NLR 31/23 - All-Spend Film and Video Production Tax Credit Regulations under the Income Tax Act, 2000

NEWFOUNDLAND AND LABRADOR REGULATION 31/23 All-Spend Film and Video Production Tax Credit Regulations under the Income Tax Act, 2000 (O.C. 2023-092) Amended: 25/25 54/25 NEWFOUNDLAND AND LABRADOR REGULATION 31/23 All-Spend Film and Video Production Tax Credit Regulations under the Income Tax Act, 2000 (O.C. 2023-092) (Filed April 20, 2023) Under the authority of section 68 of the Income Tax Act, 2000, the Lieutenant-Governor in Council makes the following regulations. Dated at St. John’s, April 20, 2023. Krista Quinlan Clerk of the Executive Council REGULATIONS Analysis 1. Short title 2. Definitions 3. Non-application 4. Criteria for eligible corporation 5. Registration of eligible production 6. Application for tax credit 7. Tax credit 8. Deduction 9. Change in circumstances 10. Suspension or cancellation 11. Commencement Short title 1. These regulations may be cited as the All-Spend Film and Video Production Tax Credit Regulations . 31/23 s1 Back to Top Definitions 2. In this regulation (a) "accommodation unit" means a residence or a hotel room located in the province, regardless of the number of people staying in the residence or hotel room, that provides temporary accommodations for one or more individuals whose presence in the province is required for the production of an eligible production; (b) "Act" means the Income Tax Act, 2000 ; (c) "all-spend film and video production tax credit" means the amount that is the lesser of (i) the amount determined by the formula A x (B – C) where A is 40%, B is the eligible production costs in respect of an eligible production for a taxation year, and C is the value of government assistance received or receivable that may reasonably be considered to be in respect of amounts included in B for the eligible production in a taxation year, and (ii) $20 million; (d) "eligible accommodation expenditure" means the lesser of (i) the amount paid per night for the accommodation unit multiplied by the number of nights the accommodation unit was used, or (ii) $300 multiplied by the number of nights the accommodation unit was used; (e) "eligible corporation" means a corporation that meets the criteria set out in section 4; (f) "eligible individual" means an individual, other than a trust or estate, who was resident in the province on (i) December 31 of the taxation year for which a tax credit is claimed under these regulations, or (ii) December 31 of the year immediately preceding the taxation year for which a tax credit is claimed under these regulations; (g) "eligible production" means a television program or series, film or video that is registered under section 5 ; (h) "eligible production costs" means the total of the following costs of an eligible corporation that are directly attributable to the production of an eligible production for a taxation year: (i) eligible salaries and labour expenditures, (ii) the corporation's eligible service contract expenditures that are not included under subparagraph (i), (iii) the corporation's parent-subsidiary amounts that are not included under subparagraph (i) or (ii), (iv) the corporation's eligible tangible property expenditures that are not included under subparagraphs (i) to (iii), and (v) the corporation's eligible accommodation expenditures for all accommodation units, to the extent that the amounts are incurred in the taxation year or the preceding taxation year, reasonable in the circumstances and not excluded production expenditures; (i) "eligible salaries and labour expenditures" means the total of the following amounts: (i) an amount equal to the total of (A) the salary or wages paid to all employees of an eligible corporation who are eligible individuals for work performed in the province in relation to an eligible production, (B) amounts paid by an eligible corporation to an eligible individual who is not an employee of the eligible corporation, for work performed by the eligible individual, or an employee of the eligible individual, in the province in relation to the eligible production, and (C) amounts paid by an eligible corporation to a taxable Canadian corporation for work performed by an eligible individual in the province in relation to an eligible production where (I) all of the issued and outstanding shares of the capital stock of the corporation are owned by the eligible individual, and (II) all of the activities of the corporation consist principally of the provision of services by the eligible individual, and (ii) an amount equal to (A) the non-resident salary and labour expenditures of an eligible corporation, or (B) the amount referred to in subparagraph ( i ), where the amount referred to in clause (A) exceeds the amount referred to in subparagraph ( i ); (j) "eligible service contract expenditure" means a n amount paid by an eligible corporation to (i) a taxable Canadian corporation with which the eligible corporation deals at arm's length for services performed in the province in respect of an eligible production by employees of the corporation at a time when they were eligible individuals, or (ii) a partnership, each member of which is an eligible individual or a taxable Canadian corporation, for services performed in the province in respect of an eligible production by an eligible individual who is a member of the partnership or by employees of the partnership at a time when they were eligible individuals; (k) "eligible tangible property expenditure" means the total of the following amounts: (i) the portion of the eligible corporation's cost of acquiring any tangible personal property, other than depreciable property, that can reasonably be attributed to the use in the province of that tangible personal property in the taxation year in the course of producing the eligible production, (ii) the portion of the eligible corporation's lease cost of any tangible property that can reasonably be attributed to the use in the province of that tangible property in the taxation year in the course of producing the eligible production, and (iii) the amounts in respect of depreciable property owned by the eligible corporation determined using the following formula: C x R x D/365 where C is the eligible corporation's undepreciated capital cost of the depreciable property at the beginning of the taxation year or, where the depreciable property was acquired by the eligible corporation in the taxation year, the cost of the depreciable property, R is the capital cost allowance rate for the depreciable property under Schedule II of the federal regulations, and D is the number of days in the taxation year that the depreciable property was available for immediate use in the province in producing the eligible production; (l) "excluded production expenditure" means an expenditure incurred for (i) meals or entertainment, other than reasonable expenditures for food and non-alcoholic beverages provided to individuals working on the eligible production at a studio or location set on a day that filming takes place, (ii) alcoholic beverages, (iii) living expenses other than the eligible accommodation expenditure, (iv) remuneration that is determined by reference to profit or revenue, (v) anything for which an amount may be included by an eligible corporation in computing a credit under any other section of the Act or the regulations under the Act, or (vi) advertising, marketing, promotion, market research or anything else that relates in any way to a film or video production other than the eligible production; (m) "government assistance" means t he amount of assistance that a corporation receives or is entitled to receive from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or other form of assistance, other than (i) a tax credit under these regulations, (ii) a tax credit under section 125.4 or 125.5 of the federal Act, (iii) a government equity investment provided by the Canada Media Fund or Telefilm Canada that is recoupable or repaid, or (iv) an amount received or receivable under the Canada Media Fund Licence Fee Program; (m.1) "non-resident salary and labour expenditures" means an amount equal to the total of the following amounts: (i) the salary or wages paid to all employees of an eligible corporation who are not eligible individuals for work performed in the province in relation to the eligible production, (ii) amounts paid by an eligible corporation to an individual who is not an eligible individual, and is not an employee of the eligible corporation, for work performed by the individual, or an employee of the individual, in the province in relation to the eligible production, and (iii) amounts paid by an eligible corporation to a corporation for work performed by an individual who is not an eligible individual, in the province in relation to the eligible production where (A) all of the issued and outstanding shares of the capital stock of the corporation are owned by the individual, and (B) all of the activities of the corporation consist principally of the provision of services by the individual; (n) "parent corporation" means a corporation that owns all of the issued share capital of another corporation; (o) "parent-subsidiary amount" means, in relation to a taxation year of a corporation, an amount that (i) is paid by a corporation, in a taxation year or 60 days after the end of the taxation year, to its parent corporation, and (ii) is paid as a reimbursement of an expense of the parent corporation that (A) the corporation and the parent corporation have agreed to treat as an expenditure of the corporation, and (B) would be an eligible service contract expenditure of the corporation for the taxation year in which it was incurred by the parent corporation if (I) the corporation's taxation year were the same as the parent corporation's taxation year, and (II) the expenditure were incurred by the corporation for the same purpose as it was incurred by the parent corporation and were paid by the corporation at the same time and to the same person as it was paid by the parent corporation; (p) "tangible personal property" means tangible property that is not real property; and (q) "tangible property" means property that can be seen, weighed, measured, felt or touched or that is in any way perceptible to the senses, and is deemed to include software. 31/23 s2 ; 25/25 s1 ; 54/25 s1 Back to Top Non-application 3. These regulations do not apply to a television program or series, film or video (a) that is registered as an eligible project under the Film and Video Industry Tax Credit Regulations ; or (b) in respect of which funding has been received under the Film and Television Equity Investment Program. 31/23 s3 Back to Top Criteria for eligible corporation 4. (1) To qualify as an eligible corporation, a corporation shall, at the time of registration of an eligible production and throughout the production of the eligible production, meet the following criteria: (a) it shall be incorporated under the Corporations Act or an Act of the Parliament of Canada or of the legislature of a province; (b) it shall have a permanent establishment in the province; (c) it shall primarily carry on the business of television, film or video production; (d) it shall not be a corporation all or a part of whose income is exempt from taxation under Part I of the federal Act ; and (e) it shall not (i) hold a broadcasting licence issued by the Canadian Radio-Television and Telecommunications Commission, or (ii) deal at non-arm’s length with a corporation that holds a licence referred to in subparagraph (i). (2) A corporation shall apply for registration of an eligible production in the form and manner determined by the minister and shall provide the following information: (a) the estimated total production costs; (b) the estimated eligible salaries and labour expenditures; (c) the estimated value of the tax credit; (d) a financing plan; (e) a script; and (f) the other information the minister may require. 31/23 s4 ; 54/25 s2 Back to Top Registration of eligible production 5. (1) The minister may register a production as an eligible production where (a) an application in accordance with section 4 is received prior to the beginning of production in the province; and (b) the production is a television program or series, film or video and the subject of the production is drama, variety, animation, children’s programming, music programming, an informational series or a documentary . (2) The following are not eligible productions: (a) news, current events or public affairs programming, or programs that include weather or market reports; (b) talk shows; (c) game shows or productions of games, questionnaires or contests; (d) sports events or activities; (e) gala presentation or awards shows; (f) productions that solicit funds; (g) reality television shows; (h) pornography; ( i ) advertising; (j) productions produced primarily for industrial, corporate or institutional purposes; (k) productions, other than documentaries, all or substantially all of which consist of stock footage; (l) productions for which public financial support would, in the opinion of the minister, be contrary to public policy; and (m) other productions that the minister determines are not eligible . 31/23 s5 Back to Top Application for tax credit 6. (1) An eligible corporation shall, within 18 months of the end of a taxation year, apply for a tax credit certificate in the form and manner that the minister requires and shall provide the following information: (a) its financial statements for the preceding taxation year; (b) a statement detailing the eligible production costs for the eligible production for the taxation year; (c) a statement in a form satisfactory to the minister and signed by an authorized officer of the eligible corporation that the information contained in the application is true and correct; and (d) other information that the minister may require. 31/23 s6 Back to Top Tax credit 7. An eligible corporation that produces an eligible production in the province and has received a tax credit certificate may deduct from the tax otherwise payable by it under the Act for a taxation year an amount not exceeding the lesser of (a) its all-spend film and video production tax credit for the taxation year; and (b) the tax otherwise payable by it under the Act for the taxation year. 31/23 s7 Back to Top Deduction 8. (1) The amount by which an eligible corporation's all-spend film and video production tax credit for a taxation year exceeds the tax otherwise payable by it under the Act for the taxation year calculated without reference to section 7 may be applied by the minister to pay (a) a tax, interest or penalty owing by the eligible corporation for that or a prior taxation year under the Act, the income tax statute of an agreeing province or the federal Act; (b) a contribution, penalty or interest owing by the eligible corporation for that or a prior taxation year as a result of payments required from the eligible corporation under the Canada Pension Plan Act ; and (c) a premium, interest or penalty owing by the eligible corporation for that or a prior taxation year under the Employment Insurance Act (Canada). (2) Any part of the amount that may be applied under paragraphs (1)(a) to (c) that is not applied shall be refunded to the eligible corporation. 31/23 s8 Back to Top Change in circumstances 9. A corporation that registers a production as an eligible production and that applies for or intends to apply for a tax credit certificate with respect to the eligible production shall immediately notify the minister of (a) a change in circumstances that might affect the continued eligibility of the production to be registered; and (b) a change in the corporation’s status that causes it to not meet the criteria set out in section 4. 31/23 s9 Back to Top Suspension or cancellation 10. (1) The minister may suspend or cancel the registration of a production or a tax credit certificate issued to an eligible corporation if one or more of the following applies: (a) in the opinion of the minister the eligible corporation is not in compliance with a provision of the Act or these regulations; (b) in the opinion of the minister there has been a change in circumstances relating to the production that affects its continued eligibility to be registered; and (c) in the opinion of the minister the registration of the production or the tax credit certificate has been obtained or maintained through misrepresentation or fraud. (2) Where the minister suspends or cancels the registration of a production or a tax credit certificate under paragraph (1)(c), the minister may suspend or cancel all tax credit certificates held by the eligible corporation. (3) Where a tax credit certificate is cancelled under this section, the eligible corporation is not entitled to a tax credit for the taxation year in respect of which the tax credit certificate was issued. (4) Where an eligible corporation has received a tax credit in respect of a year for which a tax credit certificate was cancelled, the eligible corporation shall pay to the minister the amount of the tax credit it received. (5) Before suspending or cancelling the registration of a production or a tax credit certificate, the minister shall give the corporation that registered the production an opportunity to be heard. 31/23 s10 Back to Top Commencement 11. These regulations are considered to have come into force on April 7, 2022. 31/23 s11