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OIDMTC Guidelines - Non-Specified and Specified Products

Introduction

The JUNE 2020 version of the Guidelines has been updated to provide a new separate guideline package that focuses on OIDMTC claims made under section 93 of the Taxation Act 2007, as non-specified and specified products. (Please see the new separate guideline package for digital game claims made under sections 93.2 and 93.1 as Specialized Digital Game Corporations and Qualifying Digital Game Corporations: http://www.ontariocreates.ca/tax-incentives/oidmtc/oidmtc-guidelines-specialized)

Changes include:

  • Expanded descriptions of Revenue Generating Stream, Educational Products for users under 12.
  • Expanded notes regarding interactivity of games (casino/slot/games of chance) and cinematic 360-degree VR videos.
  • Expanded notes on ineligible M&D expenditures for non-specified products.

The Guidelines

These Guidelines have been prepared to assist companies applying for an Ontario Interactive Digital Media Tax Credit (the “OIDMTC”).

Please note that the OIDMTC legislation (sections 93, 93.1 and 93.2 of the Taxation Act, 2007) and OIDMTC regulation (Regulation 37/09) take precedence over any provisions of these Guidelines.

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A. Overview of the OIDMTC[1]

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit which means that the amount of the credit, minus any Ontario taxes payable, will be paid to the qualifying corporation. The OIDMTC is based on eligible Ontario labour, marketing and distribution expenditures for the development of interactive digital media products.

What Is It?

If you develop interactive digital media products in Ontario, your company may be eligible to receive a tax credit of 35% or 40% of your eligible expenditures. The tax credit rate depends on how you create and exploit your digital products. Eligible OIDMTC expenditures include Ontario labour expenditures, and may also include up to $100,000 of marketing and distribution expenditures. You can claim an OIDMTC for your interactive digital media product for the tax year in which it is completed.

Products that can be claimed under the OIDMTC as specified or non-specified products are summarized in Table 1 below.

Table 1 – Non-specified and Specified Products

ProductDefinition
Non-specified products Developed for sale or licensing to arm’s length parties (not developed under a fee-for-service arrangement).

Product must be completed.
Specified products Developed by your company under terms of an agreement with an arm’s length buyer.

For sale or license by the buyer to one or more people who deal at an arm’s length with the buyer.

Product must be completed.
* Must meet the 80/25 rule as it relates to total development labour incurred in the claim period.

The 80/25 rule requires that 80% of total development labour expenditures to create the product be for work performed in Ontario and paid as eligible salaries or wages and eligible remuneration to personal corporations[2] and individuals providing services as part of a sole proprietorship with no employees. As well, 25% of the total development labour expenditures must be paid as eligible salaries or wages to Ontario-based employees of your company for work performed in Ontario.

What is Eligible?

i. Interactive Digital Media Products

To be eligible for the OIDMTC, the primary purpose of your interactive digital media product must be to entertain the user, or educate users under the age of 12.

ii. Qualifying Corporations

A qualifying corporation is an Ontario-based Canadian or foreign-controlled corporation that develops an eligible product at a permanent establishment in Ontario. The qualifying corporation must operate the business and file Ontario tax returns.

iii. OIDMTC Expenditures

You can claim Ontario labour expenditures (salaries and wages for employees and remuneration for arm’s length individuals who are not employees of your company) for both specified and non-specified products. You can also claim marketing and distribution expenditures for non-specified products.

OIDMTC eligible labour expenditures must be:

  • Paid to individuals resident in Ontario at the end of the calendar year that precedes the calendar year in which the individual rendered the services.
  • Directly attributable to the development of the interactive digital media product.
  • Paid for services rendered at a permanent establishment in Ontario.
  • Incurred in the three-year period prior to the completion of the product.

Marketing and distribution expenditures claimed for non-specified interactive digital media products:

  • Must be incurred in the 24-month period prior to and/or the 12 months following the completion of the product.
  • Can only include up to a maximum claim of $100,000 in marketing and distribution expenditures per product.

How Much is the OIDMTC?

Your company’s eligible OIDMTC expenditures can be refunded at 35% or 40% depending on the stream under which you apply. Table 2 below summarizes OIDMTC rates for non-specified and specified products.

Table 2 – OIDMTC Rates for Non-specified and Specified Products as of March 26, 2009

ProductTax Credit RateWages & RemunerationMarketing & Distribution
Non-specified products 40% Maximum $100,000/product
Specified products 35% N/A
Please note: There is no maximum for eligible Ontario labour expenditures that may qualify for the credit. Also, there are no per-product or annual corporate limits on the amount of OIDMTC that can be claimed.

How is the Tax Credit Administered?

The OIDMTC is jointly administered by Ontario Creates, and the Canada Revenue Agency (CRA). You submit your application to Ontario Creates for certification at your company’s year-end, based on expenditures that have already been paid. If your company and product meet eligibility requirements, Ontario Creates will issue a Certificate of Eligibility.

To claim the OIDMTC, your company must file the Certificate of Eligibility with the CRA along with your corporate tax return. The amount of the credit, net of any Ontario taxes owing, will be paid to your company. If you do not owe any taxes, the full amount will be paid out.

Please note: The OIDMTC is an after-the-fact tax credit. You can apply to Ontario Creates for a Certificate of Eligibility:

  • After your product is completed (for non-specified and specified products).
  • After you have incurred and paid the costs to develop your product.
  • At the end of the tax year in which you completed your product.

There is an application deadline that requires your company to apply to Ontario Creates for an OIDMTC Certificate of Eligibility for specified and/or non-specified products by the day that is 18 months after the end of your company’s taxation year in which development of the eligible product(s) was completed. For example, if you completed some products in your 2019 taxation year with a year end of December 31, 2019, you would have to submit an OIDMTC application for these products before July 1, 2021.

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B. Legislative Requirements

1. Eligibility Criteria

i. Interactive Digital Media Products

Your interactive digital media product is defined as a combination of one or more application files and one or more data files that are digital, integrated and intended to be operated together.

For your interactive digital media product to be eligible for the OIDMTC, the following criteria must be met:

  • 80/25 Rule: The 80/25 rule requires that 80% of total development labour expenditures to create the product be for work performed in Ontario and paid as eligible salaries or wages and eligible remuneration to arms- length Ontario-based individuals or arms- length Ontario-based individuals providing services as a corporation with no employees. As well, 25% of the total development labour expenditures must be paid as eligible salaries or wages to Ontario-based employees of your company for work performed in Ontario.
  • Primary Purpose: The primary purpose of your product must be to entertain the user, or educate users under 12 years of age.
  • Present Information: Use at least two of the three following formats: i) text, ii) sound and iii) images.
  • Choice/Interactivity: User can choose the form and sequence in which information is presented.
  • Use: Intended to be used by individuals.
  • Communication: Not used primarily for interpersonal communication.
  • Software: Not used primarily as system software.
  • Non-promotional: Not used primarily for promotion of any products, services, or companies.
  • Sale or licensing: The product must be developed for sale or licensing to an arm’s length entity who has not previously entered into an arrangement with you for the development of the product (non-specified products) or the product must be developed under the terms of an agreement with an arm’s length purchaser for the purpose of sale or license by the purchaser to an arm’s length entity (specified products).
  • Revenue Generating Stream: Product must have an eligible revenue generating stream. The product must be used by your company or the purchaser (in the case of specified products) to generate revenue.
  • Completion: Products must be completed.
  • Exclusions: Product must not be an excluded product.

Products must also not be “contrary to public policy”.[3]

a) 80/25 Rule

This quantitative rule has two concurrent tests, an 80% test and a 25% test (known as the 80/25 rule). Both tests need to be met in order for a product to be eligible.

The 80% test (or Ontario labour ratio) requires that the following formula is 80% or greater:

A/B

A is the total amount of eligible development labour expenditures incurred in the claim period for work performed in Ontario and paid by your company:

  • As salaries and wages to your company’s Ontario-based employees;
  • As remuneration to arm’s length individuals who are not employees of your company, and who provide their services to your company as part of a sole proprietorship with no employees;
  • As remuneration to arm’s length individuals who provide their services to your company through their personal loan-out corporation which is a taxable Canadian corporation where there are no employees other than the individual, all of the issued and outstanding shares of the capital stock of the loan-out corporation (other than directors’ qualifying shares) are owned by the individual, and the loan-out corporation’s primary activity is the provision of that individual’s services.

B is the total amount of development labour expenditures incurred in the claim period that is directly attributable to the development of the product. Expenditures included as part of B are not required to be eligible under OIDMTC. They may include development labour expenditures paid to non-Ontario residents, or for work performed outside of Ontario, or incurred by another corporation etc.

The 25% test (or Ontario wage ratio) would require that the following formula is 25% or greater:

C/D

C is the total amount of eligible development labour expenditures incurred in the claim period and paid on account of salaries and wages to your Ontario-based employees for services rendered in Ontario.

D is the same amount as determined for B in the formula for the 80% test.

Please note for A and C in the formulas above, amounts claimed under the federal Scientific Research & Experimental Development (SR&ED) tax credit may be included as part of eligible development labour for the purposes of this 80/25 rule. SR&ED amounts that relate to development labour expenditures for the product should also be included in B and D. Also, the amount included for A, B, C and D would only include development labour expenditures incurred in the claim period, which is 37 months preceding the end of the month in which the product was completed.

To demonstrate that your company has met the 80/25 rule you must provide detailed labour schedules that identify all development labour expenditures incurred to create the product during the claim period. This includes development labour expenditures that may not be eligible for OIDMTC, such as labour claimed under the federal tax credit for Scientific Research & Experimental Development (SR&ED), or for work done outside Ontario, etc. Applicants are also required to submit copies of T4s for the top five highest paid individuals claimed as employees under wages and salaries, and copies of contracts/invoices for the top five highest paid individuals claimed under remuneration. Additional documentation may be requested to verify eligibility.

If you intend to apply for the OIDMTC, please keep detailed records during product development.

b) Primary Purpose

The primary purpose of your product must be to entertain the user, or educate users who are children under the age of 12.

  • Entertain: The product should be designed for recreation. A product with the primary purpose of informing, or educating the user is not considered to be primarily entertaining. For example, news products would not be considered to have the primary purpose of entertaining the user, even if the user engages with the product during leisure time.

    Digital games (that do not primarily promote any product, service or company) would be considered to have the primary purpose of entertaining the user.
  • Educate Children Under 12: The product should be designed as an educational hands-on tool to be used by children under the age of 12. The users of the product, must be children under the age of 12 who interact directly with the product and are educated by it. For example, this could include an iPad app that is designed to teach the letters of the alphabet. A product that is designed primarily to educate youths and adults would not be considered to have the primary purpose of educating users under the age of 12. Products designed to be used as teaching tools for adults to teach children may not be eligible unless children under 12, can directly interact with the product.

More than 50% of product content must meet the primary purpose test. A product can only have one primary purpose. Products that are used to sell or promote goods and services (whether they are goods and services of your own company or those of a third party) such as websites promoting film and TV programs/companies, sweepstakes games, advergaming products, or corporate websites that are used to raise awareness of a company and may list services and products, are not considered to be products whose primary purpose is to entertain the user or educate users under the age of 12.

At the time the product is first accessed by the user, it should be preloaded with content that either entertains users of any age, or educates users under the age of 12. If your product requires the user to add content or user data files in order for the product to have content that meets the primary purpose, your product will not be eligible. Companies must provide Ontario Creates with access to the version of the product as it existed upon completion.

c) Interactivity

The user of the product must be able to choose what information is presented and the form and sequence in which it is presented.

Not all digital products meet the interactivity requirements of the OIDMTC.

Specifically, games of chance, or casino/slot type gambling games where the user’s only choice is to press “start” or “play” would not be eligible for the OIDMTC. The user must be able to change the form and sequence of the information being presented to them while operating the game.

Digital games: must be played interactively by one or more users; must provide the user(s) the ability to affect the outcome of game play; set out goals and rules for game play; challenge the user and have an uncertain outcome.

Also, not all virtual reality (“VR”) products meet the interactivity requirements of the OIDMTC.

Cinematic 360-degree VR videos, also known as immersive or spherical videos, may not be eligible for the OIDMTC. Simply having the ability to look around at the entire scene with a 360-degree view makes these products immersive for the user but does not make them interactive as required by the OIDMTC. What the user sees is video footage that has been shot or animated, not a simulation where the user is able to interact with and navigate through different environments as you would experience in a VR game. The video plays from beginning to end and the user cannot change the form or sequence of the content making it ineligible for the OIDMTC.

Cinematic 360-VR videos that may be eligible for OIDMTC contain interactive “hotspots” embedded in the video for the user to select that enables them to change the content they are viewing, and the sequence of the content they are viewing.

d) Revenue Generating Stream

The OIDMTC regulations have strengthened the rule that excludes products that are primarily promotional. Products with no revenue generating stream will be excluded as they are considered to promote the developer or the products of the developer (or the purchaser or products of the purchaser in the case of specified products).

Eligible Revenue Generating Streams include:

  • The sale of the product;
  • Fees for use of the product, including licence and subscription fees;
  • In-product purchases (also called an in-game or in-app purchase, which occurs when the user can purchase an enhancement to the product);
  • Third party advertising within the product (marketing and promotion of a corporation or person, or products or services of a corporation or person, that is not related to the product developer or the purchaser corporation in the case of a specified product); and
  • The sale or licence of another product developed by your company that can reasonably be considered an extension or upgrade of the product.

The product must be used by your company to generate revenue for your company in one or more of the ways listed above if you are applying for the OIDMTC on a non-specified product. For specified products (products developed by your company under a fee-for-service arrangement with an arm’s length purchaser company), the product must be used to generate revenue for the purchaser company. For specified products, the agreement between your company and an arm’s length purchaser company to develop the product is not proof of a revenue generating stream.

There is no specific amount of revenue that must be generated to be considered an eligible specified or non-specified product. However, Ontario Creates must see proof that the product being claimed was offered for sale or license. This could include a sale or license to the public via a sales platform such as iTunes, or GooglePlay for example, or via a bonafide digital distributor or publisher. If revenue was generated by third party advertising or in-product purchases, evidence of this should be visible within the product when Ontario Creates reviews a copy of the product. Copies of agreements with distributors, publishers, digital retailers, or advertising agencies will be requested by Ontario Creates.

Please note: A product with an eligible revenue generating stream may also be found to be primarily promotional. Confirmation of an eligible revenue generating stream does not guarantee your product will meet the primary purpose requirement. Ontario Creates reviews all of the content that appears on the product and also reviews all supporting documentation to determine a product’s primary purpose.

e) Product Exclusions

The OIDMTC regulations exclude certain types of products, including the following:

  • Products providing any content that is news, current events or public affairs programming; opinion, commentary or advice; or weather or market reports;
  • Products produced primarily for industrial, corporate or institutional purposes including vocational training products or products that educate or inform employees;
  • Products that are primarily reference material or otherwise designed to be used as a resource for finding information, such as a guide for equipment or software, a dictionary or a map;
  • Products that primarily aggregate content from various internet sources;
  • Products that are primarily used to filter and organize specific content from the internet;
  • Products that are search Engines;
  • Products that are blogs; and
  • Products that are primarily databases, including a real estate or recipe database.

Most websites are excluded. Websites are only eligible products if more than 50% of the site hosts any of the following:

  • One or more digital games;
  • Content related to a film, television or internet production that is hosted under a licence agreement in respect of a copyright for the film, television or internet production, but that does not exhibit more than 10% of any film, television or internet production;
  • One or more virtual or augmented reality experiences; and/or
  • Content that is designed to educate users who are under 12 years of age.

If you are submitting a website product related to a film, television or internet production, the production that your website is related to must meet the definitions outlined below:

Film, television or internet production: A film, television or internet production is a production that is produced:

  • For commercial release in theatres;
  • For broadcasting on television; or
  • For broadcasting over the internet where the end user is required to pay a purchase, licence or subscription fee.

In addition, a film, television or internet production does not include a production that is any of the following:

  1. News, current events or public affairs programming, or a programme that includes weather or market reports,
  2. A talk show,
  3. A production in respect of a game, questionnaire or contest (other than a production directed primarily at minors),
  4. A sports event or activity,
  5. A gala presentation or an awards show,
  6. A production that solicits funds,
  7. Reality television,
  8. Pornography,
  9. Advertising,
  10. A production produced primarily for industrial, corporate or institutional purposes, or
  11. A production, other than a documentary, all or substantially all of which consists of stock footage.

Your company must have access to the film, television or internet production intellectual property through an ownership or license agreement. Content related to film, television or internet production intellectual properties would include characters or story elements related to, featured in or adapted from, eligible film, television or internet productions.

Similar Content Products: If the majority of the content of a particular product is available on a website that is excluded from the OIDMTC as described in the current regulations, then that product would also be excluded. For example, if a product is an app and the same content is available through a website that is excluded, the app would also be an excluded product.

Embedded Website Eligibility: A website that is embedded in a third party’s website is not considered a complete interactive digital media (IDM) product and is ineligible for OIDMTC. The only exception to this are websites related to eligible film, television or internet productions.

Business models in the film and television industry often require that websites purchased or licensed by a broadcaster be integrated within the broadcaster’s website for a seamless user experience. In recognition of this industry-specific business model, embedded websites related to film, television or internet productions may be eligible as outlined below.

Websites that:

  • Primarily host content related to a film, television or internet production;
  • Meet the eligibility requirements of section 34 (5) 9ii of O. Reg. 37/09 General under the Taxation Act, 2007;
  • Have been purchased or licensed by a CRTC licensed broadcaster;
  • Are embedded in the CRTC licensed broadcaster’s website; and
  • Have not yet received a certificate of eligibility or a letter of ineligibility before November 1, 2017

would be considered eligible for the OIDMTC provided Ontario Creates is reasonably assured that the product would meet all of the tax credit eligibility requirements if the purchaser or licensor permitted the product to be distributed as a separate product.

Please note for websites that were submitted as part of an OIDMTC application to Ontario Creates and have been withdrawn from review prior to November 1, 2017, the applicant may choose to re-apply for the OIDMTC with these products, however, they would be subject to the OIDMTC application deadline. (Please see section 5(ii)).

ii. Qualifying Corporations

To apply for the OIDMTC, your company must be a qualifying corporation. A qualifying corporation is an Ontario-based Canadian or foreign-controlled corporation that develops an eligible product at a permanent establishment in Ontario. It must operate the business and file Ontario tax returns. Partnerships are not eligible to claim the OIDMTC. Your qualifying corporation cannot be controlled by another corporation that is exempt from paying tax in Ontario.

iii. Expenditures

You can claim Ontario labour expenditures for services rendered in Ontario to develop your product. For non-specified products, you can also claim up to $100,000 of your marketing and distribution expenditures.

a. Ontario Labour

You can claim salaries and wages for employees of your company and remuneration for arm’s length non-employees.

Remuneration paid to the following can be included in your OIDMTC claim if they are arm’s length entities:

  • Individuals (for services rendered by the individual or by the individual’s employees);
  • Personal corporations (where the individual service provider is the sole shareholder);
  • Partnerships (for the services rendered by a member of the partnership or employees of the partnership);
  • Other Ontario corporations for the services rendered by their employees.

Your labour expenditures must also meet the following criteria:

  • Be directly attributable to the development of the interactive digital media product;
  • Paid for services personally rendered by an individual who was resident in Ontario at the end of the calendar year preceding the calendar year in which services were rendered;[4]
  • Paid for services rendered at a permanent establishment in Ontario;
  • Paid no later than 60 days after the end of the tax year of your OIDMTC application;
  • Incurred in the 37-month period ending at the end of the month in which development of the product was completed;
  • Not incurred as part of scientific research and experimental development (SR&ED) federal tax credit; and
  • Not incurred as part of OCASE, OFTTC or OPSTC claims.
b. Marketing/Distribution

You can claim marketing and distribution expenditures for your non-specified product. The expenditures must meet the following criteria:

  • Be incurred in the 24-month period prior to and/or during the 12 months following the completion of the product;
  • Not already be claimed as Ontario labour expenditures for development of the product;
  • Be directly attributable to advertising or promoting the eligible product or distributing the eligible product to customers or potential customers;
  • Be paid no later than 60 days after the end of the tax year of your OIDMTC application;
  • Not incurred as part of scientific research and experimental development (SR&ED) federal tax credit; and
  • Not incurred as part of OCASE, OFTTC or OPSTC claims.

Note: Only 50% of meals and entertainment expenditures is allowed.

A maximum of $100,000 in eligible marketing and distribution expenses can be claimed per product.;

Examples of eligible marketing and distribution expenses include:

  • Attending trade shows where the product is being promoted.
  • Consultant fees for public relations and marketing/portion of wages and salaries of employee(s) attributable to specific product marketing and distribution.
  • Advertising the product in print and electronic media (including design and preparation).
  • Preparing the product for display or demonstration.
  • Product market research/focus group testing.
  • Product visual identity: logos, branding, merchandising/promotional products e.g. mugs, shirts.
  • In-store promotions, product samples.
  • Direct mail marketing/telemarketing.
  • Media kits, news releases, media lists.

If you sell your products directly to customers, you cannot include expenditures for processing or shipping orders.

Please note: if you have an agreement with a game publisher, distributor, or online retailer (i.e. the Apple App Store, or GooglePlay), the percentage of gross revenue that is kept by the game publisher, distributor, or online retailer is not considered an expenditure or out-of-pocket expense of your company and should not be claimed as a marketing and distribution expense for the OIDMTC.

2. How Much Is the OIDMTC?

Your company can be refunded 35% of eligible expenditures for specified products developed under a fee-for-service agreement. The rate is 40% for non-specified products. Eligible labour expenditures for specified and non-specified products include employee salaries and remuneration paid to arm’s length persons who are not employees. You can also claim marketing and distribution (M&D) expenditures of up to $100,000 for each non-specified product. There is no limit on the amount of eligible Ontario labour expenditures which may qualify. As well, there are no per-product or annual corporate limits on the amount of OIDMTC claimed.

The claim period for Ontario labour expenditures is 37 months preceding the end of the month in which the product was completed. If you are claiming M&D expenditures for non-specified products, the claim period is 24 months preceding the date of completion of the product and 12 months following.

The OIDMTC is calculated as the sum of all eligible expenditures less government assistance, multiplied by the applicable tax credit rate. Table 4 below illustrates an estimate for a non-specified product.

Table 4 – How to Estimate OIDMTC for a Non-specified Product

Steps to Calculate Estimated OIDMTC for a Non-specified ProductExample
1 Determine the completion date of development. July 15th 2019
2 Determine the claim period (37 months preceding the end of the month in which the product was completed). July 1, 2016
to July 31, 2019
3 Include salaries and wages paid to your Ontario based employees for product development that were incurred during the claim period. + $500,000
4 Include Ontario arm’s length remuneration paid for work on the product that was incurred during the claim period. + $35,000
Subtotal: Eligible Ontario Development Labour = $535,000
5 Deduct government assistance that relates to development labour (e.g. IRAP grant). - $10,000
6 Net Eligible Ontario Development Labour = $525,000
7 If you have M&D expenditures, determine the M&D claim period (24 months preceding the date of product completion and 12 months following). July 15, 2017
to July 15, 2020
8 Include eligible M&D expenditures capped at $100,000 incurred in the M&D claim period. + $75,000
9 Deduct government assistance related to M&D expenditures (e.g. Ontario Creates IDM Fund: Global Market Development ) - $10,000
10 Net Eligible M&D Costs = $65,000
11 Add Net Eligible Ontario Labour (Step 6) + Net Eligible M&D Expenditures (Step 10) + $525,000
+ $65,000
12 Multiply by 40% tax credit rate = $590,000 x 40%
Estimated OIDMTC = $236,000
To calculate an estimate for a specified product, skip steps 7 through 11 and use the 35% OIDMTC rate in step 12.

Government assistance includes grants, subsidies, forgivable loans, deductions from tax other than OIDMTC and investment allowance from a government, municipality or other public authority.

Government assistance for OIDMTC relates to either development expenditures, or to marketing and distribution expenditures of a product and should be allocated accordingly.

Assistance that is received from a government source that is for more than one product, should be reasonably allocated per product; for example, if your company received an Ontario Co-operative Education Tax Credit for labour expenditures of a student who worked on more than one of your products, the assistance should be allocated amongst the products.

Some grants are issued to applicants that combine the assistance awarded for budgeted development costs with assistance for marketing and distribution costs. In the case of Ontario Creates IDM Fund for Production, for example, if there are costs budgeted in categories Gen-22 “Deployment and Distribution Expenses” and Gen-23 “Promotions”, a portion of the total assistance received would relate to marketing and distribution, and the rest of the assistance would relate to development of the product.

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C. Administrative Process

The OIDMTC is jointly administered by Ontario Creates and the Canada Revenue Agency (CRA) as described below.

Ontario Creates’ Role

i. Issuance of Certificate of Eligibility

Ontario Creates is responsible for issuing a Certificate of Eligibility which your company files with your corporate tax return with the CRA in order to claim the OIDMTC. A Certificate of Eligibility will be issued for all eligible specified and non-specified products that have been completed in your company’s tax year.

A Certificate of Eligibility sets out the following:

  1. Eligibility of the company claiming the OIDMTC,
  2. Eligibility of the product(s) included in the OIDMTC claim, and
  3. Estimated amount of the OIDMTC.[5]

Where more than one product has been completed by your company, the Certificate of Eligibility will list all eligible products and an estimated OIDMTC attributed to each product.

Ontario Creates reserves the right to ask any question necessary to determine eligibility issues. Failure to provide Ontario Creates with requested information may result in your file being closed or denied eligibility. 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 product may not be relied upon as a guarantee of certification for subsequent filings.

ii. Amendment and Revocation of a Certificate of Eligibility

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 to your company. If a Certificate of Eligibility is revoked by Ontario Creates, the revoked Certificate of Eligibility is treated as if it had never been issued.

Please note that there is a fee of $100 for an amended Certificate of Eligibility. Please see section 5(iii) below.

2. Canada Revenue Agency (CRA) Role

The CRA is responsible for assessing and auditing your company’s Corporate Income Tax Return. The T2 Form, along with Schedule T2SCH560, must be filed by your company in order to claim the OIDMTC. The CRA also processes T2 tax returns and issues notices of assessment and tax refunds.

3. Filing a Corporate Tax Return

The CRA administers both federal and Ontario corporate taxes. A corporation must file its T2 return for a tax year with the CRA within six months after the end of the corporation’s tax year.

To claim the OIDMTC, your company must file its T2 return with Schedule T2SCH560 and the Certificate of Eligibility with the CRA. Following its review or audit of the OIDMTC claim, the CRA processes the T2 return, issues a notice of assessment and, if applicable, a refund. The refund amount may be reduced by your corporation’s outstanding federal and Ontario taxes.

In the event that your Certificate of Eligibility is not available at the time of submitting your corporation's tax return to the CRA, we recommend that you enter your own OIDMTC estimate on Schedule T2SCH560 and include this schedule with your corporate tax return. Once the Certificate of Eligibility is received from Ontario Creates, submit the Certificate of Eligibility (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 is available here and the applicable schedule is available here.

For additional information visit on the CRA website.

Inquiries should be directed to CRA’s Toronto Film Services Unit at (416) 973-3407 or (416) 954-0542.

4. Payment of an OIDMTC Refund

If a corporate tax refund (which may include an OIDMTC refund) is due, a cheque or direct deposit payable to your company will be sent by the CRA.

5. Applying for a Certificate of Eligibility

i. Who Applies to Ontario Creates?

Your company must submit a completed OIDMTC Application via Ontario Creates Online Application Portal for all eligible products for the applicable tax year. For administrative convenience, your company may appoint an agent to apply on its behalf but any Certificate of Eligibility issued will be in the name of your company.

ii. When Should Your Application Be Made to Ontario Creates?

You can apply to Ontario Creates at the end of your company’s tax year in which your specified or non-specified product has been completed. Include all specified and/or non-specified products completed in your company’s tax year in one OIDMTC application.

If your company has not incurred all eligible marketing and distribution (M&D) expenditures at the time of application you can submit expenditure schedules with projected expenditures up to the end of the tax year in which the products were completed. To claim additional M&D expenditures on products certified in a previous tax year, your company should submit a new application for the tax year that these additional M&D expenditures were incurred.

There is an application deadline that requires your company to apply to Ontario Creates for an OIDMTC Certificate of Eligibility for specified and/or non-specified products by the day that is 18 months after the end of your company’s taxation year in which development of the eligible product(s) was completed.

Please note that each application is subject to an administration fee.

iii. What is the Administration Fee?

A non-refundable Administration Fee is payable with respect to each OIDMTC application submitted to Ontario Creates. Administration fees are used to offset operating costs of the OIDMTC program. Please note that the administration fee is required in order for the application to receive an eligibility review.

The administration fee is calculated as 0.15 per cent of the total eligible OIDMTC expenditures. The minimum Administration Fee is $1,000 and the maximum is $10,000 per application.

For example, where eligible OIDMTC expenditures total $700,000, the Administration Fee is calculated as follows: Application Fee = Qualifying Expenditure x 0.0015 =$700,000 x 0.0015 =$1,050

Applicants now have the option of paying the administration fee through Interac E-Transfer. Please visit the following pages on the Ontario Creates website for more information:

  • How to pay your tax credit administration fee via Interac E-Transfer
  • FAQ

Please direct inquiries to applyhelp@ontariocreates.ca.

The administration fee may also be paid by cheque or money order to Ontario Creates when the application is submitted. The administration fee must be paid in full in order for your application to be reviewed.

Please note: there is a fee of $100 for each amended Certificate of Eligibility.

Please note: there is an additional filing fee of $100:

  • For non-specified products that are only making a marketing and distribution claim for an eligible product that was previously certified, if the application for the marketing and distribution claim is received more than 18 months from the subsequent year-end following the year in which the eligible product was completed.

iv. What Documentation is Required?

You must submit the documents that are outlined in the OIDMTC Document Checklist (see Appendix 1). In some cases, Ontario Creates may also require additional documentation or information in order to issue a Certificate of Eligibility. All documentation and correspondence that relates to your application must go through Ontario Creates Application Portal. 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 CRA.

v. How Long Does the Process Take?

Ontario Creates Tax Credit Department reviews completed applications on a first-come, first-served basis. Processing time will depend on the volume of applications received. If you file an incomplete application, you will be notified about deficiencies with the filing. Where significant delays are encountered in obtaining responses from applicants, Ontario Creates reserves the right to close the file after 30 days.

vi. Online Application

All Ontario Creates tax credit applications must be submitted via the Online Application Portal (OAP).

Ontario Creates has created a series of training videos describing in detail how to perform the most common actions on the portal. These training videos can be accessed on Ontario Creates website at: http://www.ontariocreates.ca/online-application-portal/online-application-portal-training-videos

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. 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.

vii. Do Different Versions of a Product Need to be Submitted as Separate Products in an OIDMTC Claim?

Yes. Each version of a product that is developed for a specific platform should be submitted as a separate product in an OIDMTC application, e.g. Product A [Android], Product A [iOS], Product A [PC]. Each version of a product should have separate expenditure allocations and may also have different start and completion dates.

If, during the course of review, Ontario Creates discovers that a single product submitted in the OIDMTC application was actually developed for multiple platforms, we will request that the applicant re-submit their OIDMTC application and split out the products and development expenditures by platform as noted above.

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CONTACT INFORMATION

If you require assistance, please contact the Tax Credits Phone Duty line (416) 642-6659 or mailbox at taxcredits@ontariocreates.ca. 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. For further information please also check out our Frequently Asked Questions.

APPENDIX 1 - OIDMTC DOCUMENT CHECKLIST (Non-Specified and Specified Products)

Your company is responsible for ensuring that all application documentation is current and accurate.

  1. OIDMTC Application Form (You must register on Ontario Creates Online Application Portal to access the Application Form.)
  2. Administration Fee, payable to Ontario Creates.
    Calculated as 0.15 percent of the total final Eligible Expenditures.
    The minimum Administration Fee is $1,000 and the maximum is $10,000 per application.
    Please note:
    • There is an additional filing fee of $100 for:
      non-specified products that are only making a marketing and distribution claim for an eligible product that was previously certified, if the application for the marketing and distribution claim is received more than 18 months from the subsequent year-end following the year in which the eligible product was completed.
    There is a fee of $100 for amended Certificates.
  3. Incorporation documents for your company, including amendments. (If these documents are already on file with Ontario Creates Tax Credits Department, please provide all updates, amendments or revisions.)
  4. Corporate chart for Qualifying Corporation. Please complete and sign the Corporate Schedule for the applicant company for the fiscal year of the application with all the information requested on the form. If applying for an OIDMTC for non-specified and specified products, please provide a corporate chart for all associated companies (e.g. chart or schedule indicating the relationship between the applicant corporation and all associated corporations, including percentage of share ownership).
  5. Consolidated annual financial statements of your company for the current tax year.
  6. Chain of title documentation for each interactive digital media product included in the application (i.e. documentation of ownership rights to the product, for example, licensing agreements, rights agreements, domain name registration, co-production agreements, distribution agreements, where applicable).

    For Convergent Websites based on film, TV or internet productions you must provide a copy of the IP license agreement with the entity (TV or Film producer) that owns the copyright in the eligible Film, TV or Internet production that the website is based on. The agreement should indicate that the rights to create the website using these copyrighted IP materials such as characters, story elements etc. have been granted to the applicant.

    For specified products, you must provide a fee-for-service agreement with the purchaser corporation.

    Documentation should clearly indicate ownership rights to the completed product.

  7. Description of product development: Design and technical specification documentation, where applicable, including a flow chart, functional design, a description of the user experience, storyboard, a list of technical requirements and specifications or script.
  8. Complete, detailed production schedule and timeline showing who did what and when (e.g. Gantt chart).
  9. Business and Marketing Plan including a description of the target audience/market and revenue model.

    Where possible, please include letters and or agreements that confirm interest and proposed terms from third-party distributors or equivalent. (Required for each interactive digital media product included in the application.)
  10. Proof of Revenue Generating Stream (required for all non-specified and specified products)
    Please include copies of agreements with third-party digital distributors, publishers, advertising agencies, and digital retailers etc. that outline the terms of sale or license to arm’s length parties. Please provide any additional documentation to prove that the product has an eligible revenue generating stream, i.e. screen shots of product listed on Apple App Store, GooglePlay, or STEAM.

    If your product is a convergent website based on a film, TV or internet production please provide the license agreement with a TV broadcaster granting access to license the website. (see item 6)

    Please note, this is not an exhaustive list. Also, a business model or plan is not sufficient evidence of a revenue generating stream. Ontario Creates may also request a copy of your General Ledger Revenue Accounts, or Sales Reports, that relate to products in your OIDMTC claim.
  11. List of names and roles (with brief description) of all individuals and companies working on the product(s) paid or unpaid. This list must also include unclaimed and ineligible individuals and companies working on the product(s). Please include addresses.

    You must use the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website.
  12. List of names and addresses of individuals who are not employees of your company that worked on product. You must use the OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website. See section “Remuneration Addresses”.
  13. Financing plan/sources of financing for the interactive digital media product (required for each interactive digital media product included in the application).
  14. Financing contracts, if available (for all sources of financing for each interactive digital media product included in the application). Include copies of financing documents for government assistance/grants.
  15. For each product included in the application you must provide a copy of the (opens new window)OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website.

    This is a schedule of ACTUAL eligible Ontario labour expenditures, which includes a split of expenditures incurred up to and including April 23, 2015, and those expenditures incurred April 24, 2015 and beyond.

    The OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) includes a section:
    • for eligible Marketing and Distribution Expenditures for non-specified products.
    • for you to list the names and roles (with brief description) of all individuals and companies working on the product(s).
    • to identify amounts claimed for the Science Research & Experimental Development Tax Credit (SR&ED). Please fill this section out if you claimed SR&ED for the product included in your OIDMTC application.
    • to report unclaimed or ineligible amounts incurred for each product for the claim period under “Ineligible Development Labour”. You must identify these amounts.
    The schedules should make a clear distinction between, and provide subtotals for:
    • Wage Amounts on account of salaries and wages of your employees
    • Remuneration Amounts paid to arm’s length parties who are not employees of your corporation.
  16. To expedite review of the 80/25 Rule please provide the following for each product claimed:
    • Copies of T4s for the top five highest paid individuals claimed under wages and salaries to develop each product. Please note, additional T4s or employee agreements may be requested by Ontario Creates.
    • Contractor Agreements for the top five highest paid individuals or personal corporations claimed under remuneration for the development of each product. If no agreement exists, provide copies of invoices. Please note additional contractor agreements may be requested.
  17. For each Non-Specified product included in the application, you must use the (opens new window)OIDMTC Expenditure Breakdown Spreadsheet for Specified and Non-Specified Products (Section 93) that can be downloaded from Ontario Creates website which includes a schedule of actual and/or projected eligible Marketing and Distribution Expenses** including split of expenditures incurred up to and including April 23, 2015 and those expenditures incurred April 24, 2015 and beyond. The schedules should make a clear distinction between, and provide subtotals for marketing and distribution expenditures as they relate to specific eligible non-specified products.

    Note: Please submit FINAL numbers if applying to include after all marketing and distribution expenditures that have been incurred up to the end of the tax year of your claim.

    Please submit a schedule of projected total expenditures if applying before all marketing and distribution expenditures have been incurred.

    ** Marketing and Distribution Expenses are not eligible expenditures for “specified products” or for “eligible digital games” claimed under section 93.1 (Qualifying Digital Game Corporation) or 93.2 (Specialized Digital Game Corporation)
  18. Please provide a copy of each completed interactive digital product or access to the version of the product as it existed when it was completed (including websites). Product should be shelf-ready or exploitable. For websites, a copy of all associated text and image files with the address where the product may be accessed at time of completion is required. Please include any password, registration or access codes that may be required to review the product.

    You must provide Ontario Creates a copy of the product that shows all of the content presented in the product as of its completion date, when first available to third party end users. This is very important for website products as there are many content restrictions and requirements. Ontario Creates also needs to confirm product interactivity, and a working copy of the product may be required in order to certify.

    The onus is on the applicant to provide an adequate copy of the completed product for Ontario Creates to review. Ontario Creates needs to review the version of the product being claimed, not a subsequent or earlier version of that product.
  19. A description of the product is required.

    Please note: As part of the product description please include a description of how the product is accessed by the end user.
  20. If the product’s primary purpose is to educate child users under the age of 12, documentation must be provided to demonstrate this. Ontario Creates will review a copy of the product, development documentation, financing documentation and marketing materials, to make our assessment of the product’s primary purpose. Should you have additional documentation that demonstrates the product’s primary purpose to educate child users under the age of 12, please submit it with your application. Please note: affidavits, or attestations will not suffice as evidence of eligibility criteria for the OIDMTC. All documentation should be contemporaneous with the time the product was developed and completed.

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APPENDIX 2 - ONTARIO INTERACTIVE DIGITAL MEDIA TAX CREDIT LEGISLATION

Current to May 29, 2019

The Legislation governing the OIDMTC is set out in Section 93 of the Taxation Act, S.O. 2007, Chapter 11, Schedule A, and can be found (opens new window)here.

APPENDIX 3 - ONTARIO INTERACTIVE DIGITAL MEDIA TAX CREDIT REGULATION

Current To May 15, 2017

* This Regulations is made in English only.

The Regulations governing the OIDMTC are set out in Ontario Regulation 37/09, and can be found (opens new window)here.

APPENDIX 4 - ONTARIO INTERACTIVE DIGITAL MEDIA TAX CREDIT RELATED PROVISIONS

NOTE: Ontario Creates versions reproduced in this Appendix are for purposes of convenience only. The authoritative text of the following provisions is set out in the official volumes.

4-I - DEFINITION OF “CANADIAN CORPORATION”

Subsection 89(1) of the Income Tax Act (Canada)

89. (1) “Canadian corporation” at any time means a corporation that is resident in Canada at that time and was

  1. incorporated in Canada, or
  2. resident in Canada throughout the period that began on June 18, 1971 and that ends at that time,

and, for greater certainty, a corporation formed at any particular time by the amalgamation or merger of, or by a plan of arrangement or other corporate reorganization in respect of, 2 or more corporations (otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of the property by the other corporation or as a result of the distribution of the property to the other corporation on the winding up of the corporation) is a Canadian corporation because of paragraph (a) only if

  1. that reorganization took place under the laws of Canada or a province, and
  2. each of those corporations was, immediately before the particular time, a Canadian corporation

4-II - DEFINITION OF “PERMANENT ESTABLISHMENT”

Subsection 400 of the Federal Income Tax Regulations

(2) For the purposes of this Part, “permanent establishment” in respect of a corporation means a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse, and

  1. where the corporation does not have any fixed place of business it means the principal place in which the corporation’s business is conducted;
  2. where a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation shall be deemed to have a permanent establishment in that place;
  3. an insurance corporation is deemed to have a permanent establishment in each province and country in which the corporation is registered or licensed to do business;
  4. where a corporation, otherwise having a permanent establishment in Canada, owns land in a province, such land shall be deemed to be a permanent establishment;
  5. where a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year it shall be deemed to have a permanent establishment in that place;
    (e.1) if, but for this paragraph, a corporation would not have a permanent establishment, the corporation is deemed to have a permanent establishment at the place designated in its incorporating documents or bylaws as its head office or registered office;
  6. the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not of itself be held to mean that the corporation has a permanent establishment; and
  7. the fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary controlled corporation engaged in trade or business in a place shall not of itself be held to mean that the corporation is operating a permanent establishment in that place.

4-III - DEFINITION OF CONTROL IN FACT

“CONTROLLED, DIRECTLY OR INDIRECTLY IN ANY MANNER WHATEVER”
Subsection 256(5.1) of the Income Tax Act (Canada)

256 (5.1) Control in fact – For the purposes of this Act, where the expression “controlled, directly or indirectly in any manner whatever,” is used, a corporation shall be considered to be so controlled by another corporation, person or group of persons (in this subsection referred to as the “controller”) at any time where, at that time, the controller has any direct or indirect influence that, if exercised, would result in control in fact of the corporation, except that, where the corporation and the controller are dealing with each other at arm’s length and the influence is derived from a franchise, licence, lease, distribution, supply or management agreement or other similar agreement or arrangement, the main purpose of which is to govern the relationship between the corporation and the controller regarding the manner in which a business carried on by the corporation is to be conducted, the corporation shall not be considered to be controlled, directly or indirectly, in any manner whatever, by the controller by reason only of that agreement or arrangement.

4-IV – REGARDING APPLICABLE ASSET AND REVENUE CAPS

Subsection 57.2(1) of the Corporations Tax Act (Ontario)

57.2 (1) Except as provided in section 57.11, every corporation subject to tax under Part II for a tax year is liable to pay to the Crown in right of Ontario a corporate minimum tax for the taxation year as determined under this Part if,

  1. the corporation’s total assets at the end of the tax year exceed $5,000,000;
  2. the corporation’s total revenue for the tax year exceeds $10,000,000; or
  3. the corporation has one or more associated corporations during the taxation year and,
    1. the aggregate of the total assets of the corporation at the end of the taxation year and of each associated corporation at the end of the associated corporation’s last taxation year ending in the corporation’s taxation year exceeds $5,000,000, or
    2. the aggregate of the total revenue of the corporation for the taxation year and of each associated corporation for the last taxation year of the associated corporation ending in the corporation’s taxation year exceeds $10,000,000.

4-V - DEFINITION OF “ASSOCIATED CORPORATIONS”

Subsection 256(1) of the Income Tax Act (Canada)

256. (1) Associated corporations – for the purposes of this Act, one corporation is associated with another in a taxation year if, at any time in the year,

  1. one of the corporations controlled, directly or indirectly in any manner whatever, the other;
  2. both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons;
  3. each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof;
  4. one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof; or
  5. each of the corporations was controlled, directly or indirectly in any manner whatever, by a related group and each of the members of one of the related groups was related to all of the members of the other related group, and one or more persons were members of both related groups, either alone or together, owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class of the capital stock thereof.

4-VI - DEFINITION OF “ARM’S LENGTH”

Section 251 of the Income Tax Act (Canada)

251. (1) Arm’s length – for the purposes of this Act,

  1. related persons shall be deemed not to deal with each other at arm’s length;
  2. a taxpayer and a personal trust (other than a trust described in any of paragraphs (a) to (e.1) of the definition “trust” in subsection 108(1)) are deemed not to deal with each other at arm’s length if the taxpayer, or any person not dealing at arm’s length with the taxpayer, would be beneficially interested in the trust if subsection 248(25) were read without reference to subclauses 248(25)(b)(iii)(A)(II) to (IV); and
  3. in any other case,it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length.

(2) Definition of “related persons” – for the purposes of this Act, “related persons”, or persons related to each other are

  1. (a) individuals connected by blood relationship, marriage or common-law partnership or adoption:
  2. a corporation and
    1. a person who controls the corporation, if it is controlled by one person,
    2. a person who is a member of a related group that controls the corporation, or
    3. any person related to a person described in subparagraph 251(2)(b)(i) or 251(2)(b)(ii); and
  3. any two corporations
    1. if they are controlled by the same person or group of persons,
    2. if each of the corporations is controlled by one person and the person who controls one of the corporations is related to the person who controls the other corporation,
    3. if one of the corporations is controlled by one person and that person is related to any member of a related group that controls the other corporation,
    4. if one of the corporations is controlled by one person and that person is related to each member of an unrelated group that controls the other corporation,
    5. if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other corporation, or
    6. if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other corporation.

(3) Corporations related through a third corporation – Where two corporations are related to the same corporation within the meaning of subsection 251(2), they shall, for the purposes of subsections 251(1) and 251(2), be deemed to be related to each other.

(3.1) Relation where amalgamation or merger – Where there has been an amalgamation or merger of two or more corporations and the new corporation formed as a result of the amalgamation or merger and any predecessor corporation would have been related immediately before the amalgamation or merger if the new corporation were in existence at the time, and if the persons who were the shareholders of the new corporation immediately after the amalgamation or merger were the shareholder of the new corporation at that time, the new corporation and any such predecessor corporation shall be deemed to have been related persons.

(3.2) Amalgamation of related corporations – Where there has been an amalgamation or merger of 2 or more corporations each of which was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to each other immediately before the amalgamation or merger, the new corporation formed as a result of the amalgamation or merger and each of the predecessor corporations is deemed to have been related to each other.

(4) Definitions concerning groups – In this Act,

  • “related group” means a group of persons each member of which is related to every other member of the group;
  • “unrelated group” means a group of persons that is not a related group.

(5) Control by related groups, options, etc – For the purposes of subsection 251(2) and the definition of “Canadian-controlled private corporation” in subsection 125(7).

  1. where a related group is in a position to control a corporation, it shall be deemed to be a related group that controls the corporation whether or not it is part of a larger group by which the corporation is in fact controlled;
  2. where at any time a person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently,
    1. to, or to acquire, shares of the capital stock of a corporation or to control the voting rights of such shares, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the person owned the shares at that time,
    2. to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the corporation, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the shares were so redeemed, acquired or cancelled by the corporation at that time,
    3. to, or to acquire or control, voting rights in respect of shares of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relationship to the control of the corporation as if the person could exercise the voting rights at that time, or
    4. to cause the reduction of voting rights in respect of shares, owned by other shareholders, of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the voting rights were so reduced at that time; and
  3. where a person owns shares in two or more corporations, the person shall as shareholder of one of the corporations be deemed to be related to himself, herself or itself as shareholder of each of the other corporations.

(6) Blood relationship, etc – For the purposes of this Act, persons are connected by

  1. a blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other;
  2. marriage if one is married to the other or to a person who is so connected by blood relationship to the other;
    (b.1) common-law partnership if one is in a common-law partnership with the other or with a person who is connected by blood relationship to the other; and
  3. adoption if one has been adopted, either legally or in fact, as the child of the other or as the child of a person who is so connected by blood relationship (otherwise than as a brother or sister) to the other.

4-VII - DEFINITION OF LIABILITY FOR ONTARIO PERSONAL INCOME TAX

Subsection 2 of the Income Tax Act (Ontario)

2. An income tax shall be paid as hereinafter required for each taxation year by every individual,

  1. who was resident in Ontario on the last day of the taxation year; or
  2. who, not being resident in Ontario on the last day of the taxation year, had income earned in the taxation year in Ontario as defined in section 4.

4-VIII - DEFINITION OF “ASSISTANCE”

Paragraph 12(1)(x) of the Income Tax Act (Canada)

12(1)(x) Inducement, reimbursement, etc. – any particular amount (other than a prescribed amount) received by the taxpayer in the year, in the course of earning income from a business or property, from

  1. a person or partnership (in this paragraph referred to as the “payer”) who pays the particular amount
    1. in the course of earning income from a business or property,
    2. in order to achieve a benefit or advantage for the payer or for persons with whom the payer does not deal at arm’s length, or
    3. in circumstances where it is reasonable to conclude that the payer would not have paid the amount but for the receipt by the payer of amounts from a payer, government, municipality, or public authority described in this subparagraph or in subparagraph (ii), or
  2. a government, municipality or other public authority,

where the particular amount can reasonably be considered to have been received

  1. as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or
  2. as a refund, reimbursement, contribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax allowance or any other form of assistance in respect of
    1. an amount included in, or deducted as, the cost of property, or
    2. an outlay or expense,

to the extent that the particular amount

  1. was not otherwise included in computing the taxpayer’s income or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts for the year or a preceding taxation year,
    (v.1) is not an amount received by the taxpayer in respect of a restrictive covenant, as defined by

subsection 56.4(1), that was included, under subsection 56.4(2), in computing the income of a person related to the taxpayer,

  1. except as provided by subsection 127(11.1), 127(11.5) or 127(11.6) does not reduce, for the purpose of an assessment made or that may be made under this Act the cost or capital cost of the property or the amount of the outlay or expense as the case may be,
  2. does not reduce, under subsection 12(2.2) or 13(7.4) or paragraph 53(2)(s), the cost or capital cost of the property or the amount of the outlay or expense, as the case may be, and
  3. may not reasonably be considered to be a payment made in respect of the acquisition by the payer or the public authority of an interest in the taxpayer, an interest in, or for civil law a right in, the taxpayer’s business or an interest in, or for civil law a real right in, the taxpayer’s property.

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  1. ^Overview of guidelines follows for section 93 specified and non-specified products. For information on section 93.1 Qualifying Digital Game Corporations and section 93.2 Specialized Digital Game Corporations, please see the separate guideline package for these claims: http://www.ontariocreates.ca/tax-incentives/oidmtc/oidmtc-guidelines-specialized
  2. ^For the purpose of these guidelines, personal corporations and personal loan-out corporations are defined as a taxable Canadian corporation which meets the following conditions: 1) all of the issued and outstanding shares of the capital stock of the taxable Canadian corporation (other than directors’ qualifying shares) are owned by the individual rendering services; 2) the individual deals at arm’s length with the qualifying corporation or qualifying predecessor corporation, as the case may be; 3) the taxable Canadian corporation’s primary activity is the provision of the individual’s services, and 4) the taxable Canadian corporation has no employees other than the individual.
  3. ^Products for which public financial support would in the opinion of Ontario Creates be contrary to public policy may include products which are capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, sex, sexual orientation or ethnic origin and products whose dominant characteristic is the undue exploitation of sex or violence, or the combination of sex and one or more of the following subjects: crime, horror, cruelty or violence.
  4. ^Factors that are relevant in establishing an individual’s residency in a jurisdiction include the location of the individual’s principal residence, and social and financial ties to the jurisdiction.
  5. ^The amount of the OIDMTC is subject to verification by the Canada Revenue Agency as indicated below.

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