Ontario Interactive Digital Media Tax Credit (OIDMTC)

Ontario Interactive Digital Media Tax Credit (OIDMTC)

On April 23, 2015, the government announced proposed changes to the Ontario Interactive Digital Media Tax Credit (OIDMTC). A bulletin with details about the proposed changes was released on May 6, 2015. Draft regulations to implement the proposed changes were posted for consultation on Ontario’s Regulatory Registry on November 2, 2015. This Bulletin provides an overview of the draft regulations. For further details, applicants should consult the draft regulations. Amendments to the Taxation Act, 2007 are also required to implement the changes.

Background

The OIDMTC is a refundable tax credit available to qualifying corporations for expenditures related to the creation, marketing and distribution of eligible interactive digital media products. A 40 per cent refundable tax credit is available for qualifying corporations that develop and market their own products. The credit is 35 per cent for products developed under a fee-for-service arrangement. A 35 per cent refundable credit is also available to qualifying digital game corporations and specialized digital game corporations.

The OIDMTC was introduced in 1998 with broad eligibility criteria to support the growth of Ontario’s emerging digital media industry and the creation of highly skilled jobs.  As interactive digital media products have become mainstream, the existing eligibility criteria of the OIDMTC limit the ability of the credit to target innovative products. 

Between 2003-04 and 2014-15, the OIDMTC is estimated to have grown by over 40 per cent annually. Ontario announced a review of the OIDMTC in the 2014 Ontario Economic Outlook and Fiscal Review. Further to this announcement, the government has held discussions with industry stakeholders on ways to contain costs and modernize support to the industry.

Overview

The 2015 Ontario Budget announced proposed changes to the OIDMTC that would:

  • Amend the primary purpose test to focus on products that entertain the user and products that educate users under the age of 12;
  • Exclude certain types of products, including most websites;
  • Strengthen the rules concerning promotional products; and
  • Improve the product certification process by amending the development requirement.

Subject to the approval of the legislature, the proposed amendments to the OIDMTC described in this Bulletin would be implemented in the Ontario Taxation Act, 2007 and related regulations. As set out in the 2015 Ontario Budget, the proposed amendments would, if enacted, be applied retroactively to the dates set out in this Bulletin. These changes do not apply to the credit available to qualifying digital game corporations and specialized digital game corporations.

In addition to these proposed changes, the Province will invest $6 million in 2015–16 and $10 million per year starting in 2016–17 in a renewed Interactive Digital Media (IDM) Fund to help support some co-production opportunities and activities that would not be eligible for the OIDMTC after the proposed changes described in this bulletin. Through the redesign, Ontario will ensure that the Fund will continue to support early product development, intellectual property investment, and company incubation, while also broadening its scope to include co-productions and magazines. This investment is made possible by the savings from the proposed changes to the OIDMTC.

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