BC Digital Media Tax Credit

Companies considering claiming the BC Interactive Digital Media Tax Credit may want to note two items not mentioned on the official BC IDMTC website:

Companies should expect to wait 2 months for the IDMTC registration number to be provided, once a complete registration package has been submitted. Incomplete packages delay the registration period.  The BC Ministry of Finance will likely make a site visit of registrants before the application is approved and the registration number is provided.  We strongly suggest that corporations have this registration number before filing their claim.  If the IDMTC claim is submitted without a registration number it will likely trigger a CRA review.

In any given tax year you must choose between BC SR&ED or  BCIDMTC.   However, you can register for the IDMTC, and then determine which has the better outcome.  If you decide to go with BC SR&ED, you can de-register your IDMTC application, and file an SR&ED claim, but you will forfeit your application fee.

The registration process is undergoing review by the MoF. It appears that the process is becoming almost as onerous a the SR&ED claim process as the MoF decides what corporations are required to provide to demonstrate eligibility.

As Western Canada’s largest SR&ED firm, Revenue Services Group prepares IDMTC stand-alone applications or in conjunction with SR&ED claims.
BC’s interactive digital media tax credit is a 17.5% tax credit (on eligible payroll) for companies working on interactive digital media like video games. For more on the IDMTC please see “What is the IDMTC?”

The New CRA Directive on Documentation

The CRA has for some time communicated a mixed message to claimants and reviewers in terms of documentation or evidence required to substantiate a SR&ED claim.

On the one hand, the CRA has maintained that documentation or evidence is required to substantiate a claim.  On the other hand they have written that “the lack of documentary information should not discourage you from making an SR&ED claim or be considered as an indication that SR&ED did not take place, particularly in the case of first-time claimants.” (T4088, Guide to Form 661, Appendix 2). Where there is no documentary information, other “supporting information” is needed to support the SR&ED work and the related expenditures. However, the CRA provides no guidance in terms of what non-documentary “supporting information” is.

As a result experienced CRA reviewers have tended to qualify a project on the basis of a range of evidence including oral interviews, facility tours, product demonstrations, company records not generated specifically for a SR&ED claim and where they exist, formal project documentation. Read more »

What is BC IDMTC?

British Columbia’s new interactive digital media tax credit was introduced in the province’s March 2010 budget. The new refundable credit applies to interactive digital media products developed in British Columbia between September 1, 2010 until September 1, 2015.

The credit is a refundable credit equal to 17.5% of eligible salaries and wages incurred by qualifying corporations in the development of interactive digital media products, i.e., those designed for use by an individual to educate, inform or entertain, and capable of presenting information in at a minimum of two of the following formats: text, sound and images. Qualifying corporations are companies whose principal business is the development of interactive digital media products or the provision of eligible activites to such a business. Read more »