When it was originally introduced, the purpose of the tax credit was to support the emerging digital media industry and help develop additional highly skilled jobs.
Over the years, it has undergone several changes. Today, the goal of the tax credit is similar to its original purpose … to foster innovation and growth. However, it is less broad than it was in 1998.
The current OIDMTC can be claimed on expenses related to:
In addition to the above service, film and TV websites purchased by broadcasters and embedded in their websites.
Some exemptions from the tax credit include products such as search engines, real estate databases and public affairs products. Large digital game corporations (qualifying digital game corporations and specialized digital game corporations) also have additional requirements to meet.
If you are not a large digital corporation, you may be eligible for the OIDMTC if your corporation:
If you meet these requirements, you can recover up to 40% of labour costs and $100,000 of marketing and distribution expenses paid within 60 days of the end of the tax year for products you develop and market as your own product. These are called non-specified products.
For specified products, which are developed under a fee-for-service arrangement (products developed because someone asked you to), you can claim a 35% credit of labour expenses incurred. You cannot claim marketing and distribution costs for specified products, as these would be incurred by the buyer. Note that there is no limit on the eligible labour nor are there per-project or annual limits on what can be claimed.
To qualify for the OIDMTC your costs must meet the 80/25 rule:
Furthermore, the expenses can’t have been claimed under one of the following tax credits at any time.
To apply, you must also have a certificate of eligibility from Ontario Creates that you applied for within 18 months of the end of the tax year in which development of the eligible product was completed.
For more information on OIDMTC or to seek other business tax advice, please contact our team today.