Why The Canada Film Tax Credit Program Is Critical To Your Film Financing

How could a government tax credit incentive possibly be ‘critical’ to your success in film financing? The answer is very simple: The Canada film tax credit program is usually the last piece of your financing, and we see many cases where it allows the other components of your project, i.e. equity, debt and ‘gap’ to come together in a final fashion.

And that of course allows you press the button on ‘ ready, action, camera, shoot ‘ which is what your project is all about. And to be clear, we’re talking about the three genres of entertainment – film / movies, television, and animation. Animation credits, somewhat unheard of years ago, are quickly gaining traction in the industry as people flock to this type of entertainment. Think Shrek!

Tax incentives in Canada give film investors the ability to complete financing successfully. Pick a number, any number… we’ll pick one for you – 30 – 40%! That is a typical amount you can expect to receive on a production tax credit in Canada. The actual final exact amount depends on the provincial geography you are shooting or producing in – as each province has adopted separate schedules of reimbursement.

These tax film financing incentives have once again brought producers and owners of project back to Canada. While in the past a major decision around Canadian content seemed to revolve around the lower priced Canadian dollar the Canadian ‘ loonie ‘ (that’s what we call a dollar up here!) is touching parity as we head into 2011- so the whole forex issue is no longer the driver – but Canada film tax credits are.

If you are not a major movie studio the film financing incentive provided to the industry by the production services tax credit has become one of the most important tools in your financing plan for your project.

The Canadian tax credits stimulate of course revenues that are generated from the industry as a whole.

Let’s recap some basics, so you can fast track and simplify your film financing project. It all about ‘ qualifying ‘ – you either do or you don’t. And if you qualify, you get your funding via a non repayable tax credit. The power of the tax credit increases significantly when you monetize or cash flow or finance (they all mean the same thing!) your tax incentive credit. These credits can be financed when your project is completed, returning cash flow to the owners, or, as importantly, they can be used as a financing strategy to generate cash flow as you film or produce your project and funds are expended.

What qualifies in your project surprises most of our clients on the upside! Including many of the costs of a project you may be surprised on.

We love the expression that the word ‘ Team ‘ is an acronym for ‘ together everyone achieves more”. Your team in film fax credit finance and film financing is critical, so aligning yourself with a Canadian tax credit business financing advisor, as well as a qualified entertainment accountant will only do two things – ensure you qualify, and maximize your credits.