or e-learning tools to educate children under 12 years old.
What is the Ontario Interactive Digital Media Tax Credit (OIDMTC)?
The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a business incentive provided through the Government of Ontario and administered by Ontario Creates. It helps Ontario-based companies recover a portion of expenses related to the development and commercialization of entertainment and education-based software.
Applicants of the Ontario Interactive Digital Media Tax Credit may receive up to 35-40% of eligible expenses related to labour and distribution.
For further analysis of what the program is and how it can benefit Ontario-based media developers, including individual streams of funding support, please access this OIDMTC overview blog.
Who is Eligible for the Ontario Creates Interactive Digital Media Tax Credit?
To claim the Ontario Interactive Digital Media Tax Credit, businesses must:
- Be incorporated in Canada (may either be Canadian or foreign-owned);
- Develop an eligible product at a permanent establishment in Ontario;
- File taxes in Ontario; and
- Maintain annual revenues less than $20 million and total assets less than $10 million.
Products Eligible for Ontario Interactive Digital Media Tax Credits
Products that may be eligible for the Ontario Interactive Digital Media Tax Credit include specified products (developed for a purchaser) or non-specified products related to:
- Digital Games;
- Mobile Applications; and
- E-learning products for children under the age of 12.
Furthermore, to qualify, eligible projects must either educate, inform, or entertain end users through two of the following three communication mediums:
- Sound; and
Ineligible Products: Operating system software is not eligible for OIMDTC support.
Expenses Eligible for OIDMTC Funding
There are two types of expenses that are eligible for Ontario Creates tax credits:
- Labour: Salaries and wages paid to Ontario-based employees and remuneration for arm’s-length Ontario-based persons (including individuals, partnerships and corporations) who are not employees. Labour costs incurred for up to three years prior to project completion can be included.
- Marketing and Distribution: Up to $100,000 in eligible marketing/distribution costs can be included for non-specified products and can be included for activities performed up to 24 months prior to, and up to 12 months following, project completion. Specified products are not eligible to expense marketing/distribution costs.
All products must include labour expenses that pass both elements of Ontario Creates’ 80/25 rule. This states that:
- 80% of the product’s total development labour must be attributable to eligible wages/remuneration paid to individuals, personal corporations, or sole proprietorships that do not have employees.
- 25% of the total development labour to create the product must be attributable to eligible wages of employees of the qualifying corporation.
Access Alternate Government Funding for Software Development
Ontario digital media tax credits are an entitlement program for businesses, meaning that eligible companies can claim these to offset corporate income taxes. Tax credits are retroactive in nature, which means companies must first incur costs prior to applying for funding.
Even better, many software businesses may also qualify to receive project funding for future initiatives. Government grants and loans require proactive companies to apply for funding prior to incurring expenses, but often provide greater incentive than tax credits do.
To learn more about developing a proactive approach to government funding programs, download the How to Build a Proactive Funding Plan slide deck.
Posted: July 19, 2013 by Ryan Weaver. Updated: January 2, 2018 by Jeff Shepherd.