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Page 3 of 4 Administrative Procedures The certification of a production as a Canadian film is a two-step process. A producer must initially obtain from CAVCO a Canadian Film or Video Production Certificate (Part A), followed by a Certificate of Completion (Part B). Upon receipt of a Part A certificate and upon the completion and filing of the applicable CRA (T1131) tax form with its tax return, an eligible applicant corporation may claim a tax credit at the end of its fiscal year. The eligible corporation must submit an application for a Certificate of Completion (Part B). An audited statement of production costs, prepared by an independent certified accountant, must be submitted for productions with a budget of $500,000 or more. The Certificate of Completion certifies that a production was completed within two years after the end of the taxation year in which principal photography began. Because the CRTC requires Canadian broadcasters to meet Canadian content programming quotas, Canadian television broadcasters will usually pay a higher licence fee for productions that qualify as Canadian for the purposes of the CRTC. Productions that have received CAVCO certification are automatically recognized as Canadian programs for purposes of the CRTC, but the reverse does not apply – that is, productions recognized by the CRTC are not automatically recognized by CAVCO. In general, the CRTC has discretion to recognize as “Canadian” certain programs that would not be certified by CAVCO. Assignment of the Federal Content Credit The Income Tax Act expressly allows the Federal Content Credit to be assigned or transferred to a bank or other financial institution as part of an interim financing arrangement. However, the assignment is technically not binding on the CRA. This means that the rights of the assignee institution are subject to all statutory and common law “rights of set off” that the CRA may exercise against it. In other words, even though the filmmaker has assigned the tax credit to a lender as repayment in part or full for interim financing for the project, the CRA may deduct from that credit any monies it is owed by the filmmaker as a taxpayer. Lending institutions must conduct due diligence reviews to confirm that the CRA will have no rights of set-off against their respective borrowers. Continued... |
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