Updated November 22, 2019
The December 2019 version of the Guidelines has been updated to reduce duplication of sections and achieve consistent formatting amongst the tax credits guidelines administered by Ontario Creates. A new numbering system has been implemented.
Commentaries are now indicated by sidebar line.
TABLE OF CONTENTS
- Part 1 - Overview
- 1.01 What Is the Ontario Book Publishing Tax Credit (OBPTC)?
- 1.02 Tax Credit Rate
- 1.03 What Is An Eligible Ontario Book Publishing Company?
- 1.04 Book Publishing Company
- 1.05 Permanent Establishment in Ontario
- 1.06 Eligible Literary Work
- 1.07 Eligible Literary Categories
- 1.08 Ineligible Publications
- 1.09 Eligible Canadian Author
- 1.10 Qualifying Expenditures
- 1.11 Government Assistance
- Part 2 - Administrative Process
- 2.01 Ontario Creates Issues Certificates of Eligibility
- 2.02 How to Apply for a Certificate of Eligibility
- 2.03 Tax Credit Administration Fees
- 2.04 How Long Does the Process Take?
- 2.05 Amendment or Revocation of Certificates
- 2.06 Ontario Creates Contact Information
- 2.07 Canada Revenue Agency (CRA) Role
- 2.08 CRA Payment of Corporate Tax Refund
- 2.09 CRA Contact Information
- Part 3 - Required Documents
- Part 4 - Links to Relevant Legislation and Regulations
Part 1 – Overview
These Guidelines have been prepared to assist applicants in applying for an Ontario Book Publishing Tax Credit (OBPTC).
Please note that the OBPTC Legislation (Section 95 of the Taxation Act, S.O. 2007) and Regulation (Ontario Regulation 37/09) take precedence over any provision of these Guidelines.
1.01 What Is the Ontario Book Publishing Tax Credit (OBPTC)?
The OBPTC is a refundable tax credit, which means that the credit will be refunded to the qualifying corporation, net of any Ontario taxes payable by the qualifying corporation. The OBPTC is based upon eligible Ontario pre-press, printing and marketing expenditures, incurred by a qualifying corporation, during a taxation year, with respect to eligible book publishing activities.
1.02 Tax Credit Rate
The OBPTC is calculated as 30% of the eligible expenditures incurred by a qualifying corporation with respect to eligible book publishing activities, up to a maximum tax credit of $30,000 per book.
The eligible expenditures are reduced by any government assistance the corporation received, or expects to receive in the taxation year, in relation to the publication of a particular book.
1.03 What Is An Eligible Ontario Book Publishing Company?
A corporation is an eligible Ontario book publishing company for a taxation year if throughout the taxation year:
- the corporation is a Canadian-controlled corporation throughout the taxation year, and
- the corporation is a book publishing company that carries out its business primarily through a permanent establishment of the corporation in Ontario.
A “Canadian-controlled corporation” is generally a corporation that is more than 50% owned by Canadians, as determined under sections 26 to 28 of the Investment Canada Act (Canada).
A qualifying corporation must allocate more than 50% of its taxable income to Ontario in the taxation year the credit is being claimed and must have published at least two books in the 12-month period immediately before the taxation year. An exception is made regarding the requirement to have published two books in the previous year where an Ontario book publishing company has transferred its business, amalgamated or wound up its company.
1.04 Book Publishing Company
A corporation is considered to be a book publishing company if the corporation’s principal business is selecting, editing, and publishing books, and it meets the following conditions:
- it enters into contractual agreements with authors and copyright holders for the production of literary works in print form;
- it offers for sale into the retail market the literary works that it publishes;
- it owns its own inventory, or is related to a Canadian-controlled corporation that owns the inventory, or has a contractual arrangement for inventory repurchase or acceptance for book returns; and
- it bears the financial risks associated with carrying on the business of publishing, or is related to a Canadian-controlled corporation that bears the financial risks associated with carrying on the business.
A “Book Publishing Company” is a company whose principal business is selecting, editing and publishing books. The business of publishing includes creating original literary or scholarly works through contractual agreements with Canadian authors and illustrators and other copyright holders, printing these literary and scholarly works in the form of proper bound books (hardcover or paper/trade paperback), and making them available to the retail and educational markets through industry-recognized sales and distribution channels.
It is incumbent upon the book publishing company, if applying for an OBPTC, to support writers through the application of conventional publishing principles. These would include industry standard contracts for the acquisition of intellectual properties, and incurring all costs for undertaking such work as editing, design, printing, marketing, distribution and sales. Soliciting any form of financing for the publishing process from authors or “others” (the subjects of an author’s book), might disqualify a book publishing company in its application for an OBPTC.
1.05 Permanent Establishment in Ontario
A business is carried on in Ontario if it allocates more than 50% of its revenues through a permanent establishment (office[s], warehouse) situated in Ontario, and reports taxable income in Ontario.
A “permanent establishment” generally refers to a fixed place of business (please consult the definition of “Permanent Establishment” in Part 4 of these Guidelines). However, whether a fixed place of business is a “permanent establishment” is a question of fact which must be determined on a case-by-case basis. In interpreting the term “permanent establishment”, the courts have considered factors such as:
- the degree of the corporation’s control over the place of business,
- the degree of continuity and permanence of the place of business, and
- the presence of personnel and routine activities.
1.06 Eligible Literary Work
A literary work is an eligible literary work if it satisfies the following conditions:
- The literary work is written by an eligible Canadian author or, if it is written by more than one author, all or substantially all of the work is the work of eligible Canadian authors.
- The literary work belongs to an eligible category of writing.
- At least 90% of the literary work is new material that has not been previously published.
- If the literary work contains pictures and is not a children’s book, the ratio of the amount of text to pictures in the literary work is at least 65%.
- The literary work is suitable for publication as a bound book having not less than 48 printed pages, unless the literary work is a children’s book.
- The literary work is not an ineligible publication.
1.07 Eligible Literary Categories
There are eight eligible categories of writing:
- Fiction is a book-length work of the imagination in prose, including novels, novellas, and book-length collections of short stories.
- Non-fiction is a book-length work of prose based on factual information, including history, travel, social issues, and current events; or is an exposition of ideas, including works of philosophy, social and art criticism, and political inquiry.
- Book-length non-fiction educational texts, published for use in educational institutions (such as schools and universities), are eligible as long as they meet the other eligibility requirements.
- A book-length play or a radio or television drama published in book form will be considered under non-fiction.
- Poetry is a book-length work of imagination written in rhyme, blank verse, or another recognized poetic form, either as a book-length poem or a book-length collection of poems.
- A biography is a book-length work in prose based on fact, telling the story of one (or more) person’s life (or persons’ lives), including an autobiography (the author’s own story told as a factual account), or a memoir (a selective but factual retelling of events).
- Children’s books are books designed for readers under 16 years of age. Children’s books may be less than 48 pages and may be illustrated titles. Young adult titles, specifically designed for readers aged 9 to 18 will be considered children’s books.
There are four categories for children’s books:
- children’s fiction,
- children’s non-fiction,
- children’s poetry, and
- children’s biography.
There is no cap on the number of eligible literary works written by an eligible author.
In the case of an anthology of contributed literary works (such as essays or articles), 90% of the literary work must be the work of eligible Canadian authors. In the case of a co-authored literary work, 90% of the work must be created by eligible Canadian authors. If one or more of the co-authors is not an eligible Canadian author, their contribution may be no greater than 10% of the book’s total contents.
In the case of illustrated children’s titles, the illustrator is considered a co-author and must meet the same eligibility requirements as any co-author.
1.08 Ineligible Publications
No tax credit may be claimed by a corporation with respect to the publishing of a literary work if:
- the corporation publishes the literary work on consignment or at the expense of another person;
- the author of the literary work, a person related to the author, or a person who is, or is related to, the subject of the literary work, directly or indirectly funds, or guarantees the payment of, any part of the cost of publishing or marketing the literary work;
- the corporation is controlled by the author of the literary work, or by a person not dealing at arm’s length with the author;
- the corporation publishes the literary work other than as a bound hardback, a paperback or a trade paperback book or as a digital or electronic version of the literary work;
- the corporation publishes the literary work in an edition of less than 500 copies of a bound book;
- the published literary work is not assigned an International Standard Book Number (ISBN);
- the corporation does not offer the literary book for sale through an established distributor;
- the corporation published fewer than two books in the 12-month period immediately before the taxation year for which the credit is claimed; or
- the literary work is published in a book that also contains one or more other literary works and less than all or substantially all of the literary works contained in the book are by eligible Canadian authors.
A literary work is also an ineligible publication if it is:
- a translation of a previously published literary work;
- a calendar, agenda, almanac, colouring book, or comic;
- an instructional book or other printed material that forms part of a children’s product which is primarily a toy or play kit;
- a university or college dissertation, a conference paper or report, a government report, or a catalogue of exhibitions;
- an instruction book or manual (such as a computer manual, guidebook, arts and crafts book, recipe book, or musical performance method book);
- a publication primarily containing maps;
- a publication that is used primarily as learning material (such as a workbook, kit, activity manual, or educational game);
- a publication that is primarily a reference book (such as a directory, index compilation, compilation of statutes, rulebook, or bibliography);
- a publication that is primarily musical notation;
- a publication that is a combination of any of the publications described in (a.) to (i.) above;
- a publication where the identity of the author or authors is unknown to the publisher;
- a publication where the pages are typewritten, individually photocopied, mimeographed, or handwritten;
- a publication that is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation, or ethnic origin;
- a publication the dominant characteristic of which is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty, or violence;
- a publication for which public financial support would be contrary to public policy.
The ineligible publications guideline is designed to help make the distinctions between eligible books that draw attention to original intellectual ideas expressed through literary convention and ineligible books, those which are compiled from information that is in the public domain. Such ineligible books might be “guide books” of a commercial nature (guides to parks and campgrounds, best shopping, dining, etc.), furniture assembly manuals, or “how to” books on games and crafts.
Eligibility is measured by the book’s literary content, and is determined by whether at the core of the creative or scholarly process, the book is an author’s original work of ideas.
1.09 Eligible Canadian Author
An “eligible Canadian author” of an eligible literary work is an individual who at the time the contract is entered into to publish the literary work, is ordinarily resident in Canada and is a Canadian citizen or is a permanent resident within the meaning of the Immigration and Refugee Protection Act (Canada).
An author who is a Canadian citizen but resides outside of Canada will not be considered to be an eligible Canadian author. An author may have more than one residence, but must be “ordinarily resident” in Canada, within the meaning of the Income Tax Act, in order to be considered an eligible Canadian author.
1.10 Qualifying Expenditures
The following amounts in respect of the publishing of an eligible literary work by an Ontario book publishing company are qualifying expenditures of the company for a taxation year:
- Non-refundable monetary advances to the eligible Canadian author of the literary work.
Expenditures incurred by the company in the taxation year in respect of activities that reasonably relate to preparing a literary work for publication in one or more digital or electronic formats, if the activities are carried out primarily in Ontario, including:
- salaries or wages paid to employees involved in editing, design and project management,
- amounts in respect of activities that reasonably relate to the publishing of the literary work, if the activates are carried out primarily in Ontario, including,
- salaries or wages paid to employees involved in editing, design and project management,
- amounts in respect of fees for freelance editing, design and research, and
- amounts in respect of the cost of art work, developing prototypes, set-up and typesetting.
- amounts in respect of the cost of art work, developing prototypes, set-up, and
- salaries, wages, fees or other amounts in respect of related activities, including scanning, editing, formatting, indexing, encryption and establishing digital rights management or other technological protection measures.
- Expenditures incurred by the company in the taxation year in respect of activities that reasonably relate to preparing a literary work for publication in one or more digital or electronic formats, if the activities are carried out primarily in Ontario, including:
- One-half of the expenditures incurred by the company in the taxation year for the printing, assembling and binding of the literary work, if those activities are carried out primarily in Ontario.
- One half of the expenditures incurred by the company in the year that reasonably relate to transferring a prepared digital or electronic version of the literary work into or onto a form suitable for distribution, if those activities are carried out primarily in Ontario.
- Those expenditures incurred in the year that reasonably relate to the marketing of copies of the published literary work and are incurred by the company within the period that begins 12 months before and ends 12 months after the date of publication of the literary work, including:
- expenditures in respect of promotional tours by the eligible Canadian author of the literary work, except that only 50% of expenditures for meals and entertainment are qualifying expenditures,
- salaries or wages paid to employees of the company engaged in marketing copies of the published literary work, and
- amounts expended in respect of promoting and marketing copies of the published literary work.
Qualifying expenditures include 100% of the costs of preparing a literary work for publication in print and digital or electronic formats, and 50% of the production costs with respect to publishing a printed version of a book, as well as the costs relating to transferring a prepared digital or electronic version of a literary work into a form suitable for distribution.
Whether an activity is carried out primarily in Ontario is a question of fact. If more than 50% of the costs of an activity are incurred in Ontario, the activity is generally considered to be carried out primarily in Ontario. However, where the printing of a book is done outside of Ontario and the paper is supplied from an Ontario company, this activity is not considered to be carried out primarily in Ontario even if the paper cost is more than 50% of the total cost of the print job.
If a book has received an OBPTC eligibility certificate for pre-press and production costs for the preceding taxation year, the company can re-submit a copy of the original certificate, at the time of its next fiscal year end, to account for a book’s qualifying marketing and promotional expenditures.
“Meals and entertainment” include such expenditures as catering for book launches and per diems for staff and authors during the promotional tour of a book.
Promotional activities include graphic design of advertising, buying advertising space, media planning, scheduling author promotional activities (author events: readings, book signings, media interviews).
1.11 Government Assistance
Government assistance means assistance from a government, municipality, or other public authority in any form, including a grant, subsidy, forgivable loan, deduction from tax, and investment allowance, but excluding an Ontario Book Publishing Tax Credit, or a grant that is not specific to a particular eligible literary work.
The total of all qualifying expenditures claimed by a corporation is reduced by the amount received as government assistance.
Part 2 - Administrative Process
The OBPTC is jointly administered by the Ontario Media Development Corporation (OMDC) operating as Ontario Creates – an agency of a Ministry of the Provincial Government of Ontario and the Canada Revenue Agency (CRA). In order to obtain an OBPTC for a taxation year, a qualifying corporation must apply to Ontario Creates for a Certificate of Eligibility for the taxation year, which certifies eligibility of the book publishing company, the book and author.
2.01 Ontario Creates Issues Certificates of Eligibility
Ontario Creates is responsible for issuing Certificates of Eligibility for a corporation’s taxation year, which the qualifying corporation files with CRA with its corporate tax return for the applicable taxation year in order to claim the OBPTC.
A Certificate of Eligibility sets out the eligibility of the applicant corporation and the literary work.
The qualifying corporation applies to Ontario Creates for certification of eligible literary works published in that taxation year. Ontario Creates completes its review of an application, or multiple applications, determines the eligibility of the submitted books and its authors, and issues Certificates to the qualifying corporation.
Ontario Creates reserves the right to ask any question necessary to determine eligibility issues. As issues and fact patterns will differ depending on the specifics of any application, so too may the line of inquiry. Please note that receipt of a certificate for one book may not be relied upon as a guarantee of certification for subsequent filings.
2.02 How to Apply for a Certificate of Eligibility
The qualifying book publisher submits a completed OBPTC Application via the Online Application Portal (OAP) to have the literary work certified. For administrative convenience, the qualifying corporation may appoint an agent to apply on its behalf, but any Certificate of Eligibility issued will be in the name of the qualifying corporation.
The application can be made at any time after the publication of the book. When you start an application on the OAP, you can save your work and come back to it before submitting the application online. However, please note that once you have started the application on the OAP, you have 90 days to submit it before the application expires.
Please ensure that your application includes all of the required information and supporting documentation (see Part 3 Required Documents. A copy of the finished book(s) – as well as the correct administration fee – must be submitted with each application.
All applications will be reviewed by a Tax Credit intake officer for completeness. If required documentation is missing, the file will not enter the queue. Applicants will be advised that the file will not move forward until the requested documentation is submitted.
2.03 Tax Credit Administration Fees
A non-refundable administration fee is payable with respect to each OBPTC application submitted to Ontario Creates. Administration fees are used to partially offset operating costs of the OBPTC program.
A. Calculation of the Administration Fee
The administration fee is calculated as 0.15% of the Total Estimated Eligible Expenditures for the application. The minimum fee is $50 and the maximum fee is $200 per literary work.
For example, where Total Estimated Eligible Expenditures total $40,000, the administration fee is calculated as follows:
Administration Fee = Total Estimated Eligible Expenditures x .0015
= $40,000 x 0.0015
B. Other Administration Fees
Note: there is an additional filing fee of $100 applied per literary work to applications for Certificates of Eligibility received more than 24 months after the first year-end of the claim.
C. How to Pay
Administration fees are payable at the time the OBPTC application is submitted, and must be paid in full in order for the application to be reviewed.
Administration fees may also be paid by cheque or money order made payable to Ontario Creates.
2.04 How Long Does the Process Take?
An eligibility review will only be conducted on complete applications on a first-come, first-served basis. Processing time will depend on the volume of applications received.
Where significant delays are encountered in obtaining responses from applicants, Ontario Creates reserves the right to close the file after 30 days.
2.05 Amendment or Revocation of Certificates
A Certificate of Eligibility may be amended to correct an error and, under certain circumstances, may be revoked by Ontario Creates.
An amended Certificate of Eligibility replaces any Certificate of Eligibility previously issued. There is a fee of $100 for each amended Certificate of Eligibility.
If a Certificate of Eligibility is revoked by Ontario Creates, the revoked Certificate of Eligibility is treated as if it had never been issued, and any tax credit previously paid must be repaid.
2.06 Ontario Creates Contact Information
Questions? Not sure of eligibility?
Many questions are answered in our Frequently Asked Questions (FAQs).
For further assistance, please contact the Tax Credits Phone Duty line at 416 642 6659 or firstname.lastname@example.org.
Please leave a detailed message, including your name, company, phone number, and which tax credit or file you are inquiring about. Phone calls and emails will be responded to within one business day.
2.07 Canada Revenue Agency (CRA) Role
The Canada Revenue Agency (CRA) is responsible for the review or audit of the T2 Corporation Income Tax Return (T2 return), along with the Schedule T2SCH564 which must be filed by the qualifying corporation in order to claim the OBPTC. The CRA also processes T2 tax returns and issues notices of assessment and tax refunds.
A corporation must file its T2 return for a taxation year with the CRA within six (6) months after the end of the corporation’s taxation year. To claim the OBPTC a qualifying corporation must file its T2 return with Schedule T2SCH564 and the Certificate of Eligibility with the CRA.
In the event that the Certificate of Eligibility is not available when you are ready to file your T2 return, then you can still file the return and Schedule T2SCH564 with the estimated tax credit amount. Once Ontario Creates has issued the Certificate of Eligibility, submit the Certificate (or copy of) to the CRA. The CRA will process the claim once they have received the Certificate of Eligibility as well as the T2 Corporation Income Tax Return and applicable schedules.
The T2 Corporation Income Tax Return and applicable schedules are available on the CRA website at:
- T2 Corporation Income Tax Return
- T2SCH564 Ontario Book Publishing Tax Credit
- Ontario refundable media tax credits
2.08 CRA Payment of Corporate Tax Refund
Following its review or audit of the OBPTC claim, the CRA processes the T2 return and issues a notice of assessment and, if applicable, a refund.
If the qualifying corporation is owed a tax refund (which may include an OBPTC) for the taxation year, a cheque or direct deposit may be issued by the CRA.
The amount of refund may be reduced by any of the qualifying corporation’s outstanding federal and Ontario taxes (such as corporate income taxes, retail sales tax, provincial sales tax, etc.).
2.09 CRA Contact Information
For additional information, visit the following CRA website: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/film-media-tax-credits/film-services-units.html
Inquiries should be directed to CRA’s Toronto Film Services Unit at 416 973 3407 or 416 954 0542.
Part 3 - Required Documents
3.01 What Documentation is Required?
All required documents must be submitted via the Online Application Portal (OAP) in order for an application to receive a review.
All documentation or information received from an applicant is subject to the confidentiality provisions of the Taxation Act and will be maintained in strictest confidence by Ontario Creates, the Ministry of Finance and the Canada Revenue Agency.
It is the responsibility of the applicant to ensure that all documentation is current. Please forward updated information and documentation as they occur. In some cases, Ontario Creates may require additional documentation or information in order to issue a Certificate of Eligibility.
The applicant must submit to Ontario Creates the following documents via the Online Application Portal (OAP):
- Incorporation documents for the qualifying corporation
- All applicable financial statements for the qualifying book publisher
- List of applicant company's shareholders or corporate chart for the fiscal year
- Previous year's catalogue(s)
- Current year's catalogue(s)
- Company's distribution agreement
- Company's contract with the author(s)
- Proof of Citizenship and Residency for author(s)
- Printer's invoice
- Book in digital form (if applicable)
- Declaration of Citizenship and Residency
If you do not have a document that is listed above, please contact Ontario Creates Tax Credits Phone Duty line, as you may have an alternate document that will satisfy the eligibility requirements.
The OAP will not upload files larger than 6MB, so please submit them to Ontario Creates on a CD-ROM or USB memory stick.
3.02 How do we submit a copy of the book?
Please arrange for the delivery of a copy of the book(s) to Ontario Creates when the application is submitted on the OAP.
Part 4 - Links to Relevant Legislation and Regulations
These Guidelines have been prepared to assist applicants in applying for an Ontario Book Publishing Tax Credit (OBPTC). The OBPTC Legislation (Section 95 of the Taxation Act, S.O. 2007) and Regulations (Ontario Regulation 37/09) take precedence over any provision of these Guidelines.
4.01 Ontario Book Publishing Tax Credit Legislation
The Legislation governing the OBPTC is set out in Section 95 of the Taxation Act, S.O. 2007, Chapter 11, Schedule A, and can be found here.
4.02 Ontario Book Publishing Tax Credit Regulations
The Regulations governing the OBPTC are set out in Ontario Regulation 37/09, as amended by Regulation 70/10, and can be found here.
4.03 Definition of "Permanent Establishment"
The provision governing the 'Definition of "Permanent Establishment"' is set out in Subsection 400 (2) of the Federal Income Tax Regulations, and can be found here.