OVERVIEW – Information on film and television tax credits in Canada. Financing your Cavco tax credit and production incentive credits via the government refund program helps to cash flow your project – today
Film and Television tax credits in Canada , via government refund of your refundable tax credit hardly sounds ‘ romantic’ or ‘ exciting’ when it comes to this huge part of the entertainment industry in the Canadian market . As one recent market observer remarked, these credits helps pay for the tinsel in tinsel town, aka Hollywood north… aka ‘ Canada ‘!
How key a role do these production incentives/ Cavco credits play in the financing of movies and TV and animation projects in Canada? Quite a huge role, as you’ll see. Let’s dig n.
Almost all Canadian provinces offer tax incentives, via refundable tax credits to owners/producers of independent projects. Canada has naturally evolved as a great place to film and produce movies and television. In certain cases even the geography, i.e. where you film in fact garners a larger credit refund.
Independent producers/ owners of projects face a daunting task – however basic. That task? How to pay for the entire project. While large well known studios can fund entire projects the independent must fund via a variety of mechanisms, often which are ‘ cobbled’ together to finance a project.
Those other parts of the financing puzzle? They include but are not limited to:
Territory / Geographical rights
Gap Financing/letters of credit/short term loans
Crowd funding/hedge funds
These financing vehicles, along with film and TV tax credits allow producers to have all, or more creative control in their projects given they have no backing from major studios.
The most interesting fact about the tax credit financing part of a film/TV or animation project is that the lender that finances the tax credit is not dependent on the commercial success of the project. And given that these production incentive credits can finance anywhere from 30-50% of an entire project it’s easy to see the importance.
Refundable tax credits in Canada are all about Canadian content. Producers, along with their tax credit accountant pick one of two main credit categories, the Production Credit or the Services Credit. These credits cover labor and service costs associated with the project.
Financing your tax credit, once you’ve applied for and received your credit is a very straightforward process. These are in effect bridge loans with your tax credit being the main collateral . Typical loans are 70% of the combined federal and provincial credits. No payments are made for the duration of the loan and when final government funding occurs you receive the balance of the credit, i.e. the other 30%, less financing costs on the 70% that was financed. A great cash flow strategy for the current project, or your next one.
If you want to limit the worrying that comes with financing independent film and TV projects in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you finance those govt refunds.
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