OIDMTC: Frequently Asked Questions
Applicants
A1. Are partnerships eligible to apply?
A2. Does the corporation's type of business matter?
A3. Is co-development eligible?
Products
P1. What are the four types of products that can be claimed?
P2. What is the difference between non-specified and specified products?
P3. What is the difference in categories between non-specified and specified products vs. digital games developed by a qualifying or specialized digital game corporation?
P4. What kind of products are eligible for the OIDMTC?
P5. Are products like webinars, webisodes, or mobisodes eligible?
P6. Is an online catalogue type of site developed in Ontario eligible?
P7. Is an online social networking site type of product eligible?
P8. How do I determine the product completion date?
P9. Is content required in the product as of the completion date to be eligible?
P10. Can a new version of the same product be claimed?
P11. Can a different language version of the same product be claimed?
P12. How do I demonstrate an online product was developed for sale or licensing?
Expenditures
E1. What is considered 'government assistance' for the OIDMTC and therefore grinds the tax credit?
E2. Can both Scientific Research & Experimental Development (SR&ED) and OIDMTC be claimed on the same labour expenditure?
E3. Are marketing /sales salaries or wages eligible to be claimed for OIDMTC?
Filing
F1. How many applications to the OMDC should be submitted and when do I apply to the OMDC?
F2. If we have completed products in a previous taxation year, can we still apply for the OIDMTC?
F3. Should I withhold filing the Corporate Tax Return until I have received the OIDMTC Certificate?
F4. Do I need to submit the "Ontario Declaration of Residency/Consent Forms" to the OMDC?
Other Questions
Q1. Who should I contact in the Tax Credits Department with other questions or more detail?
Applicants
A1. Are partnerships eligible to apply?
No. Only a qualifying corporation may apply - that is, it must be a corporation incorporated in Canada (though it may be Canadian or foreign controlled) and it must have a permanent establishment in Ontario. There are other restrictions, please see the OIDMTC Information/Application Package.
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A2. Does the corporation's type of business matter?Generally, when applying for specified and non-specified products under section 93 of the Taxation Act, 2007, to be considered a qualifying corporation, the type of business activities is not restricted to interactive digital media product development.
However, if a company is applying as a digital game corporation under section 93.1 or 93.2 then the nature of the company’s business does matter. Under section 93.1 a qualifying digital game corporation carries on a business that includes the development of digital games in Ontario. Under section 93.2 a specialized digital game corporation carries on a business that includes the development of digital games in Ontario where either a) at least 80% of the total salaries and wages incurred by the corporation in the year for services rendered in Ontario are directly attributable to the development of digital games, or b) at least 90% of the corporation’s gross revenues for the year are directly attributable to the development of digital games.
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A3. Is co-development eligible?The OIDMTC requirements state that the applicant corporation must demonstrate that they developed 90% or more of the product in Ontario. In other words, the OIDMTC is available to the company that has produced or made 90% or more of the product.
Also please note that simply owning the copyright or Intellectual Property (IP) of the product does not demonstrate that the applicant developed 90% or more of the product.
The only exceptions to the 90% developed rule are for qualifying digital game corporations under section 93.1 or specialized digital game corporations under section 93.2:
Under section 93.1 where a qualifying digital game corporation carries on a business that includes the development of digital games in Ontario AND incurs a minimum of $1 million in eligible labour expenditures in a 36 month period that ends in the tax year on a digital game under an agreement with a purchaser corporation, that applicant can receive the OIDMTC even though they developed less than 90% of the product.
Under section 93.2 where a specialized digital game corporation carries on a business that includes the development of digital games in Ontario, where either a) at least 80% of the total salaries and wages incurred by the corporation in the year for services rendered in Ontario are directly attributable to the development of digital games, or b) at least 90% of the corporation’s gross revenues for the year are directly attributable to the development of digital games; AND the company has incurred a minimum of $1 million in eligible labour expenditures in the year on a digital game(s), that applicant can receive the OIDMTC even though they developed less than 90% of the product.
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ProductsP1. What are the four types of products that can be claimed?
There are four types of products that can be claimed for the OIDMTC: non-specified products (formerly known as eligible products), specified products, digital games developed by qualifying digital game corporations and digital games developed by specialized digital game corporations.
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P2. What is the difference between non-specified and specified products?Non-specified products are developed by the applicant for sale or licence to one or more arm’s length parties who have not previously entered into an arrangement with the qualifying corporation for development of the product.
Whereas, specified products are developed by the applicant under the terms of an agreement between the qualifying corporation and an arm’s length purchaser corporation for sale or licence by that purchaser to one or more arm’s length parties. Specified products are essentially developed under a fee-for-service arrangement.
Non-specified products receive a higher OIDMTC rate of 40% on eligible expenditures incurred after March 26, 2009 and a wider range of expenditures qualify, while specified products receive an OIDMTC rate of 35% on eligible expenditures incurred after March 26, 2009. (For relevant OIDMTC rates and eligible expenditures in a given time period, please refer to the chart on page 8 of the OIDMTC Guidelines).
PLEASE NOTE: whether it’s an non-specified or specified product, the applicant must develop 90% or more of the product in Ontario.
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P3. What is the difference in categories between non-specified and specified products vs digital games developed by a qualifying or specialized digital game corporation?A qualifying digital game corporation carries on a business that includes the development of digital games AND incurs $1 million in eligible labour expenditures in a 36 month period on a digital game under an agreement with a purchaser corporation. Unlike non-specified and specified products, a digital game developed by a qualifying digital game corporation can qualify for the OIDMTC even if a) the corporation is responsible for developing less than 90% of the product, b) the product is not completed, and c) the corporation is related to the purchaser corporation for whom the product is being developed. Qualifying digital game corporations receive a 35% OIDMTC on eligible expenditures incurred after March 26, 2009.
A specialized digital game corporation carries on a business that includes the development of digital games, where either a) at least 80% of the total salaries and wages incurred by the corporation in the year for services rendered in Ontario are directly attributable to the development of digital games, or b) at least 90% of the corporation’s gross revenues for the year are directly attributable to the development of digital games; AND the company has incurred $1 million in eligible labour expenditures in the year on a digital game(s). Unlike non-specified and specified products, a digital game developed by a specialized digital game corporation can qualify for the OIDMTC even if a) the corporation is responsible for developing less than 90% of the product, b) the product is not completed, and c) the corporation is related to the purchaser corporation. Specialized digital game corporations can file annually and receive a 35% OIDMTC on eligible expenditures incurred after March 26, 2009.
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P4. What kind of products are eligible for the OIDMTC?Digital games, e-learning products, online information and entertainment websites, such as online magazines or newspapers, which primarily inform, educate, or entertain are common categories. Applicants are welcome to submit different product types not listed here. If you are not sure if your product is eligible, please contact us at the number at the end of this document.
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P5. Are products like webinars, webisodes, or mobisodes eligible?
The streaming video/audio content policy has been re-evaluated, and products that are made up of more than 50% streaming video or audio content may now be eligible for the OIDMTC, as long as the user has a choice of information to be presented, and the sequence and form in which it is presented. For example, for a product to be eligible there must be more than one video clip or audio clip to choose from, and/or there is other content that the user can access in the form of text or image included in the product.
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P6. Is an online catalogue type of site developed in Ontario eligible?To be eligible, a product’s primary purpose must be to inform, educate, or entertain. Therefore interactive digital media products that primarily present, promote or sell products or services are not considered eligible. The OMDC will interpret “primarily” to mean “more than 50%”.
Note that informing by presenting products and/or services for sale is considered promotional.
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P7. Is an online social networking site type of product eligible?Often social networking websites are made up of user generated content, which can be an issue. To be eligible for OIDMTC, a specified or non-specified product must be 90% or more developed by the applicant, which rules out products with more than 10% user generated content in a product. Also, products whose primary purpose is interpersonal communications are not considered eligible.
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P8. How do I determine the product completion date?The product completion date is the date when the product is shelf-ready, accessible, online, and/or available for exploitation. This date must be consistent with the product development documentation.
OMDC reviews the product as of this date to determine eligibility. Note that maintenance expenditures are not eligible for OIDMTC as they are not considered part of product development.
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P9. Is content required in the product as of the completion date to be eligible?As of the product completion date, the product must contain content that presents information in at least two of text, sound, and images, and whose primary purpose is to educate, inform or entertain the user.
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P10. Can a new version of the same product be claimed?OIDMTC is a content based credit, so a version of the product with different content can also be eligible, as long as the new version is significantly different. The difference can be the content, the underlying technology, or a combination of the two.
New versions of website products are restricted to being claimed only every two years.
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P11. Can a different language version of the same product be claimed?No. If the only change between product versions is the language of the text, video, and/or audio, this is not considered a significant enough difference for OMDC to consider them to be separate products.
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P12. How do I demonstrate an online product was developed for sale or licensing?There are different ways to demonstrate a product was developed for sale or licensing, such as a distribution or financing agreement, customer invoice, or by determination that the product is available to the public, ie available online.
OMDC considers a website product to be available for public license or use.
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ExpendituresE1. What is considered 'government assistance' for the OIDMTC and therefore grinds the tax credit?
Government assistance includes government grants, subsidies forgivable loans, deductions from tax other than OIDMTC and investment allowances. These will reduce (‘grind’) the OMDC tax credit.
The following are not considered government assistance:
• Other tax credits such as Scientific Research & Experimental Development (SR&ED),
• Bona fide loans with a set repayment date, (See Canada Revenue Agency’s (CRA) Application Policy on Bona Fide Loan – FAS 2008-01 for more information), and
• Equity investments.
Note that labour deferrals (amounts not paid within 60 days of the tax year end) cannot be claimed for the OIDMTC for that tax year. However if it is paid within 60 days after the end of the subsequent tax year; the labour expenditures can be claimed in the subsequent tax year as part of qualifying expenditures.
We will want to see documentation of all the financial contributions to the development of a product, including loans, deferrals, and sponsorship amounts.
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E2. Can both Scientific Research & Experimental Development (SR&ED) and OIDMTC be claimed on the same labour expenditure?No. An applicant cannot include costs claimed for SR&ED activities, whether allowed by CRA or not, in the OIDMTC claim. Labour included in the OIDMTC claim must be for different activities than those claimed under SR&ED.
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E3. Are marketing /sales salaries or wages eligible to be claimed for OIDMTC?Up to $100,000 in eligible marketing and distribution expenditures (which can include salaries and wages specific to marketing and distribution of a non-specified product), can be claimed once for a non-specified product. Marketing and distribution expenditures cannot be claimed for specified products, nor included in claims made by digital game corporations under sections 93.1 or 93.2.
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FilingF1. How many applications should be submitted to OMDC and when do I apply to OMDC?
Only 1 application per tax year can be filed, which must contain all products completed in that tax year. For example, for a July 31, 2008 tax year end, an interactive digital media product completed on February 1, 2008 would be submitted in a 2008 tax year OIDMTC application, while a product completed on July 1, 2009 would be submitted in a 2009 tax year OIDMTC application.
Under section 93.1 qualifying digital game corporations can apply to the OMDC in the tax year that falls after the end of the 36 month period in which the applicant has incurred $1 million in eligible labour expenditures for any period of 36 months that ends in the tax year in respect of an eligible digital game.
Under section 93.2 specialized digital game corporations can apply to the OMDC at the end of the tax year in which the applicant has incurred - the minimum $1 million in eligible labour expenditures in respect of an eligible digital game or games.
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F2.If we have completed products in a previous taxation year, can we still apply for the OIDMTC?Applications can be made for prior tax years, however the applicant may have to make a request to the Canada Revenue Agency (CRA) to amend a previously filed tax return. It is the applicants’ responsibility to ensure that they are within the time limits for requesting an amendment to the tax return for a previous tax year.
Please consult the CRA webpage Reassessments – Adjustments to your T2 return for more information, or contact them at 416 973 3407.
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F3. Should I withhold filing the Corporate Tax Return until I have received the OIDMTC Certificate?No. File your tax return with the estimated OIDMTC amount as follows:
For tax years that ended on or before December 31, 2008, submit the Ontario CT23 Corporations Tax and Annual Return to the Ontario Ministry of Revenue (OMoR) along with the estimated OIDMTC amount. Once the Certificate of Eligibility is received from the OMDC, submit the Certificate of Eligiblity (or copy) to the OMoR. Upon receipt of the Certificate of Eligiblity, the OMoR will process the claim and forward the information electronically to the Canada Revenue Agency (CRA) for review and verification. You will receive your assessments and reassessments from the OMoR.
For tax years that end on or after January 1, 2009, file the T2 Corporation Income Tax Return along with schedule T2SCH560 “Ontario Interactive Digital Media Tax Credit (2009 and later tax years)” with the Canada Revenue Agency (CRA) along with the estimated OIDMTC amount. Once the Certificate of Eligibility is received from the OMDC, submit the Certificate of Eligibility (or copy) to the CRA. CRA will process the claim once they have received the OIDMTC Certificate of Eligibility as well as the T2 Corporation Income Tax Return and applicable schedules. You will receive your assessments and reassessments from the CRA.
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F4.Do I need to submit the "Ontario Declaration of Residency/Consent Forms" to the OMDC?No, for OIDMTC the OMDC generally does not need to see the Ontario Declaration of Residency/Consent Forms as part of the review. We do require the list of names of all individuals working on the product, and the list of names and addresses of all remuneration individuals and companies being claimed.
However, we advise applicants to keep the Residency Declarations on file as the Canada Revenue Agency may ask to see them should they decide to conduct an audit of the claim.
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Other QuestionsQ1. Who should I contact in the Tax Credits Department with other questions or more detail?
If you have further questions, please e-mail taxcredits@omdc.on.ca, or call us at 416-314-6858 and ask to speak to the Business Officer who is on ‘Phone Duty’ for the Tax Credits Department. There is a different person on phone duty every day, and he/she will be happy to assist you.
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