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Are you looking to enhance your capital stack in 2023 and solidify your position as a major contender within the digital media industry? Knowing how to leverage government grants and funding is essential to fuelling any startup or Canadian business that paves the way for innovation. While many in the Research and Development (R&D) and scientific development industries may be familiar with the Scientific Research and Experimental Development (SR&ED) program, not everyone is aware of the Interactive Digital Media Tax Credit (IDMTC). As a valuable source of funding that can be combined with other government programs like SR&ED, it is vital to be aware of the specific requirements when it comes to qualifying for IDMTC and to know that each province offering IDMTC has its own mandates for eligibility.
Below, we’ll take a closer look at some of the specifics of IDMTC, as well as the benefits of partnering with a proven lender like Venbridge. Read on to learn more.
Which Provinces Offer IDMTC?
One of the first aspects you’ll want to know is that not every province in Canada offers this tax credit. With that being said, due to the high concentration of gaming, animation studios and qualifying filmmaking companies in certain hotspots like Toronto, Montreal, and Vancouver, the good news is many eligible companies are already likely to be situated in a location that offers IDMTC. Per the CRA, the digital media tax credit is available in multiple provinces, including:
- British Columbia
- Ontario
- Newfoundland and Labrador
- Quebec
- Nova Scotia
- Manitoba
As mentioned above, every province has its own designated guidelines for applicants, as well as qualifiers for what kinds of projects are deemed eligible. From education software to video games and AR/VR products, the main qualifiers that eligible companies must meet are the following objectives:
- Products must be designed to educate, inform, or entertain users
- Products must be intended to be used interactively, and
- Eligible platforms may present information using text, sound and images in a combination that allows the above qualifiers to be met.
What is NOT Eligible?
As with any external funding source, not ALL forms of digital media are able to qualify for IDMTC. While certain digital assets may check some of the qualifiers above, if they fail to meet provincial specifications or cannot satisfactorily prove that they abide by program guidelines, they may be deemed ineligible. Exclusions for IDMTC often consist of:
- Blogs or blogging platforms
- Search engines
- News, weather, financial market reporting and public affairs platforms.
- Social Media
- Video streaming applications
- Products used primarily for interpersonal communication and more.
For the best results on your application, it is crucial to be aware of the specific provincial requirements in your region (for example, view BCs here) and to ensure your product adheres to all relevant guidelines.
What Are the Funding Options?
If you’re hoping to combine IDMTC and SR&ED, you’ll want to be aware that it is doubtful that you’ll be to receive both for the same project within the same calendar year. The Government of Canada has strict guidelines in place limiting your ability to stack this particular form of capital. Thus you’ll want to investigate further to determine which program better suits your needs in both the long and short term. For those intending to only apply for IDMTC, the general outline for regional allocation is as follows:
- BC: 17.5% of eligible salary and wages incurred in the tax year
- Ontario: 40% of expenditures, including marketing and distribution expenditures, or 35% of expenditures for products developed under a fee-for-service arrangement
- Newfoundland and Labrador: 40% of qualifying expenditures, which include eligible salaries and 65% of eligible remuneration
- Quebec: 37.5% of eligible labour expenditures
- Nova Scotia: The lesser of 50% of qualifying expenditures or 25% of total expenditures, plus a bonus credit of 10% (qualifying) or 5% (total) expenditures, is also available
- Manitoba: 40% of eligible project costs or 35% of eligible labour costs for the year
Venture Debt Funding with Venbridge
Whether your R&D project is in the key points of development or you’re looking to find creative ways to combine SR&ED and IDMTC (for eligible regions/applications), having access to quick capital is essential for growth and sustainable momentum. At Venbridge, we know the long waits associated with government funding can often be detrimental to innovation-based companies and potentially set operations behind without the proper safeguards in place. That’s why we’re proud to offer trusted venture debt financing for eligible SR&ED applicants and those who can stack SR&ED and IDMTC. With the help of our team, you can receive your SR&ED loan in as little as 3 business days. We are proud to stand behind Canadian innovation and to support your funding needs when it matters most!
