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Film Production and Visual Effects in British Columbia 2010 deals with BC Film and Television Tax Credits, Structuring for Visual Effects Work in BC and Canadian Indigenous Tax Credits.
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Presented by:
Film Production and Visual Effects in British Columbia 2010
Gordon W. Esau, Fraser Milner Casgrain LLPRobert Wong, British Columbia FilmJuliet D.W. Smith, Fraser Milner Casgrain LLP
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Presented by:
BC Film and Television Tax Credits
Robert WongVice President, Tax Credits & DevelopmentBritish Columbia Film
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Production Services Tax Credit (PSTC)• Refundable tax credits• Based on BC labour expenditures• No production cap• No corporate cap• No annual cap
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PSTC – How much is it worth?
• The PSTC consists of 4 tax credits:– Basic – 33%*– Regional - 6%– Distant Location – 6%– Digital Animation or Visual Effects (DAVE) – 17.5%*– If eligible, may claim all 4 tax credits– Plus 16% federal tax credit
* Effective on productions starting principal photography after February 28, 2010
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BC-based Individual - Definition
• Principal photography begins after February 19, 2008:– Resident in BC at the end of December 31 of the year preceding
the taxation year for which a tax credit is claimed
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BC-based Individual – Scenario #1• Production starts shooting on August 1, 2010
• Production company taxation year December 31, 2010
• Individual must be resident in BC as of December 31, 2009
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BC-based Individual – Scenario #2• Production starts shooting on August 1, 2010
• Production company taxation year January 31, 2011
• Individual must be resident in BC as of December 31, 2010
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DAVE – What is it?• A tax credit for digital animation or visual effects activities
performed in BC• 17.5% of BC labour expenditures directly attributable to digital
animation or visual effects activities• Can be combined with the Basic, Regional and Distant Location
PSTC
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DAVE – Eligibility requirements• Must qualify for the basic PSTC• Visual effect must be created primarily with digital technology• Visual effects activities must be prescribed activities• Labour must be directly attributable to creating the visual
effect
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DAVE – What activities are excluded?• Audio effects• In camera effects• Credit rolls• Subtitles• Effects which are created by editing activities• Effects created for use in promotional material
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DAVE – What activities are included?• Designing• Modeling• Rendering• Lighting• Painting
• Animating• Compositing• Visual effects photography• 3D stereoscopic filming
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Assumptions:
A. Invoice from BC VFX house: $1,000,000
• Applicant company can claim:
B. BC labour portion of BC VFX house invoice (A): $650,000
C. On-set BC labour directly attributable to creating effects: $400,000
D. Other BC labour: $550,000
E. Total BC labour expenditures: (B) + (C) + (D) $1,600,000
Calculations:
Step 1: Calculate Basic PSTC:
F. Applicable Basic rate: 33%
G. Basic PSTC: (E) x (F) $528,000
Step 2: Calculate DAVE PSTC:
H. Applicable DAVE rate: 17.5%
I. DAVE PSTC: [(B) + (C)] x (H) $183,750
J. Total Provincial Tax Credits:(G) + (I) $711,750
BC Tax Credit Example – Filmed in BC
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Calculation:
K. Canadian labour expenditures: (E) $1,600,000
• Less:
L. Provincial tax credits: (J) $711,750
M. Total Qualified Canadian labour: (K) – (J) $888,250
N. Applicable federal rate: 16%
Total Federal Tax Credit: (M) x (N) $142,120
Federal Tax Credit Example – Filmed in BC
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DAVE – Productions filmed outside of BC• Who can claim the tax credits?
– BC visual effects house, or – Production company if it has a “permanent establishment” in BC
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Assumptions:
A. Invoice from BC VFX house: $1,000,000
B. BC labour portion of BC VFX house invoice (A): $650,000
Calculations:
Step 1: Calculate Basic PSTC:
C. Applicable Basic rate: 33%
D. Basic PSTC: (B) x (C) $214,500
Step 2: Calculate DAVE PSTC:
E. Applicable DAVE rate: 17.5%
F. DAVE PSTC: (B) x (E) $113,750
G. Total Provincial Tax Credits:(D) + (F) $328,250
BC Tax Credit Example – Filmed Outside of BC
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Calculation:
H. Canadian labour: (B) $650,000
• Less:
I. Provincial tax credits: (G) $328,250
J. Total Qualified Canadian labour: (H) – (I) $321,750
K. Applicable federal rate: 16%
Total Federal Tax Credit: (J) x (K) $51,480
Federal Tax Credit Example – Filmed Outside of BC
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Contact
British Columbia Film Tel: (604) 736 – 7997 2225 West Broadway Fax: (604) 736 – 7290 Vancouver, BC Email: [email protected] V6K 2E4 Web: www.bcfilm.bc.ca
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Presented by:
Structuring for Visual Effects Work in BC
Gordon W. Esau, Partner, Fraser Milner Casgrain LLP
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Contracting directly with the Copyright Owner• Canadian Income Tax Definition:
An ‘eligible production corporation’:– owns the copyright in the accredited production throughout the period
during which the production is produced in Canada, or– has contracted directly with the owner of the copyright in the
accredited production to provide production services in respect of the production, where the owner of the copyright is not an eligible production corporation in respect of the production
• Chain of title opinion to CAVCO and BC Film
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Most Common Structures when Contracting for VFX Work
Structure 1
Copyright Owner
Canadian VFX House
Canadian Production Company
Structure 2
Copyright Owner
Subcontractors
Canadian VFX House
U.S
Canada
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Three Party Agreement
Copyright Owner
Canadian VFX House
Production Company
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Contracting through a Canadian Production Company
• Settle form of PSA• Security Agreement• Ownership of Canadian Production Company
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Permanent Establishment in BC• Section 1(1) of the B.C. Income Tax Act:
“permanent establishment” has the same meaning as in the Canadian Income Tax Act
• Canadian Income Tax Act has more than one definition of permanent establishment
• Fixed place of business• Employees reporting for work• Permanent production company
– Investment Canada Act definition is different
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Contracting Directly with BC Visual Effects House• Official Designee Affidavits• Chain of Title Opinion• Information for the Accreditation Certificate Application –
Confidentiality
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Presented by:
Canadian Indigenous Tax Credits
Juliet D.W. Smith, Partner, Fraser Milner Casgrain LLP
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Canadian Film or Video Production Tax Credit• Two types of tax credits in Canada
- production services tax credits- indigenous tax credit for “Canadian content”
productions- Canadian Film or Video Production Tax Credit - 25%- Film Incentive BC Tax Credit - 33% basic
• CPTC Program Guidelines – March 31, 2010- Canadian Audio Visual Certification Office – Part A and Part B certificates- Canada Revenue Agency
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Corporate Information
• Qualified Corporation – permanent establishment in Canada where its primary business is Canadian film or video production.
• Prescribed Taxable Canadian Corporation – owned and controlled by Canadian citizens or permanent residents.
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Canadian Film or Video Production
• excluded productions
• excluded genres
• copyright ownership
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Production Personnel
Key creative personnel – live action• minimum of 6 points with director or writer obtaining points
and one of first two leads- director (2 points)- screenwriter (2 points)- lead performer (1 point)- second lead performer (1 point)- director of photography (1 point)- art director (1 point)- music composer (1 point)- picture editor (1 point)
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Production PersonnelKey creative personnel – animation productions• minimum of 6 points with director or screenwriter and storyboard
supervisor obtaining points and one of first two lead voices
- director (1 point)- screenwriter and storyboard supervisor (1 point)- lead voice (1 point)- design supervisor (1 point)- camera operator (1 point)- music composer (1 point)- picture editor (1 point)
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Production PersonnelKey creative personnel – animation productions continued…• The following points will be allotted if the work is performed
solely in Canada:
- layout and background (1 point)- key animation (1 point)- assistant animation and in-betweening (1 point)
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Producer Control
• Definition of “Canadian Producer”
• Development - the Canadian producer must have and maintain full control over the development of the project from the time at which the producer has secured the underlying rights
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Producer Control• Production - the Canadian producer must have and maintain
full responsibility and control over all creative and financial aspects of the production of the project
• Financing - the Canadian producer must have and maintain full responsibility and control over all aspects of production financing
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Producer Control• Exploitation - the Canadian producer must have and maintain
full responsibility and control over the negotiation of initial exploitation agreements
• Producer Remuneration - the Canadian producer is entitled to a reasonable and demonstrable monetary participation in terms of budgeted fees and overhead, and participation in revenues of exploitation
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Courtesy Credit• Courtesy Credit Exemptions for Non-Canadian Producer-Related Personnel
- Group A- Executive Producer- Senior Executive- Executive in Charge of Production- Supervising Producer- Associate Producer
- Group B- Supervising Executive- Production Supervisor- Production Executive- Production Associate- Executive Consultant- Production Consultant- Creative Consultant
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Thank you
Robert WongVice President, Tax Credits & DevelopmentBritish Columbia Film(604) 736 – [email protected]
Juliet D.W. SmithPartner, Fraser Milner Casgrain LLP(604) [email protected]
Gordon W. Esau Partner, Fraser Milner Casgrain LLP(604) [email protected]
The preceding presentation contains examples of the kinds of issues companies dealing with Film Production and Visual Effects could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.
