Ontario Production Services Tax Credit (OPSTC)
Note: On November 14, 2022, the Province introduced a legislative amendment to the Ontario Production Services Tax Credit to allow applicants to claim a portion of their location fees. This legislative amendment passed into law on December 8, 2022.
The Province proposed regulatory amendments for eligibility of online productions and for screen credit requirements for productions in the 2022 Budget and in the 2022 Economic Outlook and Fiscal Review (Fall Economic Statement), respectively. These regulatory amendments are still pending.
What Is It?
The Ontario Production Services Tax Credit (OPSTC) is a refundable tax credit based upon Ontario qualifying production expenditures (labour, service contracts and tangible property expenditures) incurred by a qualifying corporation with respect to an eligible film or television production. The OPSTC requirements are generally “harmonized” with the federal Film or Video Production Services Tax Credit administered by the Canadian Audio Visual Certification Office of the Department of Canadian Heritage (CAVCO) and Canada Revenue Agency (CRA). For information on the federal credit contact CAVCO at 1-888-433-2200 or CAVCO.
How Much Is The Tax Credit?
The OPSTC is calculated as 21.5% of all qualifying production expenditures incurred in Ontario. A qualifying corporation’s Ontario labour expenditures, including Ontario labour paid under an eligible service contract, must be at least 25% of the qualifying production expenditures claimed. The OPSTC can be combined with the federal Film or Video Production Services Tax Credit of 16% of qualified Canadian labour expenditures. There are no per-project or annual corporate tax credit limits.
Who Is Eligible?
A qualifying corporation is a Canadian or foreign-owned corporation which carries on a film or video production, or production services business, at a permanent establishment in Ontario, files an Ontario corporate tax return and owns the copyright in the eligible production, or contracts directly with the copyright owner to provide production services to an eligible production.
What Is An Eligible Production?
An eligible production must exceed a minimum production cost and must not be in an excluded genre. In addition, a production that receives an Ontario Film and Television Tax Credit (OFTTC) is not eligible for an OPSTC.
The production cost must exceed $1 million (Cdn.), except in the case of a series consisting of two or more episodes, or a pilot for such a series. In the case of a series or pilot, the cost for each episode which has a running time of less than thirty minutes must exceed $100,000 (Cdn.) and the cost for episodes with a longer running time must exceed $200,000 (Cdn.).
The production must not be in an excluded genre: news, current events or public affairs programming; a program that includes weather or market reports; talk shows; productions in the nature of a game, questionnaire or contest; a sports event or activity; a gala presentation or awards show; a production that solicits funds; reality television; pornography; advertising; or a production produced primarily for industrial, corporate or institutional purposes; nor must it be a production for which public financial support would be contrary to public policy.
What Expenditures Are Eligible?
Qualifying production expenditures are incurred in Ontario and include eligible wages, eligible service contracts and eligible tangible property expenditures, such as equipment, studio rentals and computer software (and in the case of location fees, those expenditures which were incurred after November 14, 2022).
Eligible production expenditures are expenditures paid to companies and partnerships which have a permanent establishment in Ontario and to Ontario-based individuals (individuals resident in Ontario at the end of the calendar year prior to the commencement of principal photography).
The expenditures must also be reasonable in the circumstances, directly attributable to the production, and incurred for the stages of production after the final script stage to the end of postproduction. Expenditures must be incurred in the taxation year, paid in the taxation year or within 60 days after the end of the taxation year, and paid for services provided in Ontario.
How Is The Credit Administered?
The OPSTC is jointly administered by Ontario Creates - an agency of the Government of Ontario - and the Canada Revenue Agency. Application is made to Ontario Creates for a certificate of eligibility, which the production company files with the Canada Revenue Agency together with its tax return in order to claim the OPSTC. The amount of the credit, net of any Ontario taxes owing, will be paid to the qualifying corporation. If the qualifying corporation does not owe any taxes, the full amount will be paid out.
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*PLEASE NOTE: CANADA REVENUE AGENCY (CRA) ADMINISTERS BOTH FEDERAL AND ONTARIO CORPORATE TAXES. THE CRA IS THE FIRST POINT OF CONTACT FOR ALL CORPORATE TAX ENQUIRIES (1 800 959-5525).
Note: This sheet is a general guide and may not be relied upon in order to determine eligibility or the amount of an anticipated credit. Please consult the OPSTC legislation and regulation for further details.
As of November 2021
OPSTC COVID FAQS
Please see information on CRA’s website.
1. Are costs for medical and/or health and safety personnel required due to COVID-19 eligible costs for tax credits? What about expenses related to testing for COVID-19 and extra cleaning and sanitation costs?
2. Are costs for personal protective equipment (PPE) required due to COVID-19 eligible costs for tax credits?
3. Are suspension, severance or relief payments eligible expenditures for tax credits? What about retention payments to induce an individual to remain with the production while it is stalled?
4. Are extended studio hold payments due to COVID-19 eligible expenditures for OPSTC?
5. Will deposits or advances paid to vendors be eligible costs for tax credits where those amounts have been forfeited due to COVID-19?
6. Is CEWS considered assistance for purposes of the Ontario tax credits?
7. My production has stalled and will never commence principal photography because of COVID-19. Can I still claim the OPSTC on the expenditures my company incurred before we were shut down?
8. My production has been completed but my company had to make changes due to COVID-19 so we weren’t able to meet all of the tax credit eligibility requirements. Have any eligibility requirements been waived due to COVID-19?
FAQs as of January 2023
This version of the FAQs has been updated to provide information regarding the proposed regulatory amendments for online productions (see #1) and screen credit requirements (see #15), and the legislative amendment to allow eligibility for location fees (see #7 and #8); and information about appeals (see #16 and #17).
Numbering has changed.
Frequently Asked Questions
Are productions that are only exhibited on online platforms eligible for the OPSTC?
Productions that are only exhibited online through a service which provides content to the end user for a purchase, license or subscription fee are eligible for the credit. Examples of such over-the-top streaming services are Netflix, Crave, Amazon Prime and Hulu.
In the 2022 Budget and the 2022 Economic Outlook and Fiscal Review (Fall Economic Statement) the Province proposed regulatory amendments for eligibility of online productions. These regulatory amendments are still pending.
Does Ontario follow CAVCO Public Notice 2017-02 which defines ineligible genres and Public Notice 2017-03 which defines advertising for purposes of federal film or video production tax credit programs?
Yes, Ontario Creates uses these definitions in determining if a production is an excluded production by virtue of being one of the genres listed in the OFTTC and OPSTC Regulation (O. Reg 37/09) section 27(2) h and section 31 paragraph 4, or section 90(11) of the Taxation Act, 2007 for OCASE. While Ontario Creates uses the same definitions, Ontario Creates will conduct our own assessment of a production’s genre.
Has there been any change to the treatment of talk shows for the purposes of the Ontario tax credits?
Talk shows have always been and continue to be ineligible for all Ontario tax credits, including the OFTTC, OPSTC, OCASE and OIDMTC. Talk shows are only eligible for the federal credit, the Canadian Film or Video Production Tax Credit administered by CAVCO, where principal photography began after February 16, 2016. Talk shows are not eligible for the federal Film or Video Production Services Tax Credit administered by CAVCO.
If my qualifying labour expenditures are less than 25% of my Qualifying Production Expenditures, am I still eligible for the OPSTC?
Yes, however, your production’s qualifying production expenditures will be capped at no more than 4 times your qualifying labour expenditures. Labour expenditures include salary and wages and labour paid under an eligible service contract.
When are eligible expenditures incurred?
They must be incurred for the stages of production after the final script stage to the end of post-production. In order to be qualifying production expenditures for a corporation’s taxation year, the expenditures must be incurred in the taxation year, paid in the taxation year or within 60 days after the end of the taxation year.
How do I determine residency?
Under film and television tax credits, eligible labour expenditures are based on residency in Ontario for purposes of the provincial credits, and residency in Canada for purposes of the federal credits. CRA provides guidelines to assist companies in determining whether individuals are resident in Canada. An individual may be a “factual resident” or a “deemed resident” of Canada. Factual residents of Canada are those who have established significant residential, economic and social ties to Canada. They are subject to Canadian and provincial/territorial income tax on worldwide income throughout the year. Labour expenditures paid to factual residents may qualify for both federal and provincial film and media tax credits. CRA’s guidelines have a list of documents that are evidence of strong ties to Canada for purposes of establishing if someone is a factual resident of Canada. For more information see Residency status determination. The same principles can be applied in determining if an individual is Ontario-based individual or a resident of another Canadian province.
This is distinguished from “deemed residents” who have not established significant ties in Canada but were in Canada for 183 days or more in a calendar year. They are subject to Canadian income tax on worldwide income throughout the year and are subject to federal surtax instead of provincial tax. For more information see Residency status determination. Labour expenditures paid to “deemed residents” may qualify for federal film and television tax credits but do not qualify for provincial film and television tax credits.
If I lease a location for shooting in Ontario, either directly from the property owners or via an agent or broker, will those expenditures be eligible tangible property expenditures under the OPSTC?
To qualify as an eligible tangible property expenditure, an expenditure must meet all of the conditions set out in subsection 92(5.7) of the Taxation Act, 2007. This includes the condition that the expenditure must be paid to a person or partnership that is ordinarily engaged in the business of selling or leasing tangible property of the type of tangible property acquired or leased by the corporation. Whether a person or partnership is “ordinarily engaged in the business” is determined on an objective basis by weighing all of the facts and circumstances of the particular business. The person or partnership selling or leasing the tangible property must be ordinarily engaged in the business of selling or leasing the particular property and the use of an agent or broker by the corporation claiming the tax credit or by the person or partnership selling or leasing the property is not relevant in making this determination.
In the case of eligible tangible property expenditures incurred after November 14, 2022, in respect of real property leased by the qualifying corporation from a person or partnership not ordinarily engaged in the business of leasing the type of real property in question, the expenditures must be paid to a person or partnership that deals at arm’s length with the qualifying corporation; in the case of an individual who is not an employee of the qualifying corporation, and in the case of a partnership who members are not employees of the qualifying corporation.
Is there a limit on the amount of location fees that can be claimed as eligible expenditures?
The definition of eligible tangible property expenditures has been amended to remove the “ordinarily engaged in” requirement for expenditures for leasing real property in Ontario for on-location filming. This is effective for expenditures incurred after November 14, 2022. To be eligible, expenditures for leasing real property for on-location filming must be reasonable in the circumstances and paid to a party that deals at arm’s length from the qualifying applicant company.
The maximum eligible expenditures for leasing real property for on-location filming that can be claimed for a production is five per cent of the production’s qualifying production expenditures, net of these location costs.
What is considered ‘assistance’ and therefore grinds the tax credit?
Assistance includes grants, subsidies and forgivable loans. These will reduce (‘grind’) your tax credit. However, the 2015 Ontario Production Services and Computer Animation and Special Effects Transitional Fund is not considered assistance for the purposes of the OFTTC, OPSTC or OCASE.
Bona fide loans with a set repayment date, other tax credits, licence fees and equity investments are not considered assistance.
Sponsorships may be considered assistance if there does not appear to be an exchange of benefits (such as cash or goods) at fair market value between the producer and the sponsor.
Labour deferrals reduce the amount of labour that can be claimed for the OFTTC and OCASE tax credit. Deferrals for non-labour costs do not. The OPSTC is based on qualifying production expenditures (QPE) which is broader than just labour. Deferrals of qualifying production expenditures reduce the amount of QPE that can be claimed for the OPSTC.
We will want to see documentation of all the financial contributions to a production, including loans, deferrals and sponsorship amounts.
In April 2017, CRA posted an application policy to provide stakeholders in the film, video and television production industries with an overview of the legislation related to the definition of assistance. The application policy addresses various forms of financing and provides guidance to stakeholders to help them determine whether an amount would be considered assistance for purposes of calculating the Canadian Film or Video Production Tax Credit (CPTC) and the Film or Video Production Services Tax Credit (PSTC). The policy also applies to similar provincial tax credits that are co-administered by CRA such as OFTTC, OPSTC and OCASE.
Does the timing of an OFTTC or OPSTC Certificate of Eligibility impact OCASE?
Yes. For purposes of OCASE, an eligible production is one that has already been issued an OFTTC or OPSTC Certificate of Eligibility. If you are a producer that will be applying for OFTTC or OPSTC and you have performed eligible animation or visual effects activities so you plan on applying for OCASE, you may wish to consider staggering your applications. Applicants for the OFTTC/OPSTC may apply to Ontario Creates as early as the first day of principal photography or key animation. OCASE applicants may only apply to Ontario Creates at the end of their fiscal year. If you have applied promptly, you will have your OFTTC/OPSTC Certificate of Eligibility in hand and it won’t hold up your OCASE application. Likewise, you may have contracted vendors to provide animation or visual effects services on your production. The processing of OCASE applications by those vendors for their work will be held up pending the processing and certification of your OFTTC/OPSTC. Producers are encouraged to communicate with their visual effects and animation suppliers as to when they file their OFTTC/OPSTC claims.
What is the best way to send the certificates of eligibility to CRA?
Applicants are encouraged to upload their certificates via the “T2 attach-a-doc” feature of their CRA-approved tax software. This is a feature that allows taxpayers to electronically file supporting documentation with the CRA directly at the time of filing their T2 tax return (note that documents can also be filed via this feature within 24 hours after filing the T2 tax return electronically). If the document is filed later (i.e., after 24 hours from the time of filing the T2 tax return electronically), you can register for My Business Account (MyBA) and then submit it electronically via the MyBA portal. A new feature is now available on MyBA that allows registrants to submit their certificates and other documents without a case or reference number. Please see What’s new – Film and media tax credits on CRA’s website for further details.
If you choose to submit the certificate by mail, it should be sent to the appropriate CRA tax centre. You can also submit the certificate by fax and it will be converted to electronic format when received at the CRA. Please see Film services units - Canada.ca for the mailing addresses and fax numbers.
What is the tax credit administration fee?
The OPSTC administration fee is calculated as 0.15% of eligible expenditures for the application. There is a minimum fee of $5,000 per application and a maximum fee of $10,000 per application.
There is an additional filing fee of $100 applied to applications for Certificates of Eligibility received more than 24 months after the end of the first fiscal year in which principal photography began. Where a year-end has not been included in the application, the additional fee will be applied to applications submitted more than 24 months after the start of principal photography. As well, there is a fee of $100 for each Amended Certificates.
Where can I get more information?
If you have further questions, please contact the phone duty line by e-mail firstname.lastname@example.org or call us at 416-642-6659.Please leave a detailed message including your name, company, phone number and the file about which you are inquiring. There is a different person on phone duty every day, and he/she will respond to your email or call within one business day.
Does crowdfunding impact a production’s tax credit?
Crowdfunding will not impact a production’s eligibility for a tax credit. However, depending on the type of crowdfunding model utilized, it may be treated as assistance. In April 2017 CRA posted an application policy on various forms of financing and how to determine if they were assistance. The policy also dealt with three crowdfunding models: donation, lending and investment. The donation model is the one that producers might be most likely to use where there are small gifts/items provided by the producer to the contributor based on tiered levels of donation. In accordance with CRA’s application policy the donation model of crowdfunding would be treated as assistance.
CRA Application Policy
Is a screen credit required on the production?
In the 2022 Economic Outlook and Fiscal Review (Fall Economic Statement) the Province proposed a regulatory amendment to require a mandatory screen credit. This regulatory requirement is still pending.
What can I do if my product/production is found to be ineligible?
If an issue of ineligibility arises during review, the Business Officer will communicate with the Applicant to explain the issue, ask further questions and request additional documentation if required. The Applicant will be given the opportunity to provide additional information or documentation to support their position for any issue in dispute.
After considering any additional information or documentation and consulting with the Ontario Creates Director of Tax Credits, if the issue remains unresolved, Ontario Creates may recommend the Applicant withdraw the product(s)/production(s) from review. If the product(s)/productions(s) are not withdrawn, Ontario Creates will issue a Letter of Ineligibility for those product(s)/production(s).
If a Letter of Ineligibility has been issued for a product or production, the Applicant cannot resubmit that product or production for a tax credit. CRA is notified of any Letters of Ineligibility issued by Ontario Creates.
Determinations of ineligibility are not subject to the Ministry of Finance or Canada Revenue Agency objections and appeal process. Applicants can commence an application for judicial review of an Ontario Creates’ decision on eligibility.
Can I appeal the amount of the tax credit received?
If you have received a Certificate of Eligibility but wish to appeal the amount of the tax credit determined by the CRA, please refer to the CRA’s objections and appeals process at : https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/ontario-corporations-tax.html
Note that determinations of ineligibility are not subject to the Ministry of Finance or Canada Revenue Agency objections and appeal process.