Newfoundland and Labrador Interactive Digital Media (IDM) Tax Credit

Effective January 1, 2015, eligible companies developing eligible IDM products in the province may avail of the new NL IDM tax credit. This credit will be 40% of qualifying expenditures.

Eligible expenditures include eligible salaries and 65% of eligible remuneration.

The credit is a refundable tax credit. The IDM tax credit is based on eligible salaries and eligible remuneration incurred by an eligible corporation for the development of interactive digital media products during the period of January 1, 2015 to December 31, 2019 inclusive.

To be eligible for the IDM credit, a corporation developing an interactive digital media product must:

  1. Be primarily carrying on the business of interactive digital media development;
  2. Have a permanent establishment in the province of NL;
  3. Be a taxable Canadian corporation;
  4. Hold a valid registration certificate under the IDM program.

The credit value is limited to $40,000 per employee per year and $2 million per company, or group of associated companies, per year. The value of the credit may also be reduced subject to government assistance received in respect of the project.

To be eligible for the IDM tax credit, the product’s primary purpose must be to:

  • Educate;
  • Inform; or
  • Entertain.

This must be achieved by presenting information in at least two of the following formats:

  • Text;
  • Sound; and
  • Images.

Additionally, the product must meet the following requirements:

  • Use: intended to be used interactively by individuals.
  • Communication: not used primarily for interpersonal communication.
  • Non-promotional: not used to market or promote an entity, product or idea.

Certain types of products are excluded from the credit including:

  • Any product that is likely to receive an “AO” rating by the Entertainment Software Rating Board;
  • Any product which enables gambling activities with real currency;
  • Content aggregators;
  • Search engines;
  • Products primarily providing content that is news, public affairs, opinion, commentary, advice, blogs or current affairs including weather or financial market reporting;
  • Websites unless the website primarily contains or hosts digital games, virtual or augmented reality experiences or educational products.

To receive the credit, a company must first apply for registration as an eligible corporation. It is recommended that applications be made through the NL Film Development Corporation. This optional step is intended to give the applicant corporation an opportunity to receive a preliminary indication on whether the project is likely eligible for the credit and potentially reduce overall processing times.

Once a company has been registered as an eligible corporation, they must apply to the Minister of Finance for a tax credit certificate within six months of the end of each taxation year. For projects being developed primarily for government, the application for the credit may be submitted within six months of the end of the taxation year during which the product was completed.

If all requirements are met, the minister will then issue the tax credit receipt and the company will claim the credit on the appropriate line on the T2 return for that year as identified on the receipt. CRA will have the capacity to process returns claiming the IDM credit beginning in May 2016.

For more information, please contact the Tax Administration of the OCG.