YOUR COMPANY IS LOOKING FOR TAX CREDIT FINANCING!
FINANCING FEDERAL TAX CREDIT INCENTIVES - SR&ED AND FILM
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Canadian film and SR&ED tax credits are the ' real deal ' when it comes to your ability to both access, and finance these two pre-eminent tax credit funding programs from the Canadian government, both federal and provincial.
These are not government grants but actual refundable credits for cash. These government programs are federal and provincial or a combination of both.
Oh, and by the way, they have nothing to do with 'BITCOIN ! ‘, the internet's newest peer-to-peer electric money system which we're quite frankly still trying to understand! So trust us on this one, financing your SRED or Media credit is done with real money! Let's dig in.
SR&ED TAX CREDIT FINANCING
FINANCING SR&ED CREDITS IN CANADA / SR&ED FINANCING CANADA
Let's move on to our ' scoop ' on SR ED Program tax credits. This funding program allows companies to access valuable tax credits after they have spent capital on R&D. The actual name of the program is Scientific Research And Experimental Development / via the federal government via Canada Revenue Agency /CRA. No, it’s not a grant, you spend the money first, and they claim your credit, which as we have noted, can also be financed if you want to bridge the timing gap in the whole process.
THE IMPORTANCE OF A SRED CONSULTANT / WHAT IS A SRED CONSULTANT?
Maximum success in the area of SR&ED typically comes when you use SR&ED funding consultants, sometimes known as an ' SRED engineer' who prepares your claim. Let's recap who they are and discuss sr&ed consultant fees.
A SR&ED consultant helps a business work through the Scientific Research and Experimental Development (SR&ED) program - The role of the consultant is to ensure the company has identified eligible r&d work - At that point, they help to prepare and submit your sr&ed claim, ensuring that your are compliant with the terms and spirit of the program.
The majority of sr&ed consultants seem to work on contingency, meaning they are willing, at their time and risk, to prepare your claim in an effort to share in the proceeds. Other firms typically charge hourly or engagement fees to prepare the claim.
BILLIONS OF DOLLARS EVERY YEAR ARE REFUNDED VIA SRED R&D CREDITS
In past times the SR&ED consultants have come under attack for aggressiveness in claim amounts for these tax incentives, as well as having their own fees determined to be somewhat aggressive also!
At 7 Park Avenue Financial, we won’t weigh in on the merits or non-merit of SRED consultants, we will say that as a business owner involved in R&D, you're entitled to your share of the 3-4 Billion dollars every year doled out in this longstanding program. Sred funding is a great way to monetize our claim.
HOW DO TAX CREDIT LOANS WORK
If your business or project accesses Canadian film or SRED tax credits, consider this - your claims can also be financed.
Bridge loans for SRED or media credits are typically 75% loan to value, no payments are made during the duration of the loan, and you receive the final 30%, less financing costs when your credit is adjudicated by the feds and provinces.
That can take weeks, months, or a year depending on various factors, so the appeal of financing via a bridge loan can be very attractive.
Key Point - We'll ensure that no personal guarantees are required for the loan, and the typical time to fund takes only a couple of weeks - Talk about a tax incentive program that really works!
PEOPLE ALSO ASK:
What is sr&ed financing?
SR&ED financing is a financing option for companies who utilize the federal Scientific Research and Experimental Development (SR&ED) program that provides a refundable tax credit for r&d claims. Banks and the government do not finance these claims - they are financed via private commercial financing companies. A company can choose to 'self-finance their claim and wait for the refund, or it can monetize the claim when filed or on an accrual basis. Funds received from the financing can be used to accelerate further r&d and other general company purposes.
Are sr&ed credits taxable /are sr&ed refunds taxable?
How do sr&ed tax credits work
The sr&ed program is a tax credit for companies who are spending on research and development (' r&d") under the guidance of the Canada Revenue Agency's sred program - the key benefit of the program is to help companies with the costs of r&d, which can often be a large part of a company's expenses.
Companies must ensure they are eligible, and the work in r&d must be spent in Canada - the three key areas of this r&d are experimental development, research and applying the research of SR&ED, which includes experimental development, basic research, and applied research.
A claim is prepared by the company for the Canada sr&ed tax credit, which has typically engaged a Sred consultant to detail basic information on the research, as well as costs related, such as employees and subcontractors. A typical claim includes reports and documentation and verifies sr&ed eligibility under CRA's sr&ed eligibility criteria around sr&ed eligible expenditures.
The claim is submitted with the company's annual filing of financial statements - CRA/Canada Revenue Agency reviews claims and determines the final amount of the refundable investment tax credit.
How Do You Apply for Sr&ed
Applying for Sred refundable tax credits is different based on the type of r&d work a company is performing.
Companies must determine basic eligibility around the type of r&d they are performing, where they are doing the work and the basic business activity of the company. The business must ensure that all proper information and documentation on the cost and expenses are available- such as technical reports and write-ups, etc.
The actual claim is submitted on the company's T6661 tax, which CRA uses to process claims - that allows CRA to review and process the claim.
What does sr&ed stand for?
The term SR&ED is the acronym for Scientific Research and Experimental Development. The SR&ED program is an investment tax credit and incentive program for businesses conducting research and development / r&d. The government's focus on the program is to stimulate economic development and Canadian innovation via these tax incentives.
FILM TAX CREDIT FINANCING
FILM/TV/DIGITAL MEDIA AND SR&ED TAX CREDIT IN CANADA
Let's take a look at film and media-type credits first. These credits, at the provincial level, provide producers and project owners with a valuable form of funding that makes their projects, from a financial perspective, more achievable.
WHAT IS FILM TAX CREDIT FINANCING
Financing film tax credits in Canada allows a company to generate cash for the production by financing the refundable film tax credits the production is eligible for. Owners of productions apply for film tax credits from a provincial jurisdiction, and these tax credits can be financed via a bridge loan structure. While some banks finance large projects, the majority of financing is via independent commercial finance firms,
COMPETITION AMONG THE PROVINCES FOR YOUR FILM AND DIGITAL MEDIA TAX CREDITS
There is strong competition among the provinces to have your project fall into their hands. Using British Columbia as an example that province in recent years has provided tax credits to the tune of close to 300 million dollars. As an example, BC offers a 33% refund of legitimate labour expenses. Ontario and Quebec predominantly compete with BC, and as an example, the tax credit for production costs is 25% in Ontario.
TAX CREDITS PLAY A KEY ROLE IN FINANCING FILM PROJECTS
While the tax credit isn’t the only reason a film, television, or media production goes to any one province (geography, talent, and production facilities are other reasons), Canadian film tax credits do nevertheless play a huge part in the overall financing model of any project.
CO-PRODUCTIONS ARE ELIGIBLE
Not known to everyone, but certain qualifying foreign-eligible productions of non-Canadian content can also qualify for refundable tax credit programs. These typically are known as 'co-ventures'. These co-ventures must still have a Canadian producer, and certain 'points' around areas of content must be met.
FINANCING DIGITAL MEDIA TAX CREDITS
The gaming industry in Canada continues to become a large part of the new economy - employment in the industry and industry revenues are at an all-time high - Innovation and large production budgets require a significant amount of r&e around physics, AI, Graphics, etc., Game development is available for funding via digital media credits which are refundable. Some gaming research and development qualify under SR&ED also. Canadian provinces such as Ontario offer significant credits to the industry to encourage new interactive digital products and the development of games.
WHAT IS A FILM TAX CREDIT
A film tax credit is a government tax incentive offered by governments to promote the production of film and tv in a specific province/geography. The refundable film tax credit helps offset the cost of production around qualified labour expenditure and other expenses such as equipment and materials and facility rentals.
How do film tax credits work?
Film tax credits work via government assistance because they allow productions to receive a portion of production funds as a fully refundable tax credit which offsets production costs. Different jurisdictions in Canada offer different types, and amounts of credits - Productions apply in advance and are required to provide information about spending and labour.
Credits vary by province and type in Canada, and refundable tax credits can be financing to monetize claims - Canada is a leader in film tax credits as a way of encouraging entertainment products in film, tv, digital media and gaming.
HOW DOES THE CANADIAN PRODUCTION TAX CREDIT WORK?
The Canadian Production Tax Credit (CPTC) is a film and video production tax credit that is a refundable tax credit that funds a portion of labour costs incurred in production. The type of production and the geography where the filming is done determines the amount of the tax credits, - Factors affecting the amount of these investment tax credits include the amount of spending, as well as Canadian content qualifications. A ' CAVCO ' certificate must be approved and claimed to validate the production tax credits.
KEY TAKEAWAYS - SR&ED & FILM TAX CREDITS
SR&ED AND Film Tax refundable credits are Canadian government incentives to provide cash refunds to firms conducting R&D or engaged in the production of film, tv, and digital media /gaming. Unlocking cash flow by financing these credits helps to fund Canadian businesses and is a non-dilutive funding strategy around ownership.
CONCLUSION - FINANCING CANADIAN FILM AND SRED TAX CREDITS
Canadian businesses should take advantage of every tax incentive available to fund your company or project, whether its research and development in Canada in digital media or products and processes via the SR&ED program. Seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with the real scoop on accessing financing for SR&ED and Media projects.
FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION
Is debt financing better than equity financing - Why use debt financing?
Debt financing is typically viewed as better than equity financing because a business can leverage capital in the business to grow revenues and profits. Financing costs are also tax deductible in a business, and a company borrowing money does not have to relinquish equity control as it would in equity financing. The advantage of equity funding is that it does not require repayment and brings no debt to the balance sheet.
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