Independent Film And Movie Financing Via Tax Credits in Canada

It certainly might look like somewhere in Hollywood, but the reality is that much film, and television projects are produced and filmed in Hollywood North, a.k.a Canada.

The Canadian government at both the federal and provincial levels has moved to significantly enhance the generosity around tax credits. Business owners of film, television, and yes animation also can utilize these tax credits to form an integral part of their overall project financing strategy.

A very significant portion of your project expenses can be recovered via the appropriate use of tax credits. Moreover, you can finance these claim prior to, or at the time of filing. This generates working capital and cash flow for the current project, and in many cases we speak to clients who intend to use these funds for their next project.

It can be very realistically stated the may projects in film, TV, and digital animation in fact could perhaps not be funded or completed without the effective use of tax credits. When you can ‘ monetize ‘ or ‘ cash flow ‘ those credits now you have just taken advantage of a powerful overall project financing strategy! As a result all areas of Canadian entertainment in our three aforementioned market segments continue to generate box office revenue in Canada. What was a new and innovative strategy in years past now becomes a priority ‘ job 1 ‘ in the financing of almost every project.

Entertainment projects in film, TV and animation clearly ‘ follow the money ‘ and that money has been followed to Canada in a number of different provinces – primarily Ontario and B.C., but in other provinces also.

While there is great pressure in many of the U.S. states to reduce, or in some cases eliminate tax credit incentives Canada has in fact increased incentives in every area – the government has essentially based its case that there is a huge economic windfall to Canada by virtue of the tax incentives offered. The term ‘ domino theory ‘ might well be mentioned, because the way the Canadian government sees it additional revenue comes into Canada in the form of hotels, food, carpentry, etc

So how are these tax credits financed? In any business your probably are ahead of the game when you work with an expert, and certainly tax credit finance is no different. We recommend to clients they work with a trusted, credible and experienced advisor in this area. When you project is well documented in the form of a project finance plan, and has solid Canadian content in key areas such as Director, Writer, Performers, Art, Music or Animation you have a very significant ability to enhance your total claim for the credit. (Other key areas of your total project are of course: Equity contribution via owners or investors, foreign pre sales, etc)

Your eligible tax credits can be financed as soon as they are filed – if you have a strong mgmt team – i.e. a good entertainment accountant, lawyer, etc, your credits can even be financed before you file them. That’s a total cash flow strategy that provides valuable cash flow and working capital to you project.

Let’s look at a quick example – let’s assume your production is budgeted at 1.04 Million dollars, and your labour component is 571k. Your labour to production ratio is 54%. Using Ontario as a current example the tax credit on this project would come in at 45% of your labour budget – That nets you 257,000.00$ in capital.If you finance your claim you could receive a significant portion of those funds almost immediately.

Utilize the services of a film financing expert to investigate the financing of your tax credits. Prepare a solid project finance plan and let the cash flow from monetizing your credits enhance the viability of your project.