Financing Your Canadian Film or Video Production Tax Credit

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ANIMATION FINANCING  VIA TAX CREDITS IN CANADA! 

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THE KEY TO FINANCING TAX CREDITS FOR FILM AND DIGITAL MEDIA IN CANADA

 

It certainly might look like somewhere in Hollywood, but the reality is that many films and television projects are produced and filmed in Hollywood North, a.k.a Canada.

 

FINANCING INDEPENDENT FILM TAX CREDITS IN FILM/TV/MULTIMEDIA

 

 

The Canadian government at both the federal and provincial levels has moved to significantly enhance the generosity around tax credits. Business owners of film, television, and yes animation also can utilize these tax credits to form an integral part of their overall project financing strategy.

 

Independent film producers/project owners recognize the importance of efficient financing and the challenges around raising money and funding for film and animation projects in Canada - Tax credits are a key factor in any film or television or digital multimedia budget.   Federal and provincial tax credit incentives can be a key factor in funding your project in the most efficient, and expedient manner.

 

 

FILM FINANCING WITH TAX CREDITS 

 

Why tax credits? Simply because the federal and provincial governments in Canada recognize that the film tv and multimedia industry in Canada is a strong economic stimulus and creates jobs as well as the promotion of tourism associated with these same projects and productions. Canadian refundable tax credits in film and multimedia are some of the most generous and sought-after in the world.

 

UNDERSTANDING FILM TAX CREDIT FINANCING

 

A very significant portion of your project expenses can be recovered via the appropriate use of tax credits. Moreover, you can finance these claims prior to, or at the time of filing. This generates working capital and cash flow for the current project, and in many cases, we speak to clients who intend to use these funds for their next project.

 

It can be very realistically stated that many projects in film, tv, and digital animation in fact could perhaps not be funded or completed without the effective use of tax credits. When you can ‘monetize‘ or ‘cash flow‘ those credits now you have just taken advantage of a powerful overall project financing strategy!

 

As a result, all areas of Canadian entertainment in our three aforementioned market segments continue to generate box office revenue in Canada. What was a new and innovative strategy in years past now becomes a priority ‘ job 1 ‘ in the financing of almost every project.

 

 

Entertainment projects in film, tv and animation clearly ‘follow the money' and that money has been followed to Canada in a number of different provinces – primarily Ontario and B.C., but in other provinces also.

 

While there is great pressure in many of the U.S. states to reduce, or in some cases eliminate tax credit incentives Canada has in fact increased incentives in every area – the government has essentially based its case that there is a huge economic windfall to Canada by virtue of the tax incentives offered. The term ‘domino theory‘ might well be mentioned, because the way the Canadian government sees it, additional revenue comes into Canada in the form of hotels, food, carpentry, etc.

 

So how are these tax credits financed? In any business your probably are ahead of the game when you work with an expert, and certainly, tax credit finance is no different. We recommend to clients they work with a trusted, credible and experienced advisor in this area. When your project is well documented in the form of a project finance plan and has solid Canadian content in key areas such as Director, Writer, Performers, Art, Music or Animation you have a very significant ability to enhance your total claim for the credit. (Other key areas of your total project are of course: Equity contribution via owners or investors, foreign pre-sales, etc.).

 

Your eligible tax credits can be financed as soon as they are filed – if you have a strong management team – i.e. a good entertainment accountant, lawyer, etc, your credits can even be financed before you file them. That’s a total cash flow strategy that provides valuable cash flow and working capital to your project.

 

  

MAXIMIZE YOUR PRODUCTION BUDGET WITH CANADIAN FILM TAX CREDITS   

 

Let’s look at a quick example – let’s assume your production is budgeted at 1.04 Million dollars, and your labour component is 571k.  Your labour-to-production ratio is 54%. Using Ontario as a current example, the tax credit on this project would come in at 45% of your labour budget – That nets you 257,000.00$ in capital funding. If you finance your claim you could receive a significant portion of those funds almost immediately.

 

 KEY TAKEAWAYS - CANADA'S FILM TAX CREDITS 

 

In Canada, refundable film tax credits play a key role in the independent entertainment production industry - allowing production companies to reduce total production costs.

 

Tax credits by film, tv and multimedia type can vary by province and allow projects to claim a certain amount of labour and production costs

 

Tax credits can be financed and assigned

 

Governments like tax credits because they create jobs and are economically positive

 

CONCLUSION - FILM FINANCING & TAX CREDITS

 

The financing of film, tv and multimedia projects often involves tax credits that play a key role in financing the success of projects. The ability of a producer/owner to understand the tax credits available and how to finance them is key to success.

Utilize the services of a film financing expert to investigate the financing of your tax credits. Prepare a solid project finance plan and let the cash flow from monetizing your credits enhance the viability of your project. Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing advisor who can assist you with Your refundable tax credit financing needs

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

What are film tax credits?

 

A film tax credit is an incentive offered by governments at the federal and provincial level in Canada to offset production costs - Projects that  provide employment and utilize resources locally are viewed as being a positive aspect of economic development.

 

Federal and provincial tax credits are key aspects of film, television tax credit, and digital multimedia productions and help to finance production costs for film and television productions. - The government refunds tax credits in the form of a  fully refundable tax credit. Third-party financing is available for assigning these credits - payments to actors, directors and producers are a part of the tax credit formula. around qualified labour expenditure - Certain provinces in Canada allow for higher tax credits for production companies based on the shooting of productions in certain areas. Tax credit financing will typically have a 75% loan-to-value ratio on financing approval for the production company financing these assignable tax credits,

Key issues in tax credits revolve around areas such as how much funding might be available in certain jurisdictions as well as the amount of employment attached to any project in areas such as independent films.  Below-the-line costs are typically the largest part of a film budget and are eligible for certain credits under the formula - projects typically also have above the line costs also as part of a budget. The potential refund on any project, such as a video tax credit can bring an excellent potential tax refund. Tax refunds can significantly lower financing costs attached to any entertainment project.

Other key issues are around when and where principal photography occurs.

The Canada Revenue Agency website has information about film tax credit data and income tax regulations around tax credits.

 

What are completion bond fees?

Many independent entertainment projects are required to provide a completion bond to secure certain aspects of a financing package. That bond is essentially insurance to lenders and others involved that the project will be delivered on time and on budget.

 

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