Canadian Film or Video Production Tax Credit – Guide to Form T1131
RC4164(E) Rev. 21
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Table of contents
- What’s new?
- Before you start
- At your service
- General information
- Canadian Audio-Visual Certification Office
- How to complete Form T1131
This guide and Form T1131, Canadian Film or Video Production Tax Credit, have been updated to accommodate most of the Canadian film or video production tax credit (CPTC) claims that are currently filed with the Canada Revenue Agency (CRA).
Before you start
This guide contains information and instructions on how to complete Form T1131, Canadian Film or Video Production Tax Credit. To make sure that your Canadian film or video production tax credit (CPTC) is calculated correctly, it is important that you carefully review the information in this guide.
This guide explains current tax situations in plain language. The relevant sections of the Income Tax Act (the Act) and the Income Tax Regulations (the Regulations) take precedence over these explanations.
Form T1131 and additional information on the CPTC is available on our website at Film and media tax credits.
Throughout this guide, we also refer to other forms and publications that are available on our website at Forms and publications. You can also order forms and publications by calling us at 1-800-959-5525.
At your service
Film services units
The film services units (FSUs) are available to answer your questions relating to the CPTC.
For more information, go to Film and media tax credits.
FSUs are located within the following CRA tax services offices:
- For services performed in British Columbia, Alberta, Saskatchewan, and Manitoba:
Fraser Valley Tax Services Office
9755 King George Boulevard
Surrey BC V3T 5E1
Telephone: 1-866-317-0473, Option 5
- For services performed in Ontario, the Yukon, Nunavut, and the Northwest Territories:
Toronto Centre Tax Services Office
1 Front Street West
Toronto ON M5J 2X6
Telephone: 416-973-3407 or 416-954-0542
- For services performed in Quebec, Prince Edward Island, New Brunswick, Nova Scotia, and Newfoundland and Labrador :
Western Quebec Tax Services Office
305 René-Lévesque Boulevard West
Post Office Box 49
Montréal QC H2Z 1A6
Information on these related topics is available on the following websites/pages:
The legislation governing the Canadian film or video production tax credit (CPTC) is in section 125.4 of the Income Tax Act and in section 1106 of the Income Tax Regulations.
Other tax incentives
Film or video productions may also be eligible for the Film or video production services tax credit (PSTC). However, if you claimed a CPTC for a production, you cannot claim the PSTC for the same production.
For information on the PSTC, go to Film and media tax credits.
Provincial or territorial
Provincial or territorial incentives may also be available for your film or video productions. For more information, go to Film and media tax credits.
The CPTC is a refundable tax credit equal to 25% of the qualified labour expenditure. The qualified labour expenditure is the lesser of the amount of labour expenditures and 60% of the net production cost (production cost minus any assistance received, entitled to be received, or expected to be received).
There is no limit on the amount of CPTC that you can receive for a production.
To get a CPTC, you must first apply to the Canadian Audio-Visual Certification Office (CAVCO) of Canadian Heritage for a Canadian Film or Video Production Certificate (Part A) and/or a Certificate of Completion (Part B). Visit Canadian Heritage, and select "Canadian Audio-Visual Certification Office" to submit your application online and to access other important information pertaining to the Canadian film or video production tax credit program.
CAVCO application deadlines
There is no specific deadline to apply for a Canadian film or Video Production Certificate (Part A). However, keep in mind that to get a CPTC refund, you must file with the CRA the T2 Corporation Income Tax Return (T2 return) no later than three years after the end of the corporation's tax year.
The application for a Certificate of Completion (Part B) must be received by CAVCO no later than 24 months after the end of the qualified corporation's tax year in which the principal photography began.
An additional 18 months may be available to apply for a Certificate of Completion (Part B) if:
- the first (and second, if applicable) tax year ending after the production's principal photography began has not been assessed by the CRA; or
- the qualified corporation files with the CRA a valid Form T2029, Waiver in respect of the normal reassessment period or extended reassessment period, within the normal reassessment period for the qualified corporation (three years after the date of the notice of assessment for a Canadian-controlled private corporation (CCPC), four years for a non-CCPC) for the first (and second, if applicable) tax year ending after the production's principal photography began.
To get Form T2029, go to Forms and publications. The completed Form T2029 should be sent to:
Film and Media Tax Credits Section
Canada Revenue Agency
427 Laurier Avenue West, 13th Floor
Ottawa, ON K1A 0L5
Failure to meet the final application deadline will result in CAVCO revoking a previously issued Part A certificate or refusing a Part A/B application. If a certificate is revoked, it is considered to have never been issued. Consequently, any previously issued CPTC refunds for the production will be recaptured by the CRA.
Filing your claim
To claim a CPTC, include the following with your T2 return for the tax year:
- a copy of the Canadian Film or Video Production Certificate (Part A) or, if available, the Certificate of Completion (Part B) issued by CAVCO for each Canadian film or video production; and
- a completed Form T1131, Canadian Film or Video Production Tax Credit, for each Canadian film or video production. To get Form T1131, go to Forms and publications.
File the T2 return and attachments with your tax centre. To find a list of the tax centres, go to Where to send your corporation income tax (T2) return.
If you are filing electronically, please use the Canada Revenue Agency's online Submit Documents service, which is available through My Business Account, to submit a copy of the CAVCO certificates (Part A and/or Part B). You will find instructions at Submit documents online. Alternatively, submit a paper copy of the CAVCO certificates (Part A and/or Part B) to the FSU that will handle your claim. Go to Film and media tax credits and select "Film Services Units" for the appropriate mailing address.
If the books and records are maintained outside of Canada your claim will be reviewed by the Fraser Valley FSU.
You must keep information slips, documentation, and records relating to your income tax return for at least six years.
The CRA is committed to reviewing T2 returns that include a CPTC claim in accordance with the following service standards:
- When no audit is undertaken, our goal is to review the T2 return within 60 calendar days from the date we receive a complete claim.
- When an audit is undertaken, our goal is to review the T2 return within 120 calendar days from the date we receive a complete claim, not including any delays requested or caused by the claimant.
Our target is to meet these standards at least 90% of the time.
A CPTC claim is considered complete when all of the following documentation is filed with the CRA:
- a T2 Corporation Income Tax Return;
- a completed Form T1131, Canadian Film or Video Production Tax Credit, for each eligible production; and
- a copy of the Canadian Film or Video Production Certificate (Part A) or the Certificate of Completion (Part B) issued by CAVCO for each Canadian film or video production.
When multiple federal and/or provincial film or media tax credit claims are filed with the T2 return, all tax credit claims must be considered complete before the CRA service standards apply.
If you are filing for a CPTC and a provincial film tax credit, such as the Ontario film and television tax credit (OFTTC), both claims will be considered complete when all of the following documentation is filed with the CRA:
- a T2 Corporation Income Tax Return;
- a completed Form T1131 for each Canadian film or video production;
- a copy of the Canadian Film or Video Production Certificate (Part A) or the Certificate of Completion (Part B) issued by CAVCO for each eligible production;
- a completed T2SCH 556, Ontario Film and Television Tax Credit, for each eligible production; and
- a copy of the Certificate of Eligibility issued by Ontario Creates for each eligible production.
Assignment of credit
The CPTC may be assigned to lenders as security for bridge financing of the Canadian film or video production. This is provided for under subsections 220(6) and (7) of the Act.
Assigning the CPTC does not affect the legal rights of set-off in our favour. In other words, we have no obligation toward the assignee, and the assignee's rights are subject to the legal rights of set-off in our favour. Even if an assignment has been made, we will issue the refund cheque in the name of the qualified corporation.
If you want the CRA to send your refund cheque to an address other than your regular mailing address, include a letter with your T2 return requesting this and make sure you give us the address.
Alternatively, you can use direct deposit, which is available through My Business Account, to manage where you would like your refund to be deposited.
If your CPTC claim is selected for an audit, we may request any of the following documentation to support your claim:
- information to support the application filed with CAVCO;
- the books, records, and supporting documents of the qualified corporation;
- financing, broadcast, and distribution agreements between the qualified corporation, or any other related corporations, and Telefilm Canada, financial institutions, and any other agency, organization, or person;
- agreements and contracts between actors, producers, directors, and other persons (for example, employees or third-party service providers) and the qualified corporation;
- the minute book of the qualified corporation and any related corporations; and
- any other documents that may be needed to support your claim.
Scope of the audit
If your CPTC claim is selected for an audit, we may decide to restrict our audit to specific issues or to complete a detailed audit of the CPTC and other film and media tax credits claimed. Our audit may also include verifying income, capital cost allowance, and other items included on the T2 return.
We may review a CPTC claim that was previously audited, or accepted as filed, if:
- there is new information that affects the amount of assistance you reported in your CPTC claim;
- you request a reassessment for this tax credit claim;
- the certificate issued by CAVCO is revoked;
- we identify fraud or facts that were misrepresented.
The qualified corporation's T2 return may also be selected for an audit under our regular audit program. If it is, the CPTC will not be re-audited unless one of the situations described above applies.
Objecting to an income tax assessment or reassessment
If you think the CRA has misinterpreted the facts or applied the law incorrectly, you have the right to object to most income tax assessments and reassessments.
For more information about objections and appeals, go to Corporations and select the topic “After you file your corporation income tax return” and then “Resolving disputes.”
Canadian Audio-Visual Certification Office
The Minister of Canadian Heritage, through the Canadian Audio-Visual Certification Office (CAVCO), provides certification for an eligible production, confirming that it meets the requirements of the Canadian film or video production tax credit program.
For more information, visit Canadian Heritage, and select "Canadian Audio-Visual Certification Office". Section 1106 of the Regulations stipulates that to qualify as a Canadian film or video production, a production must meet the following requirements:
The producer must be an individual who is:
- in control and the central decision maker of the production;
- directly responsible for the acquisition of the production story, or screenplay, as well as for the development, creative and financial control, and exploitation of the production; and
- identified in the production as the producer of the production.
All positions related to the producer function (including producer, line producer, and production manager) must be held by Canadians. An exemption is granted for treaty co-productions and in limited circumstances to non-Canadian producers (such as executive producer or associate producer) as courtesy credits.
The producer must be a Canadian from the start of the production to the completion of post-production, without interruption.
A "Canadian" is defined as a Canadian citizen according to the Citizenship Act, a permanent resident according to the Immigration and Refugee Protection Act, or a corporation that is Canadian-controlled as determined for the purposes of the Investment Canada Act.
A live action production must earn a minimum of six points based on the following key creative personnel qualifying as Canadians as set out in paragraph 1106(5)(a) of the Regulations.
- Director (Note 1) - 2 points
- Screenwriter (Note 1) - 2 points
- Highest-paid lead performer (Note 2) - 1 point
- Second-highest-paid lead performer (Note 2) - 1 point
- Art director - 1 point
- Director of photography - 1 point
- Music composer - 1 point
- Picture editor - 1 point
Either the director or the screenwriter must be a Canadian.
Either the highest-paid or the second-highest-paid lead performer must be a Canadian.
A documentary production that does not involve performers or functions such as art director or music composer may meet the key creative personnel requirements, even if it has not earned the minimum six points. However, Canadians must hold all the key creative point positions.
An animation production must earn a minimum of six points based on the following key creative personnel qualifying as Canadians and the following services provided in Canada as set out in paragraphs 1106(5)(b) to (d) of the Regulations.
- Director (Note 1) - 1 point
- Principal screenwriter and storyboard supervisor (Note 1) - 1 point
- Highest-paid or second-highest-paid lead voice (Note 2) - 1 point
- Design supervisor (art director) - 1 point
- Camera operator (done in Canada) - 1 point
- Music composer - 1 point
- Picture editor - 1 point
- Layout and background (done in Canada) - 1 point
- Key animation (done in Canada) - 1 point
- Assistant animation and in-betweening (done in Canada) - 1 point
The director, or both the principal screenwriter and the storyboard supervisor, must be Canadian.
The highest-paid or the second-highest-paid lead voice must be a Canadian.
Expenditures incurred in making the production must satisfy the following requirements:
- at least 75% of the total of all costs for services (other than post-production work) must be for services provided to or by individuals who are Canadians; and
- at least 75% of the total of all costs incurred for the post-production work must be incurred for services provided in Canada.
Certain costs are not included in these calculations, such as:
- costs determined by reference to the amount of income from the production;
- remuneration paid or payable to the producer or the key creative personnel (in point positions); and
- amounts paid for insurance, financing, brokerage, legal and accounting fees, and similar amounts, when they relate to the production stage.
A production will not be eligible for the CPTC if it falls within the following list of excluded genres:
- news, current events, or public affairs programming, or programmes that includes weather or market reports;
- a production in respect of a game, questionnaire, or contest (other than a production directed primarily at minors);
- a sports event or activity;
- a gala presentation or an awards show;
- a production that solicit funds;
- reality television;
- a production produced primarily for industrial, corporate, or institutional purposes; and
- a production, other than a documentary, all or substantially all of which consist of stock footage.
A production will also be excluded if:
- the qualified corporation has not filed an application for a Certificate of Completion (Part B) before the production's application deadline (see "CAVCO application deadlines");
- CAVCO has not issued a Certificate of Completion (Part B) within six months after the production's application deadline;
- there is no written agreement, at fair market value, with a Canadian distributor, or a broadcaster holding a Canadian Radio-Television and Telecommunications Commission licence, to have the production shown in Canada no later than two years after production is complete; or
- a person, who is not a Canadian, distributes the production in Canada within two years following the completion of the production.
Except for treaty co-productions, a production will be an excluded production if a person other than the qualified corporation or a prescribed person (see "Line 313 – Is the production co-owned by a prescribed person?"):
- is a copyright owner of the production, for any commercial exploitation purposes, at any time during the 25-year period that begins at the earliest time after the production was completed that it is commercially exploitable, or
- controls the initial licensing of commercial exploitation.
Co-productions between Canada and another country are eligible under the Canadian film or video production tax credit program only when they are co-produced under an official agreement. The requirements listed under Canadian producer, Canadian production, and Canadian expenditures do not apply to treaty co-productions.
Telefilm Canada is the administrative body responsible for examining projects to assess whether they can be recommended for certification as audio-visual treaty co-productions. Telefilm Canada recommendations are sent to the Minister of Canadian Heritage via CAVCO. The Minister is responsible for rendering the final decision on whether a production is an audio-visual treaty co-production.
In addition to applying to Telefilm Canada for a recommendation as a co-production, producers must apply to CAVCO for a Canadian film or video production tax credit certificate. This certificate gives the production national status and can be used to obtain a CPTC.
How to complete Form T1131
This section contains information to help you complete Form T1131. Read the explanation for each line as you complete the form.
Name of corporation
Enter the name of the qualified corporation.
Enter the business number of the qualified corporation.
Enter the tax year-end date of the qualified corporation.
Part 1 – Contact information
Line 151 – Name of person to contact for more information
Enter the name of the person in charge of financial information for the overall claim (for example, the financial manager, accountant, or tax manager). This person should be in a position to answer our questions about the claim and be an authorized representative.
To get Form AUT-01, Authorize a Representative for Access by Phone and Mail, go to Forms and publications. Alternatively:
- you may authorize a representative through My Business Account;
- your representative submits an authorization request via EFILE; or
- your representative submits a business authorization request in Represent a Client.
Line 153 – Telephone number
Enter the telephone number, including area code, of the contact person.
Part 2 – Identifying the Canadian film or video production
Line 301 – Title of production
Indicate the title of the Canadian film or video production as shown on the certificate issued by CAVCO (Part A or Part B).
Line 302 – Date principal photography began
Enter the date on which the principal photography began.
You can claim a CPTC if principal photography began in the tax year for which you are filing Form T1131 or in a previous tax year. If principal photography began after the tax year for which you are filing Form T1131, you will only be able to claim a CPTC on the qualified labour expenditure in the following or a subsequent tax year.
Line 303 – CAVCO reference number (for a certificate issued before April 1, 2010)
Enter the reference number as shown on the certificate issued by CAVCO (Part A or Part B).
The CAVCO reference number no longer exists for productions certified after March 31, 2010.
Lines 304 – CAVCO certificate number
Enter on line 304 the CAVCO certificate number shown on the certificate (Part A or Part B).
Line 311 – Is the production a Canadian co-production involving only qualified corporations?
A production is a Canadian co-production involving only qualified corporations if more than one qualified corporation owns it. If this is not the case, tick the "No" box and proceed to the next question.
If the production is a Canadian co-production, each qualified corporation must claim its own CPTC based on its share of expenditures.
Line 312 – Is the production a treaty co-production?
A production is a treaty co-production if it is co-produced under an official co-production treaty. Visit Telefilm Canada for a list of countries with co-production treaties with Canada. If the production is not a treaty co-production, tick the "No" box and proceed to the next question.
If the production is a treaty co-production, the qualified corporation and the foreign corporation will each own a percentage of the copyright of the production. The qualified corporation must calculate its production cost and its labour expenditure based on its interest in the production.
Line 313 – Is the production co-owned by a prescribed person?
A prescribed person, as defined in subsection 1106(10) of the Regulations, means:
- a corporation that holds a television, specialty, or pay-television broadcasting licence issued by the Canadian Radio-Television and Telecommunications Commission (CRTC);
- a corporation that holds a broadcast undertaking licence and that provides production funding because of a "significant benefits" commitment given to the CRTC;
- a non-profit organization described in paragraph 149(1)(l) of the Act, if that person has a fund used to finance Canadian film or video productions;
- a Canadian government film agency (federal, provincial or territorial);
- a non-resident person who does not carry on a business in Canada through a permanent establishment in Canada, when the person's interest in the production is acquired to comply with the certification requirements of a treaty co-production twinning arrangement;
- a person:
- that is a registered charity to which paragraph 149(1)(f) of the Act applies;
- that has a fund that is used to finance Canadian film or video productions, all or substantially all (90% or more) of which financing is provided by way of a direct ownership interest in those productions; and
- that, after 1996, has received donations only from persons described above in (a) to (e).
- a prescribed taxable Canadian corporation;
- an individual who is a Canadian; and
- a partnership, each member of which is described in any of paragraphs (a) to (h).
If the production is not co-owned by a prescribed person, tick the "No" box and proceed to Part 3 of the form.
If the production is co-owned by a prescribed person, also include in the production cost those production expenditures incurred by the qualified corporation for or on behalf of the prescribed person.
Part 3 – Eligibility
To be eligible to claim the CPTC, the corporation must be a qualified corporation and the film or video production must be a Canadian film or video production, as explained below.
Canadian film or video production
A Canadian film or video production is a film or video production of a prescribed taxable Canadian corporation, other than an excluded production (see "Excluded productions"), that is a treaty co-production, or a film or video production that meets the following prescribed requirement:
A qualified corporation is a corporation that is, throughout the tax year, a prescribed taxable Canadian corporation whose activities consist primarily of conducting a Canadian film or video production business through a permanent establishment in Canada.
- A prescribed taxable Canadian corporation is a taxable Canadian corporation that is controlled by Canadians, as determined by sections 26 to 28 of the Investment Canada Act. A corporation does not qualify if it is:
- controlled directly or indirectly in any way by one or more persons, all or part of whose taxable income is exempt from tax under Part I; or
- a prescribed labour-sponsored venture capital corporation.
- A Canadian film or video production business is not defined in the Act. Such a business is one that produces films or videos that are certified by CAVCO. To qualify for the CPTC, a corporation's activities must consist primarily (more than 50% of its activities) of conducting a business that is a Canadian film or video production business.
To determine whether the activities of a corporation consist primarily of carrying on a business that is a Canadian film or video production business, all the facts surrounding each of the various activities undertaken by the corporation must be examined and compared.
The following is a non-exhaustive list of factors that may be considered:
- the profits realized from each of the corporation's activities;
- the volume and value of the gross sales or transactions from each activity;
- the value of the assets devoted to each activity;
- the capital used in each of the corporation's activities; and
- the time, attention, and efforts the employees, agents, or officers of the corporation spend on each activity.
Consequently, if the business of a corporation primarily includes other activities such as renting equipment or studios or distributing films or videos, it may not be considered a qualified corporation for the purposes of the Canadian Film or Video Production Tax Credit Program. Furthermore, if the corporation produces films or videos that do not qualify as Canadian film or video productions, the corporation may also not be considered a qualified corporation. It is therefore possible that a corporation will be denied the CPTC because of its activities in the year.
- A permanent establishment usually refers to a fixed place of business, including an office, a branch, a workshop, or a warehouse, and, when the person does not have a fixed place of business, the principal place at which the person's business is conducted. Refer to section 8201 of the Regulations for more information.
Answer the following five questions to determine if a corporation and a production meet the requirements to claim the CPTC.
Question 1 – Were the activities of the corporation primarily the carrying on of a Canadian film or video production business through a permanent establishment in Canada?
If you answer no to this question, the corporation is not a qualified corporation. Therefore, the corporation is not eligible for the CPTC.
Question 2 – Was all or part of the corporation's taxable income exempt from Part I tax at any time in the tax year?
See the comments for Question 4.
Question 3 – Was the corporation at any time in the tax year controlled directly or indirectly in any way by one or more persons, all or part of whose taxable income was exempt from Part I tax?
See the comments for Question 4.
Question 4 – Was the corporation at any time in the tax year a prescribed labour-sponsored venture capital corporation?
If you answered yes to Question 2, 3, or 4, then the corporation is not a qualified corporation because it does not meet the definition of a prescribed taxable Canadian corporation. Therefore, the corporation is not eligible for the CPTC.
Question 5 – Is the production, or an interest in a person or partnership that directly or indirectly has an interest in the production, a tax shelter investment for purposes of section 143.2?
If you answer yes to this question, you are not eligible to claim the CPTC.
Part 4 – Production commencement time
To be eligible for the CPTC, the labour expenditures for the Canadian film or video production must be incurred from the production commencement time to the end of the post-production stage (see "Part 6 – Qualified labour expenditure").
The production commencement time describes the time that is the earlier of:
Line 651: the date the principal photography of the Canadian film or video production began
The latest of:
- Line 652: the date the qualified corporation or its parent corporation first incurred labour expenses for the development of the script material for the Canadian film or video production (see note below)
- Line 653: the date the qualified corporation or its parent corporation first acquires a right to the story that is the basis of the final script (such rights might include a published literary work, play, or screenplay)
- Line 654: two years before the date the principal photography of the Canadian film or video production began
Script material is defined as written material describing the story on which the Canadian film or video production is based. The material includes a draft script, original story, screen story, narration, television production concept, outline, scene-by-scene schematic, synopsis, and treatment.
Part 5 – Production cost limit
Line 421 – Cumulative production cost as at the end of the tax year
Enter the total amount of expenditures that is included in the qualified corporation's cost of production at the end of the tax year. This amount may also include expenditures that are part of the cost of the production for any other person or partnership if the expenditures were incurred by the qualified corporation on their behalf. However, do not include expenditures on behalf of a co-producer of the Canadian film or video production if the co-producer is another qualified corporation. Each qualified corporation must claim its own expenditures.
Calculate the production cost using generally accepted accounting principles and include amounts such as the cost of materials, labour expenditures, and overhead expenses.
Examples of production costs include:
- development costs, including the cost to purchase the rights to a novel, script, or idea;
- the salary or wages and remuneration of writers, executive and associate producers, directors, performers, musicians, technicians, and production personnel;
- the employer's contributions to various social benefit plans;
- the rental or other cost of a studio and of photographic, lighting, sound recording, and other equipment;
- amounts incurred to dub a film or video in either official language;
- amounts incurred to subtitle a film or video for persons with a hearing impairment;
- advertising costs related to the production that are incurred during the production (including press expenses, still photography, videotapes, public relations, and other similar expenses); and
- post-production expenses, such as editorial labour, rental of editorial equipment, laboratory costs, sound effects, sound mixing, titles, and translation.
The production cost does not include:
- any expense relating to marketing, promoting, and distributing a production (prints and ads). These types of expenses are considered distribution costs; or
- deferred amounts that are contingent liabilities (dependent on a future event). However, if the deferred amount becomes a legitimate liability of the qualified corporation, it would be included in the production cost at that time. A legitimate liability is a contractual arrangement that is enforceable by the creditor.
Line 423 – Total government or non-government assistance that the corporation has not repaid
Enter the cumulative government and non-government assistance received, entitled to be received, or expected to be received at the time of filing for your production. Only include the amounts that have not been repaid under a legal obligation at the time of filing.
Assistance received for the production can be from Canadian or foreign sources, including any amount received as a refund, reimbursement, contribution, or allowance, whether as a grant, subsidy, forgivable loan, deduction from tax, or any other form of inducement. For example, any provincial tax credit allowed in connection with the Canadian film or video production is considered assistance.
A forgivable loan generally means that the lender agrees to forgive the loan under specific conditions, such as the production not reaching a certain revenue target.
The CPTC is not considered government assistance for the purposes of determining the CPTC itself.
An equity participation in a Canadian film or video production by a government, municipality, or other public authority is considered assistance.
Subtotal – Amount A
Enter the difference between line 421 and line 423.
Calculation – Amount B
Enter 60% of amount A.
Line 427 – Qualified labour expenditures for all previous tax years
Enter the qualified labour expenditures of the qualified corporation for all previous tax years. If a production continues through more than one year, deduct the qualified labour expenditures of the previous tax years to ensure that no CPTC is claimed on amounts that have already earned the CPTC.
The amount of the qualified labour expenditure must be determined for each production, except in the case of episodes of the same series, which can be reported on the same form.
Line 430 – Production cost limit
Enter the difference between amount B and line 427.
Part 6 – Qualified labour expenditure
Labour expenditure for the tax year
The labour expenditure you enter on lines 601 to 609 must be:
- reasonable in the circumstances;
- included in the cost, or in the case of depreciable property the capital cost, of the Canadian film or video production to the qualified corporation or any other person or partnership (except another qualified corporation);
- incurred by the qualified corporation for the production stages of the property, from the production commencement time to the end of the post-production stage;
- directly attributable to the Canadian film or video production (there must be a clear link to specific work on the production); and
- paid in the tax year or no later than 60 days after the end of the tax year.
Line 601 – Salary or wages paid that are directly attributable to the production
Enter the salary or wages paid to the employees of the qualified corporation who are Canadian residents or Canadian citizens when they provide services for the production.
The salary or wages of a qualified corporation include amounts paid to employees such as vacation pay, statutory holiday pay, sick leave pay, and taxable benefits (for example, a corporation's contribution to the employees' registered retirement savings plan, group insurance plan, or meals).
Salary or wages do not include:
- stock options or amounts determined with reference to profits or revenues;
- the employer's part of payments to the Canada Pension Plan, the Quebec Pension Plan, or the Employment Insurance Commission; or
- the employer's part of payments to workers' compensation boards or the Commission de la santé et de la sécurité du travail du Québec, or any approved employee pension plan, dental care plan, or medical care or optical care plan for the employee (unless it is a taxable benefit to the employee).
Lines 603 to 607 – Remuneration directly attributable to the production and paid to:
Line 603 – Individuals
Enter the remuneration paid to an individual who is not an employee of the qualified corporation for services personally rendered for the production when the individual was a Canadian resident or a Canadian citizen. If the remuneration paid is for services personally rendered by the individual's employee when the employee was a Canadian resident or a Canadian citizen, enter only the amount of salary or wages paid to the employee for rendering these services (using the look-through approach).
Mr. Lewis is a Canadian citizen and a self-employed camera operator. ABC Ltd., a qualified corporation for purposes of the CPTC, pays Mr. Lewis total remuneration of $20,000 during the year for services that were directly attributable to a production. Since these services were rendered equally by Mr. Lewis and his employee, a camera operator who resides in Canada, the portion of remuneration that is attributable to their services is $10,000 each. The amount of salary or wages paid by Mr. Lewis to his employee for rendering these services totalled $7,000. As a result, ABC Ltd. can only include remuneration totalling $17,000 on line 603.
Line 605 – Other taxable Canadian corporations
Enter the remuneration paid to other taxable Canadian corporations, to the extent that the amount paid is attributable to and does not exceed the salary or wages of the other corporation's employees (who at the time were Canadian residents or Canadian citizens) for personally rendering services for the production (using the look-through approach).
Line 606 – Taxable Canadian corporations (solely owned by an individual)
Enter the allowable remuneration paid to other taxable Canadian corporations all the shares of which (except directors' qualifying shares) belong to one individual ("the shareholder").
In calculating the allowable remuneration, you have to first determine whether the activities of the other taxable Canadian corporation consist principally (more than 50% of its activities) of the provision of the shareholder's services. To determine this, you will have to ask the service provider about the corporation's activities.
- If the "more-than-50% activities" condition does not apply, the rules described at line 605 apply.
- If the "more-than-50% activities" condition applies, the allowable remuneration is the amount paid to the other taxable Canadian corporation for services provided by the shareholder for the production when the shareholder was a Canadian resident or a Canadian citizen. The allowable remuneration may include a profit element, in which case the look-through approach would not apply. However, if the remuneration includes amounts that are attributable to services personally rendered by an employee of the other taxable Canadian corporation, the allowable remuneration cannot exceed the amount of salary or wages paid to the employee for services provided for the production when the employee was a Canadian resident or a Canadian citizen (using the look-through approach).
For lines 605 and 606, remuneration paid to non-taxable Canadian corporations and foreign corporations should not be included in the remuneration paid by the qualified corporation, even if the amounts are part of the production cost. Please note that some Canadian broadcasters are not taxable Canadian corporations.
Line 607 – Partnerships carrying on business in Canada (for their members or employees)
Enter the allowable remuneration paid to a partnership that carries on a business in Canada.
The qualified corporation may include remuneration paid to the partnership for services provided for the production by an individual who is a member of the partnership (a partner) when the partner was a Canadian resident or a Canadian citizen. The allowable remuneration paid for services provided by the partner may include a profit element, in which case the look-through approach would not apply.
If the remuneration includes amounts that are attributable to services personally rendered by an employee of the partnership, the allowable remuneration cannot exceed the amount of salary or wages paid to the employee for services provided for the production when the employee was a Canadian resident or a Canadian citizen (using the look-through approach).
In order to support the fact that an individual who worked on your production was a Canadian citizen at the time their services were rendered, a copy of one of the following documents should be requested and retained:
- Birth certificate from a Canadian province or territory,
- Canadian certificate of registration of birth abroad,
- Canadian passport,
- Certificate of Canadian citizenship or certificate of naturalization, or
- Certified statement of live birth from a Canadian province or territory.
Canadian residency for individuals
The CRA considers the documents listed below to be evidence of significant residential ties to Canada. However, the CRA may ask for more information as outlined in the Income Tax folio S5-F1-C1 “Determining an Individual's Residence Status” to support the residency status of an individual in Canada. All documents sent to the CRA are subject to verification, especially in situations where there is dual residency and an income tax treaty applies.
The CRA requires a copy of any one of the following documents to support residency status:
- Notice of assessment (T1) showing that the individual is a resident of Canada for the relevant tax year;
- Letter from the CRA giving an opinion of the individual’s residency status in Canada for the relevant year(s) after completing Form NR74, Determination of Residency Status (entering Canada) or NR73 Determination of residency Status (leaving Canada); or
- Long-term (one year or more) lease or purchase of a Canadian dwelling with utility and/or cell phone bills showing the individual is living at that Canadian address.
If none of the above documents are available, the CRA requires a copy of three of the following documents to support residency status:
- Copy of the last income tax return filed in the country of origin and/or any document filed with the foreign tax authority in which the individual has declared that they are no longer a resident;
- Short-term (less than a year) lease agreement or letter from a landlord supporting a rental agreement;
- Provincial/territorial health or services card for the individual, their spouse and/or dependant;
- Driver’s licence or vehicle registration from the relevant province/territoryFootnote *;
- Professional association or union membership in Canada;
- Statements of accounts (for example, bank accounts retirement savings plan, credit cards, securities accounts) from a Canadian branch of a financial institution.
For important information on how residency is determined, including tax obligations, dual residency and residency guidelines for film and media tax credits, go to Film and media tax credits and select the topic “Residency status determination”.
The look-through approach limits the amount of remuneration that may qualify as a labour expenditure to the amount that would have been incurred by the qualified corporation had it directly employed the individuals. This approach is appropriate when remuneration is paid to a self-employed individual, a taxable Canadian corporation, or a partnership carrying on a business in Canada for the services of its employees. In applying this approach, the qualified corporation must obtain from the service provider the amount of salary or wages paid to its employees. This amount should qualify as a labour expenditure directly attributable to the production.
65% administrative position
When the qualified corporation engages a service provider with whom it deals at arm's length (that is, with whom it is not related), the amount of salary or wages paid by the service provider to its employees may not be available.
This could happen, for example, when the service provider is reluctant to supply detailed labour-related information to the qualified corporation because it believes it is proprietary information that could be used to determine its profit level. To give qualified corporations the opportunity to claim labour expenditures under such circumstances, the CRA will accept, as an administrative practice, 65% of the labour portion of an invoice amount as a reasonable estimate of the salary or wages paid to the employees that is directly attributable to the production. The remaining 35% represents overhead and the service provider's profit.
When non-labour amounts (such as rental fees, goods provided by the service provider, and travel and living expenses) are included in a payment to a service provider, but there is no breakdown on the invoice, estimate the labour part of the invoice before applying the 65% rate.
The 65% administrative position does not prevent the CRA from auditing a third party to determine the actual amounts paid to employees. Also, if a qualified corporation has claimed an amount greater than 65%, it must provide evidence to support that percentage.
Line 609 – Labour expenditure transferred under a reimbursement agreement by the corporation, a wholly owned subsidiary, to the parent corporation that is a taxable Canadian corporation
Enter the amount of reimbursement that a wholly-owned subsidiary (the qualified corporation) made to its parent, a taxable Canadian corporation, under a written reimbursement agreement.
The reimbursement to the parent will be an eligible labour expenditure of the qualified corporation if it is paid no later than 60 days after the qualified corporation's tax year-end. The reimbursement must relate to an amount paid by the parent for the Canadian film or video production and be considered a labour expenditure of the qualified corporation that meets the criteria discussed above. If the parent and subsidiary have different tax year-ends, the eligibility of the labour expenditure is based on the date it is reimbursed to the parent corporation.
The parent corporation has a December 31, 2010 tax year-end and incurs costs for the Canadian film or video production between January 1, 2010, and December 31, 2010. All labour expenditures are paid within 60 days of the parent's tax year-end. The subsidiary has a July 31, 2011 tax year-end and reimburses the parent within 60 days of its tax year-end.
In this case, the labour expenditures incurred by the parent corporation for its December 31, 2010 tax year-end will be included in the subsidiary's calculation of labour expenditure for its July 31, 2011 tax year-end.
Labour expenditure for the tax year – Amount C
Enter the total of lines 601 to 609. This amount represents the labour expenditure of the qualified corporation for the tax year.
Line 611 – Labour expenditures for all previous tax years
Enter the amount on line 611 that is the total of the labour expenditures for all previous tax years.
Total labour expenditures – Amount D
Enter the total of amounts C and line 611.
Line 613 – Qualified labour expenditures for all previous tax years
Enter the qualified labour expenditures for all previous tax years that were used to calculate the CPTC for those years.
Line 615 – Labour expenditure transferred under a reimbursement agreement by the parent corporation, that is a taxable Canadian corporation, to the corporation, a wholly owned subsidiary
Enter the amount of reimbursement that a parent corporation (the qualified corporation) received from its wholly-owned subsidiary under a written reimbursement agreement.
Subtotal – Amount E
Enter the total of lines 613 and 615.
Line 618 – Labour expenditure for the tax year
Enter the difference between amounts D and E.
Qualified labour expenditure – Amount F
Enter the lesser of line 430 (in Part 5) and line 618. This amount is the qualified labour expenditure of the qualified corporation at the end of the tax year for the Canadian film or video production.
Part 7 – Canadian film or video production tax credit
Line 620 – Canadian film or video production tax credit
Enter the amount that is calculated by multiplying the qualified labour expenditure (amount F) by the CPTC rate of 25%. This is the qualified corporation's CPTC for the year.
Enter the amount from line 620 on line 796 of your T2 return. If you are filing more than one CPTC claim for your corporation, enter the cumulative amount.
The CPTC is fully refundable to the qualified corporation. However, if a qualified corporation has other unpaid liabilities to the Crown, the CPTC will be used to reduce those liabilities and the balance, if any, will be refunded.
The CPTC claimed is considered assistance received in the year for the purposes of determining the income of the qualified corporation. The amount must either be included in income or, if the Canadian film or video production is depreciable property, used to reduce the capital cost of the property for capital cost allowance purposes.
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