Previously, we discussed the eligibility of different multimedia titles in regards to the Quebec Multimedia tax credit and the different refund rates applicable to the labour expenditures for different multimedia categories.
Today we’ll look more closely at the labour expenditures and what’s eligible.
Deduct Other Grants or Tax Credits
Before you calculate labour expenditures, it’s important to deduct any amounts received from government or non-government assistance from your eligible expenses. For instance, if an employee. who earns $75,000, was claimed at 60% of his salary for the SR&ED tax credit, then the portion of his salary that you could claim for the Multimedia tax credit would be 40% or $30,000. This rule applies to employees, shareholders and contractors.
After you’ve deducted any other assistance you’ve received from the salaries or wages of employees, you can claim the remaining expenditures for any employee who is directly involved in producing the multimedia title, such as designers, programers, writers etc. You’ll notice this list includes people not normally eligible for SR&ED, so the Multimedia Tax Credit is a nice compliment to R&D focused subsidies. Employees involved in the promotion or distribution of the title, such as marketing or sales, are ineligible.
Non-Arm’s Length Contractors
Like employees, you can claim the full amount of a non-arm’s length contractor’s fees, once you’ve deducted any portions that have been claimed in other government or non-government assistance programs. The contractor must be based in Quebec and be directly involved in producing the multimedia title.
Arm’s Length Contractors
For Quebec based arm’s length contractors, 50% of the eligible portion of their fees can be claimed.
The Quebec Multimedia tax credit is definitively worth looking into if you produce multimedia titles such as video games and interactive software as it provides a generous refundable tax credit of up to 37.5% on labour expenses. To apply or find out more about this credit that is managed by Investissement Quebec, you can visit their website at: http://www.investquebec.com.