Canada Revenue Agency
www.cra.gc.ca
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Film or Video Production Services Tax Credit (PSTC)
Administration
Table of Contents
Introduction
Overview of the film or video production services tax credit (PSTC)
The Canadian government introduced the 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;
- pornography;
- 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.
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
The PSTC is jointly administered by the Department of Canadian Heritage through the Canadian Audio-Visual Certification Office (CAVCO) and by the 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 (the 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 Canadian film or video production tax credit (CPTC) program, not both.
An eligible production corporation has to submit a completed Form T1177, Claiming a Film or Video Production Services Tax Credit to claim its PSTC. The certificate issued by CAVCO, or a copy, must be attached to the T2 Corporation Income Tax Return for the year along with Form T1177. The eligible production corporation has to file a separate Form T1177 for each production for which a PSTC is claimed. However, we will accept one form for episodes in a series if each episode is considered to be an accredited production.
Note
If you are filing electronically, do not send us any papers to support your electronic return. If we need to verify your information, we will contact you. You must keep your CAVCO Accreditation Certificate, information slips, documentation, and records for your income tax returns for at least six years.
Our objective is to deliver the PSTC to eligible production corporations in a timely manner, once a complete claim is received. Our goal is to process our review of your claim within 60 days where no audit is performed, or within 120 days where an audit is performed. However, we have to receive a complete claim before it can be processed. A claim is considered to be complete when we have received:
- a properly completed Form T1177, Claiming a Film or Video Production Services Tax Credit;
- the accreditation certificate (or a copy); and
- the T2 corporation income tax return for the year.