Table of contents
Overview of the PSTC
The Canadian government introduced the film or video production services tax credit (PSTC) in 1997 to support film or video production services performed in Canada. The PSTC replaces legislation that provided tax incentives to production services limited partnerships.
The PSTC is a refundable tax credit for an "accredited production" which gives an "eligible production corporation" a tax credit equal to 16% of the qualified Canadian labour expenditures. There is no limit on the amount of PSTC that can be received by an eligible production corporation for any production. However, the PSTC is not available if the production corporation has claimed a Canadian film or video production tax credit (CPTC) for the production.
A production must meet certain cost minimums and be of an eligible genre to qualify as an "accredited production." Generally, the cost for a production for the 24-month period after principal filming or taping has begun must be more than $1,000,000 (CDN), except in the case of a series consisting of two or more episodes or a pilot for a series.
The cost for each episode in a series or a pilot for a series which has a running time of 30 minutes or less must be more than $100,000 (CDN) per episode. The cost for each episode in a series or a pilot for a series with a running time greater than 30 minutes must be more than $200,000 (CDN) per episode.
To be of an eligible genre, the production cannot be one of the following:
- news, current events, or public affairs programming;
- a program that includes weather or market reports;
- a talk show;
- a production involving a game, questionnaire, or contest;
- a sports event or activity;
- a gala presentation or an awards show;
- a production that solicits funds;
- reality television;
- advertising; or
- a production produced primarily for industrial, corporate, or institutional purposes.
An eligible production corporation is defined as a corporation whose activities in the year are primarily (more than 50%) the carrying on, through a permanent establishment in Canada, of a film or video production business, or a film or video production services business. The eligible production corporation must either own the copyright in the accredited production throughout the period during which the production is being produced in Canada or have contracted directly with the owner of the copyright to provide production services in respect of the production, where the owner itself is not an eligible production corporation. Where the corporation who owns the copyright is an eligible production corporation, only this corporation is entitled to claim the PSTC.
The qualified Canadian labour expenditure for a production refers to all amounts, which are Canadian labour expenditures less any form of government or non-government assistance.
The Canadian labour expenditure includes amounts paid for the accredited production for:
- salary or wages of an eligible production corporation;
- remuneration of a partnership or person who provides services to the eligible production corporation; and
- reimbursements made by a wholly-owned subsidiary to a taxable Canadian corporation (the parent corporation) of expenditures incurred by the parent for the accredited production.
To be an eligible Canadian labour expenditure, amounts have to be paid to Canadian residents for services rendered in Canada.
Objective of the PSTC program
The objective of the PSTC program is to stimulate job growth in the Canadian film industry by encouraging Canadians as well as foreign-based film producers to employ the services of Canadians. The PSTC program is an efficient way to do this because it provides support to the Canadian production services industry by making the tax incentive available directly to the production services provider.
Administrative and accreditation process
Administration of the program
The PSTC is jointly administered by the Department of Canadian Heritage through the Canadian Audio-Visual Certification Office (CAVCO) and by the Canada Revenue Agency (CRA).
CAVCO is responsible for:
- confirming that a production is an accredited production (AP);
- confirming the copyright owner of the AP;
- issuing Accredited film or video production certificates (accreditation certificate) so that Canadian producers can claim the PSTC.
The CRA verifies the qualified Canadian labour expenditure used in determining the PSTC. We are responsible for:
- helping applicants;
- interpreting and applying section 125.5 of the Act and all other provisions in the Act and Income Tax Regulations that may have an impact on the tax credit;
- reviewing PSTC claims;
- assessing the corporations' T2 income tax returns; and
- issuing timely refund cheques.
Obtaining an accredited film or video production certificate
To be entitled to the PSTC, an eligible production corporation has to obtain an accredited film or video production certificate by submitting an application form to CAVCO. Eligible services may be provided to the production by any number of eligible production corporations. However, CAVCO will issue a single certificate for the production to the copyright owner, whether that entity is an eligible production corporation or not.
As a result, the service provider is responsible for ensuring that the copyright owner will apply to CAVCO for an accreditation certificate. The service provider also has to ensure that the copyright owner provides a copy of the certificate so that the service provider may claim the relevant part of the PSTC.
Official treaty co-productions between Canada and another country (as determined by Telefilm Canada) are eligible. Like other productions, they may qualify under the PSTC program or the CPTC program, not both.
Filing your claim
To claim a PSTC, an eligible production corporation must file a T2 Corporation Income Tax Return with:
- a completed Form T1177, Film or Video Production Services Tax Credit, and
- the accreditation certificate (or a copy) issued by the CAVCO.
If you file a paper T2 return, send the return and required attachments to your tax centre. A list of the tax centres is available.
If you file your T2 return electronically, submit a paper copy of the accreditation certificate from CAVCO to the appropriate Film Services Unit (FSU). The location of the production corporation's books and records usually determines which FSU will handle the review of your claim. A list of the FSUs is available.
If the books and records are maintained outside of Canada your claim will be reviewed by the Vancouver FSU.
If you file a copy of the accreditation certificate instead of the original, you must keep the original document that was issued by CAVCO for future reference. We may request the original document if your claim is audited. You must keep your CAVCO certificates, information slips, documentation, and records relating to your income tax return for at least six years.
Issuing refund cheques
Our objective is to deliver the PSTC to eligible production corporations in a timely manner, once a complete claim is received. A claim is considered to be complete when we have received:
- a properly completed Form T1177, Film or Video Production Services Tax Credit;
- the accreditation certificate (or a copy); and
- the T2 Corporation Income Tax Return for the year.
The CRA is committed to reviewing T2 returns that include a PSTC 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.
Our target is to meet these standards at least 90% of the time.
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