Eligible registered corporations that develop interactive digital media products in BC after August 31, 2010 and before September 1, 2018 can receive a tax credit of 17.5% of eligible salary and wages incurred in the tax year. This credit is available for products developed in BC.
Which corporations are eligible for the IDMTC?
Eligible corporations must meet the following criteria:
- 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
- Its primary business is developing interactive digital media products or providing eligible activities to corporations that have a permanent establishment in BC and whose principal business is developing interactive digital media products.
What is considered an “interactive digital media product”?
An interactive digital media product (IDM product) is intended to be used interactively by an individual, in order to educate, inform or entertain the participant. An IDM product will typically include digital application files and data files that integrate and operate together. Information is presented via text, sound or pictures.
Examples of IDM products include:
- Video games
- Educational software
- Simulators
The following types of products are not considered IDM products:
- Blogs
- Online magazines or newspapers
- Slideshows or PowerPoint presentations
- Social media products
- Video streaming applications
What are eligible salaries and wages?
For the purposes of the IDMTC, eligible salaries and wages must be:
- Incurred between September 1, 2010 and September 1, 2018,
- Directly attributable to eligible activities, and
- Paid to individuals who were BC residents on December 31 of the year prior to the end of the corporation’s tax year.
The corporation must have eligible salaries and wages of at least $100,000 to be eligible for the IDMTC.
The following amounts are excluded from salaries and wages when calculating the tax credit:
- Stock options,
- Amounts paid to an employee who owns (directly or indirectly) 10% or more of the issued shares of any class of the capital stock of the corporation or does not deal at arm’s length with the corporation, that are:
- Payments based on profits or a bonus,
- Payments to an employee in excess of five times the year’s maximum pensionable earnings, and
- Amounts paid to employees in marketing, human resources, administration or management services, and
- Payments to contractors or sub-contractors.
What are eligible activities?
Activities performed by employees which are directly attributable to the development of the IDM product. For example, design, artwork, animation and project management.
Eligible activities do not include marketing, human resources, administration and support services or management services.
How can the credit be claimed?
Step 1
Register your corporation with the Ministry of Finance for each tax year the IDMTC is to be claimed. The application for registration can be found on the BC Ministry of Finance website. An eligible corporation can register at any time prior to the deadline for claiming the tax credit.
Step 2
The credit can be claimed up to 18 months after the end of the tax year in which the eligible salaries and wages are incurred. The credit is first applied against tax payable and any portion of the tax credit which exceeds tax payable is fully refundable. The tax credit is claimed on the T2 Corporation Income Tax Return.
Other considerations
A corporation cannot claim both the BC SR&ED tax credit and the IDMTC. Either the BC SR&ED tax credit or the IDTMC can be claimed in a particular tax year. However, a corporation can apply a BC SR&ED tax credit carry-forward from another year in the same year an IDMTC is claimed.
