With Ontario continuing to be one of Canada’s most vibrant hotbeds for innovation, the digital media industry has seen unprecedented growth over the past two decades. Introduced in 1998, the Ontario Interactive Digital Media Tax Credit (OIDMTC) was designed to foster the digital media industry, specifically when it comes to education and innovation. Below, we’ll take a closer look at the OIDMTC and highlight a few key aspects to be aware of prior to filing for the tax credit.
Eligibility Criteria
In order to successfully file for OIDMTC, it is essential to know what is required under the eligibility criteria for the tax credit. The following are key qualification standards:
Interactive Digital Media Focus
The OIDMTC is exclusively designed for businesses actively engaged in the development of interactive digital media products. Qualifying projects include a wide range of digital content, such as video games, educational software, mobile apps, and more. Eligible assets must be interactive, and invite the user to engage with the platform for the purposes of innovation and further development.
Ontario-Based Operations
Per the name of the program, eligible companies must be based in Ontario, and the development of eligible products must primarily occur within Ontario as well. This is to ensure that funds stay within the province and contribute directly to Ontario’s digital media industry.
Eligible Expenses
OIDMTC offers coverage for a wide range of expenses, which is part of what makes it highly appealing to many filers. Eligible expenses fall into two categories: labour and marketing/distribution expenses. Labour expenses allow you to claim a refundable tax credit on eligible expenses related to labour, like salaries and wages paid to employees directly involved in the development process of your interactive digital media products. Marketing and distribution expenses, on the other hand, are expenses incurred while promoting and distributing your digital media products to a broader audience.
Refundable Tax Credit
Unlike non-refundable tax credits that can only offset your tax liability, the OIDMTC is unique in that it is refundable. This refund can serve as a direct financial boost for recipients and can be particularly helpful for startups and small enterprises. Per Ontario Creates, the tax credit breakdown is as follows:
“A 40% tax credit is available for eligible Ontario labour expenditures and eligible marketing and distribution expenses incurred by qualifying corporations that develop and market their own products (known as “non-specified products”). The credit is 35% on eligible Ontario labour expenditures for products developed under a fee-for-service arrangement (known as “specified products”). A 35% credit on eligible labour expenditures is also available to qualifying digital game corporations and specialized digital game corporations.”
As of 2023, there is no limit on the amount of eligible Ontario labour expenditures which may qualify, and there are no per-project or annual corporate limits on the amount of the OIDMTC which may be claimed. Eligible marketing and distribution expenses, however, are capped at $100,000 per non-specified product.
Tips for Filing
When filing for OIDMTC, your application should provide a clear, comprehensive overview of your project, including its full scope, objectives and all relevant expenses. Being as detailed as possible is key to success, and financial statements, payroll records, and related documents are crucial for your claim. It is also vital to be aware that, like any government programs, the standards and current guidelines for OIDMTC may change over time; working with a qualified consultancy is often one of the best ways to enhance your claim and ensures you don’t miss valuable details during the application process.
Leverage Collaboration
OIDMTC can be particularly valuable when stacked with R&D-focused tax credits like the Scientific Research and Experimental Development (SR&ED) program. Knowing how to leverage funding from both programs is crucial to covering your bottom line and allowing your projects to progress as smoothly as possible.
Finance Your Tax Credit Today
For those looking to make the most of their SR&ED or OIDMTC tax credits, Venbridge is here to help. We know the long waits associated with government tax incentive programs between expenditure and eventual refund can often be detrimental to companies and potentially set operations behind without the proper safeguards in place. We offer trusted financing solutions for eligible SR&ED and OIDMTC recipients.
Learn how we can partner with your team to enhance your initiatives through IMDTC and SR&ED lending by contacting our team today!
