The British Columbia Interactive Digital Media Tax Credit (IDMTC) program provides a refundable 17.5% tax credit on eligible salary and wages incurred by eligible corporations to develop interactive digital media products in British Columbia after August 31, 2010 and before September 1, 2015.

Yes, the credit is refundable to the extent it exceeds the corporation's income tax payable.

A registered corporation is eligible to claim the tax credit. Please see "How do I register a corporation?" for more information.

Corporations must complete and submit form FIN 568, Interactive Digital Media Tax Credit Application for Registration, supporting documentation and the application fee to:

Corporations may register for the IDMTC prior to, during, or after the end of each tax year for which they want to claim the IDMTC, as long as the registration process is started in time to meet the 18 month filing deadline.

Information on how to Complete the Interactive Digital Media Tax Credit Application for Registration (FIN 568) form is available here.

A corporation can register for a tax year if, in that tax year, it meets all of the following requirements:

• has a permanent establishment in BC;
• is a taxable Canadian corporation throughout the year;
• has more than $100,000 of eligible salaries and wages; and
• either
  • its principal business is developing interactive digital media products, or
  • all or substantially all of its business consists of:
    • Developing interactive digital media products; and/or
    • Providing eligible activities to corporations that have a permanent establishment in BC and whose principal business is developing interactive digital media products.

A corporation cannot register for a tax year, if for that tax year, it:

• is exempt from tax or has taxable income exempt from tax;
• is a labour-sponsored venture capital corporation;
• has a registered employee share ownership plan;
• is a registered employee venture capital corporation;
• is a registered small business venture capital corporation;
• is a registered eligible business corporation;
• is controlled, directly or indirectly in any manner whatever, by one or more of the above corporations;
• claims a BC SR&ED tax credit, or
• carries on a personal services business.

A corporation should advise the Income Taxation Branch of any corporate reorganization that triggers a year end. A corporation must register for each tax year for which it wants to claim the IDMTC.

A corporation's principal business is a question of fact that will be determined in respect of a particular taxation year based on all available information and the supporting information provided to the Income Taxation Branch with form FIN 568, Interactive Digital Media Tax Credit Application for Registration.

An Interactive Digital Media (IDM) product means an interactive product developed in British Columbia, made for use by an individual, the primary purpose of which is to educate, inform or entertain, and must be capable of presenting information in at least two of the following forms: text, sound and images. This may include, but is not limited to video games. However it does not include products that are specifically excluded.

Products, as described in the IDMTC Regulations, that are:

• operating system software;
• designed to be used for interactive communication;
• classified by the Entertainment Software Rating Board as "AO" (adults only);
• designed for marketing or promoting an entity, product or idea; or
• which may be contrary to public policy.

The application fee, effective September 1, 2010, is prescribed by Regulation.

A cheque or money order made payable to the Minister of Finance must be included with the corporation's application.

The amount of the fee is based on the number of employees at the end of the corporation's previous taxation year. If the corporation has no previous taxation year, the lowest fee will apply.

To claim the credit, complete form Schedule 429, British Columbia Interactive Digital Media Tax Credit and file along with a T2 Corporation Income Tax Return to the Canada Revenue Agency.

A form Schedule 429 and T2 must be filed with the Canada Revenue Agency (CRA) within 18 months of the end of the tax year in which the IDMTC is being claimed. Late filed claims will not be processed by the CRA.

IDMTC eligible salaries and wages must be:

• incurred on or after September 1, 2010;
• directly attributable to eligible activities; and
• paid to individuals who were resident in BC on December 31 of the year preceding the end of the corporation's tax year.

Total eligible salaries and wages for the year must be greater than $100,000 (pro-rated for short tax years) for a corporation to be eligible to register for the IDMTC.

• The IDMTC is calculated based on eligible salaries and wages minus any assistance, other than federal SR&ED, received.

• Stock options;
• Amounts paid to specified employees:
• based on profits or a bonus or
• in excess of five times the year's maximum pensionable earnings (more information may be found at: http://www.cra-arc.gc.ca/limits/);
• Amounts paid to employees for performing: marketing; human resource services; administrative support or management services; and
• Amounts paid to contractors or sub-contractors.

A specified employee of a corporation is an individual:

• who owns, directly or indirectly, 10% or more of the issued shares of any class of the capital stock of the corporation;
• who does not deal at arm's length with the corporation.

Eligible activities are the activities undertaken by the corporation that are attributable to the development of an IDM product. Examples of eligible activities include design, artwork, animation, and project management.

An eligible activity does not include marketing, human resource services, administrative support services or management services.

Whether an employee's salary and wages are directly attributable to eligible activities in respect of the development of an IDM product is a question of fact based on the duties performed by the employee and not on the employee's job title.

Salary and wages are directly attributable to an eligible activity if there is a direct link between the salary and wages and the eligible activity in respect to the development of an IDM product. This link may be determined for an employee by reviewing job descriptions, contracts, time sheets or other detailed documentation.

Only the portion of the employee's salary and wages which are directly attributable to eligible activities may be claimed. For example, if an employee works 70% of the time on non-eligible activities, then only 30% of the employee's salary and wages would be considered directly attributable to eligible activities. The allocation method used must be reasonable, clearly documented and applied consistently.

Activities attributable to the development of an online or wireless game may qualify for the IDMTC.

The Income Taxation Branch of the Ministry of Finance processes the application for registration. If a corporation disagrees with a decision to refuse or cancel the registration of a corporation, an appeal should be brought in the Supreme Court within 120 days after the date of any notice of that decision.

The CRA reviews and audits claims and issues refund cheques where appropriate. If a corporation disagrees with the amount of credits assessed by the CRA, a Notice of Objection should be filed with the CRA within 90 days of the date of the Notice of Assessment.

No, a corporation that claims a BC SR&ED tax credit for a tax year is not eligible to register for the IDMTC. A corporation can not apply for the IDMTC for only part of the year. A corporation may claim either the BC SR&ED tax credit or the IDMTC for any tax year.

A corporation may apply a BC SR&ED tax credit carry-forward from another year to the tax year for which the corporation also claims an IDMTC.

Yes, the tax credit is based on eligible salaries and wages incurred on or after September 1, 2010 and before September 1, 2015.

For information about the IDMTC program:

Call us in Victoria at: 250-387-3332
Call us toll free: 1-877-387-3332

E-mail us: ITBTaxQuestions@gov.bc.ca

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