Producing in Canada A GUIDE TO CA N A DIA N FILM, TELEVISION A ND INTERACTIVE DIGITA L MEDIA INC ENTIVE PROGRA MS

Transcription

1 Poducing in Canada A GUIDE TO CA N A DIA N FILM, TELEVISION A ND INTERACTIVE DIGITA L MEDIA INC ENTIVE PROGRA MS LLP Lawyes Patent and Tade-mak Agents Monteal Toonto Vancouve Québec Calgay Shebooke Ottawa Tois-Rivièes Victoia Pais Singapoe heenanblaikie.com

2 The comments and content contained in Poducing In Canada povide geneal infomation only and should not be egaded o elied upon as legal advice o opinions. Fo advice on any of the issues discussed in this guide, please consult you egula contact o anothe appopiately qualified pofessional adviso. No pat of Poducing In Canada may be used, epoduced, alteed o distibuted without the expess pemission of LLP. Copyight 2012 LLP. All ights eseved.

3 Table of Contents 1 and the Entetainment Industy 2 Intoduction 3 Summay of Povincial and Fedeal Govenment Tax Cedits 6 Fedeal Govenment Incentive Pogams 19 Official Teaty Co-Poductions 22 Pivate Incentives 23 Albeta Govenment Incentive Pogams 25 Bitish Columbia Govenment Incentive Pogams 29 Manitoba Govenment Incentive Pogams 31 New Bunswick Govenment Incentive Pogams 32 Newfoundland and Labado Govenment Incentive Pogams 33 Nova Scotia Govenment Incentive Pogams 34 Nunavut Govenment Incentive Pogams 36 Ontaio Govenment Incentive Pogams 39 Pince Edwad Island Govenment Incentive Pogams 39 Quebec Govenment Incentive Pogams 42 Saskatchewan Govenment Incentive Pogams 43 Yukon Govenment Incentive Pogams 45 Union and Guild Related Issues 46 Tax-Related Issues 47 Contacts

4 1 and the Entetainment Industy is one of Canada s leading law fims, with ove 600 lawyes and pofessionals in nine cities including Toonto, Monteal and Vancouve. Since its inception in 1973, ou fim has expanded steadily by ecuiting topnotch talent and by building on ou coe stengths in entetainment, intellectual popety, labou and employment, business law, taxation and litigation. We advise both domestic and intenational clients on all aspects of conducting business in Canada. s Entetainment Law Pactice has been epesenting the legal inteests of the entetainment industy fo nealy 30 yeas. The membes of ou goup the lagest team of entetainment lawyes in the county advise clients involved in all entetainment media including film, television, theate, video games, new media and music. We ae committed to seving the entetainment industy at home and aboad, offeing leading-edge expetise to ou clients in thei day-to-day business opeations. We povide advice on business fomation, joint ventues, copoductions, meges and acquisitions, and financing, as well as on labou, insuance, competition, poduction and distibution mattes. Ou clients include majo studios, independent poduces, distibutos, boadcastes, intenet sevice povides, video game developes, financial institutions, softwae publishes, special effects and post-poduction houses, as well as multimedia and animation studios. We also epesent many well-known diectos, wites, poduces, pefomes, musicians and othe successful atists. Ou ability to consistently delive exceptional legal advice and pactical solutions has been key to ou success in foging long-tem elationships with ou clients. Ou aeas of specialty include: Intenational and Canadian co-poductions Film, television and copoate financing Intenational and domestic tax Telecommunications and boadcasting Poduction contacts Copyight and tade-maks Mechandising and licensing Music ecoding, publishing, labels, licensing and management New media and video games Litigation suppot Labouand employment law Competition and tade pactice Immigation.

5 2 Intoduction Canada is ecognized as a majo playe in film, television and inteactive digital media poduction. The gowth of Canada s multibillion dolla poduction industy is attibutable to ou high-standad facilities, competent wokfoce, physical and cultual poximity to the United States, as well as to vey favouable economic factos. These include lowe location and poduction costs than in the U.S. and Euope, a good exchange ate and advantageous govenment tax incentives and funding policies. At, we know the advantages associated with poducing in Canada, including the vaious tax incentives povided by both fedeal and povincial govenments. Poducing in Canada, ou guide to Canadian film, television and inteactive digital media incentive pogams, povides an oveview of some of the available incentives and the citeia that must be satisfied to qualify fo them. Although each financing pogam is descibed sepaately fo ease of efeence, any given poduction may qualify fo two o moe. The infomation povided in this edition of Poducing in Canada is cuent as of June The on-line vesion of ou guide, available at is updated on a egula basis. To find out moe about Canadian film, television and inteactive digital media incentive pogams, please contact one of the lawyes listed at the end of this document.

6 3 Summay of Povincial and Fedeal Govenment Tax Cedits A moe detailed desciption of each of the cedits set out below can be found by povince beginning on page 25. Juisdiction Fedeal 25% of QLE CAP Tax Cedit Film o Video Poduction Tax Cedit 25% of labou expenditues 1 capped at 60% of poduction budget (appoximately 15% of budget) 16% of QLE NO CAP Film o Video Poduction Sevices Tax Cedit 16% of qualifying Canadian labou expenditues Albeta N/A Bitish Columbia 35% of QLE CAP None, but see details on Albeta Multimedia Development Pogam on page 22, which povides funding though diect gants Film Incentive B.C. Basic: 35% of eligible Bitish Columbia labou expenditues up to a maximum of 60% of total eligible poduction costs Regional: 12.5% of eligible Bitish Columbia labou expenditues po-ated by the numbe of days of pincipal photogaphy outside the Vancouve aea, divided by the total numbe of days of pincipal photogaphy in Bitish Columbia Distant Location: an additional 6% of eligible Bitish Columbia labou expenditues po-ated by the numbe of days of pincipal photogaphy done in a distant location in Bitish Columbia within a pescibed aea, divided by the total numbe of days of pincipal photogaphy in Bitish Columbia. Taining: The lesse of 30% of tainee salaies o 3% of eligible Bitish Columbia labou expenditues Combined benefit of above fou tax incentives is the amount of eligible labou capped at 60% of total poduction costs Digital Animation o Visual Effects Incentive: 17.5% of eligible Bitish Columbia labou costs diectly attibutable to digital animation o visual effects activities 33% 17.5% of QLE NO CAP of QLE NO CAP Poduction Sevices Tax Cedit Basic: 33% of accedited qualified Bitish Columbia labou expenditues Regional: 6% of accedited qualified Bitish Columbia labou costs, po-ated by the numbe of days of pincipal photogaphy outside the designated Vancouve aea, divided by the total numbe of days of pincipal photogaphy in Bitish Columbia Distant Location Regional: 6% of accedited qualified Bitish Columbia labou costs, po-ated by the numbe of days of pincipal photogaphy in Bitish Columbia, divided by the total numbe of days of pincipal photogaphy in Bitish Columbia Digital Animation o Visual Effects Incentive: 17.5% of accedited qualified Bitish Columbia labou costs diectly attibutable to digital animation o visual effects activity Inteactive Digital Media Tax Cedit 17.5% of qualified Bitish Columbia labou expenditue fo video game development Manitoba up to 65% 30% o of QLE NO CAP All Spend NO CAP Film and Video Poduction Tax Cedit 45% of qualified Manitoba labou expenditues 10% fequent filming bonus 5% bonus fo location filming outside of Winnipeg 5% Manitoba Poduce bonus The foegoing bonuses may be combined with the basic cedit fo a total cedit of 65% 30% of eligible local expenditues, including labou fo poductions that stat pincipal photogaphy afte Mach Labou expenditues fo the fedeal tax cedit ae defined as the labou expenditues incued fom the final scipt stage to post-poduction diectly attibutable to the poduction, easonable in the cicumstances and included in the cost to the copoation. Fo the povincial tax cedits, a simila definition is used, but such labou expenditues must be paid to esidents of that povince. Eligible expenditues can be incued as ealy as 2 yeas befoe pincipal photogaphy begins so that in-house development labou costs of a scipt ae eligible.

7 4 Juisdiction New Bunswick 25% - 30% of QLE CAP Tax Cedit 25-30% of eligible expenditues incued in New Bunswick depending on poject gene and company eligibility Newfoundland and Labado 40% of QLE CAP Film and Video Industy Tax Cedit Lesse of 40% of eligible labou expenditues o 25% of the total eligible poduction budget Nova Scotia 50% - 65% Nunavut of QLE CAP N/A Rebate Pogam (not a tax cedit) Film Industy Tax Cedit Meto-Halifax: 50% of the eligible labou expenses Regions: 60% of the eligible labou expenses An additional 5% is available to those who qualify unde the fequent filming bonus Nunavut Labou Rebate [Note: not a tax cedit] 20-30% of the eligible Nunavut costs Rebate Tax pogam Ontaio 35% 25% 20% 40% of QLE NO CAP of QLE NO CAP of QLE NO CAP of QLE NO CAP Film and Television Tax Cedit Basic: 35% of eligible labou expenditues Fist-time poduces: 40% on the fist $240,000 of eligible labou expenditues Regional bonus: an additional 10% of eligible labou expenditues fo a total of 45% of labou expenditues (minimum of five location days in Ontaio, 85% of which must be outside of the Geate Toonto Aea) Poduction Sevices Tax Cedit Basic: 25% of all qualifying poduction expenditues in Ontaio Compute Animation and Special Effects Tax Cedit 20% of eligible labou expenditues elated to compute animation o visual effects Inteactive Digital Media Tax Cedit 40% of eligible labou expenditues elated to inteactive digital media poducts fo qualifying copoations which ae not poviding a fee-fo-sevice aangement 35% of eligible labou expenditues elated to inteactive digital media poducts fo copoations which ae developing poducts unde a fee-fo-sevice aangement Pince Edwad Island N/A P.E.I no longe has a tax cedit pogam tageted at the film industy. Please see page 38 fo details on how an indigenous component may esult in funding

8 5 Juisdiction Quebec 35% 10% BONUS 10% of QLE CAP of QLE fo SFX of QLE WITHOUT PUBLIC FINANCIAL ASSISTANCE Tax Cedit Refundable Tax Cedit fo Film and Television Poductions 35% of eligible labou expenditues capped at 50% of poduction costs (appoximately 17.5% of budget) 45% (i.e % bonus) of eligible labou expenditues capped at 50% of poduction costs elated to the ceation of digital animation o visual effects (appoximately 22.5% of budget) 45% of eligible labou expenditues capped at 50% of poduction costs fo cetain Fench language films o giant sceen films (appoximately 22.5% of budget) 65% of eligible labou expenditues capped at 50% of poduction costs fo Quebec egional poductions (appoximately 32.5% of budget) 10% of eligible labou expenditues (appoximately 32.5% of budget) capped at 50% of poduction costs pe fiction featue film o single documentay that does not eceive any financial assistance fom a public oganization 25% 20% BONUS 35% All Spend NO CAP of QLE fo SFX of QLE CAP Film Poduction Sevices Tax Cedit 25% of all-spend poduction costs (includes qualified labou costs and the cost of qualified popeties) An additional 20% of eligible labou expenditues elated to the ceation of digital animation and compute-aided special effects povided such labou costs elate to the completion of compute aided special effects and animation Dubbing Tax Cedit 35% of eligible labou expenditues capped at 45% of eligible dubbing costs Fench Titles 37.5% of QLE NO CAP Non-Fench Titles 30% Othe Titles of QLE NO CAP Multimedia Poduction Tax Cedit 37.5% of eligible labou expenditues fo Fench mass maket titles 30% of eligible labou expenditues fo non-fench mass maket titles 26.25% of eligible labou expenditues fo all othe eligible titles 26.25% of QLE NO CAP Saskatchewan 25% of QLE CAP Film/TV and Digital Tax Cedit 25% non-efundable tax cedit on all poduction expenses, including labou costs and can only be cedited against an applicant s tax liability in Saskatchewan. Note: This pogam is not yet in foce as it is eplacing the cuent tax cedit. Howeve, it may become available as ealy as July 1, Yukon N/A Rebate Pogam (not a tax cedit) Film Incentive Pogam [note: not a tax cedit] 25% ebate of Yukon below-the-line spend whee eligible Yukon labou content equals o exceeds 50% of the total peson days on the Yukon potion of the poduction 50% ebate fo tavel expenditues fom Calgay, Edmonton, Vancouve to Whitehose to a maximum of the lesse of $15,000 o 25% of total expenditues incued in Yukon

9 6 Fedeal Govenment Incentive Pogams FEDERAL TAX CREDITS The Canadian fedeal govenment assists domestic and foeign poduces by offeing a numbe of tax incentives and funding pogams that ae available to both sevice poductions and Canadian-content poductions. The Canadian Audio-Visual Cetification Office (CAVCO), a banch of the Depatment of Canadian Heitage and the Canada Revenue Agency (CRA), jointly administe the Canadian Film o Video Poduction Tax Cedit Pogam and the Film o Video Poduction Sevices Tax Cedit Pogam. Only one of these tax cedits may be claimed fo a paticula poduction. Note: As of Apil 2, 2012, applications must be submitted online. CANADIAN FILM OR VIDEO PRODUCTION TAX CREDIT PROGRAM (CPTC) The CPTC was established to aid in the development of the Canadian film and television poduction industy and to pomote Canadian television pogamming. This tax cedit is equal to 25% of eligible labou expenditues, capped at 60% of total poduction costs. The tax cedit is a efundable tax cedit (that is, it is fully payable to the poduction company even if it owes no taxes). It is calculated in conjunction with povincial cedits such that the eligible poduction costs ae educed by any applicable povincial tax cedit amount. The holding of an inteest in a film o video poduction by a peson othe than the poduction copoation will no longe disqualify the poduction fo eligibility fo a tax cedit, unless the poduction o one of the investos is associated with a tax shelte. Eligibility Requiements An application fo cetificate of completion (Pat B cetificate) must be made within 24 months of the fist fiscal yea end following the commencement of pincipal photogaphy. The cetificate must be issued by CAVCO within 6 months of this date. The poduction company must be a taxable Canadian copoation which satisfies the citeia established by the Income Tax Act Regulations, as intepeted and administeed by CAVCO. The copoation must be pimaily in the business of Canadian film o photogaphy poduction. The poduction company must own the copyight of the poduction. The poduction must not fall unde the excluded gene categoies o poductions listed by CAVCO. These ae news pogams, talk and game shows, spoting and awad events, eality television, poductions that solicit funds, ponogaphy, advetising, industial o copoate poductions and poductions othe than a documentay, all o substantially all of which consists of stock footage. The poduction must meet CAVCO s key ceative point equiements. The poduction company must be owned and contolled, eithe diectly o indiectly, by Canadian citizens o pemanent esidents in accodance with definitions found in a combination of the Citizenship Act 2, the Immigation Act 3 and the Investment Canada Act 4. All poduce-elated pesonnel must be Canadian (some exceptions fo poductions involving noncanadian development). Not less than 75% of total labou costs must be payable fo sevices povided to/by individuals who ae Canadians. The poduction company must contol the initial woldwide exploitation ights ove the poduction. 2 R.S.C., 1985, c. C-29, s. 2(1). 3 R.S.C., 1985, c. I-2, s. 2(1). 4 R.S.C., 1985, (1st Supp.), c. 28, s. 3.

10 7 Confimation in witing fom a Canadian distibuto o a CRTC-licensed boadcaste that the poduction will be shown in Canada within the two-yea peiod following its completion. The poduction cannot be distibuted in Canada by an entity that is not Canadian within the twoyea peiod that begins when the poduction fist becomes commecially exploitable. The poduction company o a elated taxable Canadian copoation must etain an acceptable shae of evenues fom the exploitation of the poduction in non-canadian makets. Eligible Expenses Eligible labou expenditues must be easonable unde the cicumstances, must be included in the cost to the poduction company, must be incued fo the stages of poduction (pe to post poduction) and must be diectly attibutable to the poduction itself. Eligible labou expenditues exclude amounts paid fo the sevices of non-canadian esidents, unless the peson was a Canadian citizen at the time the payment was made. Eligible costs may be incued as ealy as two yeas befoe pincipal photogaphy begins so that inhouse development labou costs of an initial daft of a scipt, as well as the cost of futhe evisions ae eligible. QUALIFYING AS A CANADIAN PRODUCTION FOR THE CPTC CAVCO and the Canadian Radio-television and Telecommunications Commission (CRTC) ae the two govenment bodies esponsible fo detemining whethe a poduction qualifies as Canadian. Fo moe infomation on cetification by the CRTC see the Qualifying as a Canadian Poduction fo CRTC Puposes section below. CAVCO bases its detemination on a daft egulation to the Income Tax Act (Canada) and it has set guidelines that must be satisfied befoe a film o television poduction is cetified as Canadian. Qualifying as a Canadian Poduction: Cavco In ode fo a poduction, othe than a co-poduction o co-ventue, 5 to qualify as a Canadian film o video poduction unde the CAVCO ules fo Canadian content-based tax incentives and othe govenment incentives o enhanced Canadian boadcast license fees available fo Canadian pogams, the following must be satisfied: Poduce Eligibility unde CAVCO CAVCO intoduced the Poduction Contol Guidelines (PCG) on August 31, 2007, (Public Notice - CAVCO ) which eplaces the Poduce Contol Guidelines. The PCG povides futhe guidance in the detemination of the eligibility of poductions to the CPTC. The Canadian poduce 6 must satisfy the following equiements of poduction contol: The Canadian poduce must have and maintain full contol ove the development of the poject fom the time at which the poduce has secued undelying ights. Pio development of the poject by non- Canadians is pemitted. 5 The citeia ae diffeent fo co-poductions and co-ventues. Co-poductions may qualify as Canadian Film o Video Poductions fo the puposes of both the CPTC and the CRTC ules, wheeas co-ventues may qualify fo status as a Canadian pogam only fo CRTC puposes (see Qualifying as a Canadian Poduction fo CRTC Puposes ). 6 The definition of Canadian and poduce ae set out in section 1106 of the Income Tax Regulations (C.R.C., c. 945).

11 8 The Canadian poduce must have and maintain full esponsibility and contol ove all aspects (ceative and financial) of the poduction of the poject. Whee a non-canadian has the ight to oveule any decision by the poduce, the poduce will have the onus of establishing, to the satisfaction of CAVCO, that the situation does not intefee with the poduce s esponsibilities and contol. The Canadian poduce must have and maintain full esponsibility and contol ove all aspects of poduction financing. Documentation must demonstate that the poduce has assumed and etained the commecial isks associated with the financing and poduction of the poject. Whee a non-canadian has the ight to oveule any decision by the poduce, the poduce will have the onus of establishing, to the satisfaction of CAVCO, that the situation does not intefee with the poduce s esponsibilities and contol. The Canadian poduce must have and maintain full esponsibility and contol ove the negotiation of initial exploitation ageements. Whee the non-canadian pio owne of the undelying ights etains exploitation ights to moe than one significant teitoy (ie., U.S., Euope, Asia), afte the poduce has acquied the undelying ights, the poduce will have the onus of establishing, to the satisfaction of CAVCO, that the situation does not intefee with the poduce s esponsibilities and contol. The Canadian poduce is entitled to a easonable and demonstable monetay paticipation in tems of budgeted fees and ovehead, and paticipation in evenues of exploitation. Fo example, the poduce must demonstate an equity owneship in the poject and etain at least 25 pe cent of the net pofits fom the exploitation of the poduction in non-canadian makets. The CAVCO Point System A poduction must ean a minimum of six points based on the following allocation system, with points being awaded in each case if the function is wholly pefomed by a Canadian. Unde CAVCO s amended policy egading poof of Canadian citizenship o pemanent esidency, poduces and key ceative pesonnel woking unde the Canadian Film o Video Poduction Tax Cedit (CPTC) will be equied to obtain a CAVCO pesonnel numbe in ode to be eligible fo Canadian content points. In ode to eceive a CAVCO pesonnel numbe, each eligible individual must send a copy of thei poof of Canadian citizenship o pemanent esidency diectly to CAVCO. Poduces should be awae that as of Decembe 31, 2010, it is mandatoy fo poduces and key ceative pesonnel to have a CAVCO pesonnel numbe. Peviously, CAVCO equied applicants unde the CPTC to etain a copy of an individuals citizenship o pemanent esidency documentation. Live Action Poductions The point system is as follows fo poductions othe than animated poductions: Position Points Diecto 2 Sceenwite 7 2 Highest Paid Lead Pefome (o fist voice) 8 1 Second Highest Paid Lead Pefome (o second voice) 1 Poduction Designe/At Diecto 1 Diecto of Photogaphy 1 Music Compose (oiginal music only) 1 Pictue Edito 1 Total 10 In addition, it should be noted that eithe the Diecto o the Sceenwite, and eithe one of the two highest paid leading pefomes must be Canadian. 7 In the case of films, points will only be awaded fo the sceenwite if all sceenwites ae Canadian, o if the pincipal sceenwite and autho of the published wok on which the sceenplay is based ae Canadian. 8 The citeia used to detemine which pefomes ae lead pefomes ae: (i) emuneation, including benefits, esiduals, tavel and living expenses, etc., (ii) billing and (iii) sceen time.

12 9 Animated Poductions A diffeent 10-point scale applies to animated poductions. Animated poductions must satisfy a minimum of six of the following 10 points to qualify as a Canadian Film o Video Poduction. Points ae only awaded whee the function is wholly pefomed by a Canadian. Position Points Diecto 1 Wite and Stoyboad Supeviso 1 Highest Paid o Second Highest Paid Lead Voice 9 1 Design Supeviso 1 Camea Opeato whee opeation is in Canada 1 Compose of the Musical Scoe (oiginal music only) 1 Pictue Edito 1 Layout and Backgound pefomed in Canada 1 Key Animation pefomed in Canada 1 Assistant Animation/In-betweening pefomed in Canada 1 Total 10 As with live action poductions, at least one of the Diecto o the Wite and Stoyboad Supeviso must be Canadian. In addition, the highest o second highest paid lead voice must be Canadian and all key animation must be done in Canada. The CAVCO Cost Citeia: Canadian Expenditues In the case of animated poductions, the costs associated with positions that entitle the poduction to a point based on the location whee the wok is done ae not consideed to be excluded costs. In addition, a minimum of 75% of the aggegate cost of post-poduction and laboatoy wok, pocessing and final pepaation must be paid fo sevices povided in Canada. It should also be noted that poduces and licensees can apply to CAVCO fo peliminay ecognition that a film o television poduction will be a Canadian Film o Video Poduction if the final poduction confoms to infomation submitted to CAVCO. This Canadian Film o Video Poduction Cetificate o Pat A Cetificate (which also povides an estimate of the claimable tax cedit) assists poduces in financing poductions. The poduction in question must be completed within two yeas of the yea end in which pincipal photogaphy began, and must file fo a final cetificate of completion o Pat B Cetificate within 24 months fom the end of the yea in which pincipal photogaphy began. The Pat B Cetificate must be issued within 30 months fom the end of the yea in which pincipal photogaphy began. Fo moe infomation on CAVCO, visit cavco/. The CAVCO ules equie that at least 75% of the total costs fo sevices povided in elation to poduction must be paid to Canadians in espect of sevices endeed by Canadians, egadless of whee such sevices ae endeed. The following costs ae excluded fom the calculation: Post-poduction and laboatoy sevices Poduce emuneation (only fees paid to Canadian poduce o co-poduce) Amounts paid to key ceative pesonnel who ae coveed by the point system Legal and accounting costs Insuance costs Financing costs. 9 See endnote 10 above fo the citeia used to detemine lead voice.

13 10 QUALIFYING AS A CANADIAN PRODUCTION FOR CRTC PURPOSES In addition to the content equiements administeed by CAVCO, the Boadcasting Act 10 povides a famewok of ules to detemine what is Canadian. The oganization chaged with the esponsibility of intepeting and applying these ules is the CRTC. The CRTC is also the govenment oganization with the esponsibility of issuing licences to Canadian boadcastes and egulating the amount of time that the boadcastes must devote to Canadian pogams. Thee ae clea similaities in the citeia used by CRTC and CAVCO, and a poduction which is cetified by CAVCO as a Canadian film o video poduction will automatically qualify as Canadian fo CRTC puposes. Howeve, a poduction which the CRTC cetifies as Canadian may not necessaily be cetified as a Canadian film o video poduction by CAVCO. The CRTC eleased its updated ules egading Canadian content in Public Notice CRTC , which took effect on Septembe 1, A pogam which only achieves cetification by the CRTC as Canadian will not be able to access the CPTC. Howeve, thee ae othe benefits available to a pogam being accoded cetification as Canadian by the CRTC. Canadian boadcastes (which includes pay and specialty channels) ae equied as a condition of thei licences to ai a minimum amount of Canadian pogamming, so they ae willing to pay a pemium fo pogamming which has been cetified as Canadian. In addition, Canadian pay and speciality channels ae also subject to minimum expenditue equiements in espect of cetified Canadian pogamming. Fo the foegoing puposes, pogamming cetified by eithe the CRTC o CAVCO as Canadian will suffice. I. Basic Definition of Canadian Content The CRTC will cetify a pogam as Canadian if it meets the equiements outlined in the thee sections listed below. (A) Poduce The poduce must be a Canadian citizen that is the cental decision-make thoughout the poduction. In the event that thee ae non-canadians engaged in poduce-elated functions, the poduction may still be cetified as Canadian povided: Remuneation of the Canadian poduce exceeds the total emuneation to foeign poduces Non-Canadian poduces ae on set only to obseve, to a maximum of 25% of pincipal photogaphy. (B) Point System In evaluating Canadian content, the CRTC adopts CAVCO s point system. In addition the Canadian expenditue equiements ae substantially simila to CAVCO s equiements. The CRTC has established citeia fo live action and animated poductions and each must achieve 6 points based on the following key ceative functions being pefomed by Canadians. Live Action Poduction o Continuous-Action Animated Poduction Diecto Sceenwite Lead Pefome o Fist Voice Second Lead Pefome o Second Voice Poduction Designe Diecto of Photogaphy Music Compose Pictue Edito 2 points 2 points 1 point 1 point 1 point 1 point 1 point 1 point 10 R.S.C. 1985, c. B-9 (as amended).

14 11 Animated Poduction (othe than Continuous-Action Animation) Diecto Sciptwite and Stoyboad Supeviso Fist o Second Voice o Fist o Second Lead Pefome Design Supeviso Layout and Backgound (location) Key Animation (location) Assistant Animation/In-Betweening (location) Camea Opeato (peson) and Opeation (location) Music Compose Pictue Edito 1 point 1 point 1 point 1 point 1 point 1 point 1 point 1 point 1 point 1 point Notwithstanding the above tables, at least one of the diecto o sceenwite positions and at least one of the two lead pefomes must be a Canadian. The CRTC will evaluate a live, videotape o film poduction as a Live Action o a Continuous-Action Poduction. Animation is the pocess of ceating the illusion of motion though the use of inanimate o still images. The CRTC ecognizes two types of animation: Compute Animation: Refes to the use of computes assisting o geneating animated movement pincipally o wholly though digital image synthesis using computes and compute pogams. Taditional Animation: is efeed to as eithe continuous o fame-by-fame. Continuous animation efes to the pocess of filming eal figues as they ae manipulated using mechanical devices, and fo the pupose of CRTC Canadian content these animations will be teated as Live Action Poductions. Fame-by-fame animation efes to the pocess of filming o ecoding a seies of poses of figues, shapes, objects, etc. in sequence on successive fames of ecoding mateial, theeby giving the illusion of movement. (C) Expenditue Requiements Sevice Costs. These costs epesent all expenditues associated with a poduction. At least 75% of sevice costs less the costs listed below must be spent on Canadians: Remuneation fo key ceative pesonnel fo points Remuneation fo poduce(s) and co-poduce(s) (except fo poduce-elated positions) Post-poduction/lab costs Accounting and legal fees Insuance bokeage and financing costs Indiect expenses Contingency costs Goods puchased, such as film/videotape supplies Othe costs not diectly elated to poduction. Post-Poduction/Lab Costs. At least 75% of all such costs need to be paid fo sevices endeed in Canada by Canadians o Canadian companies. II. Seies A seies is defined as a pogam with two o moe episodes poduced by the same poduce o poduction company. The pogams must be equal in length and shae a common title, theme and situation o set of chaactes. The CRTC has ecognized that poduction elements of a seies may vay and as such has established a degee of flexibility. A seies will be cetified as Canadian by the CRTC even if cetain individual episodes do not satisfy the minimum point equiements, povided that: At least 60% of the seies episodes meet o exceed the equiement of six Canadian content points pe episode The seies attains an aveage of six points pe episode All episodes ae boadcast at equitable times.

15 12 III. Spoting Events Spoting events o tounaments ae classified as Canadian by the CRTC, povided that the Canadian licensee o poduction company maintains contol ove the poduction and povides commentatos. At least one of the majo on-sceen pesonalities must be Canadian and, if the event takes place outside of Canada, Canadian teams o athletes must compete. IV. Special Recognition fo Co-Ventues With Ameicans And Othe Intenational Patnes Co-ventues include co-poductions with a foeign poduce whee thee is no co-poduction teaty between the two counties o whee the co-poduction teaty does not include the ventue in question. In the absence of Official Teaty Co-Poduction status, these poductions do not qualify fo the CPTC. Howeve, co-ventues cetified by the CRTC ae eligible fo enhanced boadcast license fees since they will qualify as Canadian fo CRTC puposes. Futhemoe, unlike Official Teaty Co-Poductions, co-ventues may be poduced with Ameican patnes. Co-ventues ae consideed Canadian if it can be shown that the Canadian poduction company has at least equal decision-making powe ove ceative elements and is esponsible fo administeing the entie potion of the Canadian budget. The poduction must also obtain a minimum of six Canadian content points, spend 75% on Canadian costs in the sevices and post-poduction categoies and the diecto o wite and at least one of the two leading pefomes must be Canadian. When detemining whethe the decision-making esponsibility fo the poduction esides with the Canadian poduction company, the CRTC will equie the following: The Canadian poduction must have sole o cosigning authoity on the poduction bank account The Canadian poduction company must etain a 50% financial stake and a 50% shae of the pofits The Canadian poduction company must be at financial isk and have budgetay esponsibility The Canadian poduction company must have at least an equal measue of appoval ove all elements of the poduction with its co-ventue patnes. Co-ventues with Commonwealth counties, Fenchspeaking counties o counties with which Canada has a film o television poduction teaty, may be povided additional flexibility. The poduction will be consideed Canadian if: The diecto o the wite, and at least one of the two leading pefomes ae Canadian It meets a minimum of five points fo key ceative pesonnel A minimum of 50% of the total costs incued fo sevices is paid to Canadians At least 50% of pocessing and final pepaation ae paid fo sevices in Canada. When boadcast o distibuted by a licensee of the CRTC, co-ventues will qualify fo special ecognition if the CRTC is satisfied that the documentation shows that Canadian poduction company: Has equal decision-making esponsibility on all ceative elements Is esponsible fo the administation of at least the Canadian element of the poduction budget.

16 13 V. Poduction Packages The CRTC defines a poduction package as two o moe co-poductions o co-ventues, undetaken by a Canadian poduction company in connection with one o moe foeign poduction companies, whee a poduction with mino foeign involvement is matched with a foeign poduction with mino Canadian involvement. A twinning involves matching a Canadian poduction with a foeign poduction with only a financial ole being played by Canadians. Unde the CRTC ules, poduction packages and twins can qualify as Canadian content if the following citeia ae satisfied: The Canadian copyight is held by Canadians fo both poductions The budgets of both poductions must be appoximately equal The co-poduction ageements fo the poductions ae submitted to the CRTC The Canadian poduction company has financial paticipation and a minimum 20% shae in the pofits of both poductions A boadcaste may eceive a cedit fo a poduction that has fewe Canadian elements, if it wee to boadcast the poduction with moe Canadian elements at an equitable time All the poductions within the package fall in the same pogam categoy. It should be noted that animation poductions ae not eligible to fom pat of a poduction package The duation of both matched (o twinned) poductions ae appoximately equal The poduction package pogam is a dama, comedy, vaiety, documentay and childen s pogamming Both matched (o twinned) poductions eceive equitable scheduling on the same Canadian station o netwok. VI. Damatic Pogam Cedit The CRTC will gant a 150% time cedit to a Canadian boadcaste each time a cetified damatic poduction is boadcast that meet the following citeia: Poduced by a Canadian independent poduction company o licensee of the CRTC afte Apil 15, 1984 Cetified as a Canadian pogam and achieves 10 points Boadcasts between the hous of 7:00 p.m. and 11:00 p.m. o at an appopiate childen s viewing time (if childen ae the main audience) Contains a minimum of 90% damatic content. The time cedit will be ganted within a two-yea peiod fom the date of the fist boadcast. This cedit is not available to the lagest multi-station owneship goups. Fo moe infomation on these citeia, visit gc.ca/eng/achive/2000/pb htm. FILM OR VIDEO PRODUCTION SERVICES TAX CREDIT PROGRAM (PSTC) A poduction that does not meet the Canadian content citeia fo the CPTC may be eligible fo the PSTC. The PSTC was designed to encouage copoations to employ Canadians. The company can be a foeign owned o Canadian owned copoation. This tax cedit is equal to 16% of labou expenditues paid to Canadian esidents and thee is no cap on the amount that can be claimed unde this cedit. The tax cedit is a efundable tax cedit (that is, it is fully payable to the poduction company even if it owes no taxes) and it is calculated in conjunction with simila povincial tax cedits.

17 14 Eligibility Requiements The applicant company pefoming poduction sevices must be eithe a Canadian-owned o foeign-owned copoation with a pemanent establishment in Canada. The copoation must be pimaily in the business of video o video poduction sevices. The poduction company must eithe own the copyight in the film duing the poduction peiod o be engaged diectly by the copyight holde to povide poduction sevices. The poduction company must meet the minimum expenditue equiements, which ae $1 million fo featue films, $200,000 fo a one-hou television episode and $100,000 fo a 30-minute television episode. The poduction must not fall unde the excluded gene categoies o poductions listed by CAVCO. These ae news pogams, talk and games shows, spoting and awad events, eality television, poductions that solicit funds, ponogaphy, advetising, industial o copoate poductions and poductions othe than a documentay, all o substantially all of which consists of stock footage. Eligible Expenses Expenses must be Canadian labou expenditues which: Ae easonable in the cicumstances Ae diectly attibutable to the poduction Wee incued afte Octobe 1997 Wee paid to pesons who wee esident to Canada at the time the payment was made Wee incued duing the poduction pocess (pe to post poduction) Ae paid fo sevices povided in Canada. Ae paid in the yea o within 60 days afte the end of the yea. Fo moe infomation on the PSTC pogam, visit www. pch.gc.ca/cavco CANADA MEDIA FUND (CMF) The CMF was launched on Apil 1, 2010, and combined the fome Canadian Television Fund and the Canada New Media Fund. The CMF opeates on a budget of $375 million and is subject to yealy eview. The pupose of the CMF is to assist in the ceation of successful, innovative Canadian content and applications fo cuent and emeging digital platfoms though financial suppot and industy eseach. 11 Steams of Funding CMF s contibutions ae divided into two steams of funding: The Expeimental Steam, which invests in the development of innovative content and softwae applications fo eventual integation into mainsteam Canadian media platfoms; and The Convegent Steam, which suppots the ceation of convegent television and digital media content. 11

18 15 EXPERIMENTAL STREAM This steam is intended to suppot digital content that is innovative and inteactive (Note: pojects must include these chaacteistics). Unde this steam, the maximum contibution pe poject is 75% of eligible costs o $1 million, whicheve is less. Funding will be deliveed in the fom of a ecoupable advance, which must be epaid fom evenue geneated by exploitation of the new poject. The CMF will choose pojects unde this steam accoding to the following: Poduction team (15%), Innovation and advancement (40%), Business plan (30%), and Distibution stategy (15%). Eligibility Requiements Eligible applicants must be Canadian-contolled, taxable Canadian copoations with thei head office in Canada o Canadian boadcastes. O, the applicant can be a Canadian boadcaste that is licensed to opeate by the Canadian Radio-television Telecommunications Commission. The applicant must own the copyight fo the poduction. The poject s undelying ights must be owned and ae significantly and meaningfully developed by Canadians. The poject must be poduced in Canada, with at least 75% of its eligible costs being Canadian costs. The poject must be, and emain thoughout its poduction, unde Canadian owneship and Canadian executive, ceative and financial contol. An eligible poject must be digital media content and/o application softwae which is innovative and inteactive. It must be intended fo the geneal use of the Canadian public. Eligible pojects include, but ae not limited to mobile applications, video games, and web seies. A television component is not equied. A single eligible poject may eceive Development Poduction and/o Maketing and Pomotion suppot, eithe alone o in combination with each othe, but in no case will the contibution be moe than $1 million. Eligible Expenses Eligible expenses ae any costs which ae diectly elated to the poject such as, but not limited to: Reseach and pepaation of content Salaies, benefits and wages fo poject teams Hadwae and softwae costs Expenses fo online content Tavel and accommodation Maketing and pomotion Poject audit fees Othe technical and administative expenses. CONVERGENT STREAM This steam is intended to suppot the ceation of television shows and elated digital media content fo fou genes: dama, documentay, childen s and youth, and vaiety and pefoming ats. Eligible pojects must include content fo television, at least one digital media platfom and high levels of Canadian elements, including Canadian ceative content. The CMF equies at least 50% of a boadcast copoate goup s envelopes to be spent on some kind of ich and substantial digital web o mobile component. Funding will be paid diectly to the applicant poduce in the fom of license fee top-ups, equity investments, ecoupable advances, and non-epayable contibutions. Eligibility Requiements Eligible applicants must be Canadian-contolled, taxable Canadian copoations with thei head office in Canada o Canadian boadcastes. O, the applicant can be a Canadian boadcaste that is licensed to opeate by the Canadian Radio-Television Telecommunications Commission. Eligible pojects must include convegent content poduced on at least two platfoms, one of which must be television, and at least one digital media component. The digital media component must be ich, inteactive content such as games, inteactive web content, podcasts, on-demand content, etc. The poject must speak to Canadians and be pimaily intended fo a Canadian audience.

19 16 The poject must be cetified by CAVCO and achieve 10/10 points (o the maximum numbe of points appopiate to the poject) as detemined by the CMF using the CAVCO scale. Undelying ights must be owned and be significantly and meaningfully developed by Canadians. The poject must be shot and set pimaily in Canada. (II) Divese Languages Pogam This pogam ensues that Canadians have access to content that eflects the vaiety of languages they speak. Natue of funding Fo television, thee is a mix of licence fee top-ups and equity investments available Fo digital media, funding is in the fom of a nonepayable contibution SUMMARY OF CONVERGENT STREAM PROGRAMS Development Pogam This pogam allocates funding to pojects in the development stage though thee sub-pogams. These pogams suppot Canadian television fom both Fench and English egions of the county as well as in the English and Fench languages. The sub-pogams ae: (I) English Development Envelope This sub-pogam allows the CMF to make contibutions to English language Canadian boadcastes who then choose which development pojects they wish to allocate funds to. Pojects must have eceived a financial commitment fom the boadcaste in question which meets o exceeds a specific amount. This amount is calculated by the CMF. Amount of Contibution Fo the television component the CMF s maximum contibution will be the lesse of: 50% (o 75% fo a Regional Development Poject) of the eligible costs in development; and $200,000 fo big budget seies in all genes, $125,000 fo damatic mini-seies o $100,000 fo all othe eligible types of pogamming. (III) Fench Regional Poject Development Eligibility Requiements Applicants must have thei head-office in the povince of Quebec and be moe than 150 km fom Monteal. This sub-pogam has two segments, the Fench Regional Poject Development and the Fench Regional Poject Pe-Development. To be eligible, pojects must have eceived a financial committment fom a Canadian boadcaste that meets o exceeds a specified minimum amount. Amount of Contibution fo the Fench Regional Poject Development Segment Fo the television component the CMF s maximum contibution will be the lesse of: 65% of the eligible costs in development; and $200,000 fo big budget seies in all genes, $125,000 fo damatic mini-seies o $100,000 fo all othe eligible types of pogamming. Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 50% of the eligible costs in development; and $50,000 Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 50% of the eligible costs in development; and $50,000

20 17 Fench Regional Poject Pe-Development This segment seeks to fund Fench-language Quebec egional pogamming in pe-development that has not yet eceived funding. Eligible applicants may apply with a maximum of two eligible pojects, neithe of which may be a etuning seies, but the maximum contibution is $5000 pe poject. All applicants unde this sub-pogam must include a lette of inteest fom a Canadian boadcaste, but no boadcaste fee is equied. PERFORMANCE ENVELOPE PROGRAM This pogam enables the CMF to allocate funding envelopes to English and Fench boadcastes in an amount which eflects thei histoy of suppoting Canadian Pogamming. Boadcasting companies ae then able to choose which pojects to contibute potions of thei envelope to subject to specified maximum contibution amounts.. Amount of Contibution Fo the television component, the maximum contibution is 49% of the component s eligible costs. Fo the digital media component(s) the maximum contibution is 75% of a component s eligible costs, o $500,000, whicheve is less. Whee thee ae multiple digital media components (e.g., a website, a mobile application, and a game), the $500,000 maximum contibution applies to each eligible component. FRANCOPHONE MINORITY PROGRAM This pogam is designed to encouage the ceation of content on digital platfoms that eflect the ealities of Fench language communities living outside of Quebec. The company must be Canadian and pimaily poducing in the Fench-language outside of Quebec. As it is pat of the convegent pogam, pojects must include distibution on at least two platfoms, one of which must be television. Amount of Contibution Fo the television component the CMF s maximum contibution will be the lesse of: 84% of the eligible costs; and $1,500,000 fo a dama, $550,000 fo a childen s/ youth pogam, $150,000 fo a documentay ($400,000 fo a one-off seies o mini-seies) o $400,000 fo vaiety and pefoming ats poductions. Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 75% of a components eligible costs; and $200,000. Note: The CMF has flexibility unde the Fancophone Minoity Pogam, and its contibution may be lowe o highe than the maximums outlined, depending on whethe funding equests pe pogam gene exceed o fall shot of available esouces fo each gene. Fo moe infomation, visit

21 18 ABORIGINAL PROGRAM This pogam suppots independent aboiginal poduction in Canada. Aboiginal language pojects may also be eligible fo funding. The applicant must be a self declaed Aboiginal peson who owns at least 51% of the poduction company and copyight in the eligible poject. The CMF will solely decide the amount of funding a poject eceives up to a maximum amount. Amount of Contibution Fo the television component the CMF s maximum contibution will be the lesse of: 70% of eligible costs; and $400,000. Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 75% of the eligible costs; and $200,000. ENGLISH PRODUCTION INCENTIVE FUNDING PROGRAM This pogam povides incentives to ensue that poduction occus thoughout all pats of Canada. The pogam may be implemented in pats of the county whee English poduction volumes have deceased moe than 20% below thei five yea aveage. Fo moe infomation on this pogam, visit DIVERSE LANGUAGES PROGRAM FUNDING This pogam suppots independent poduction in languages othe than English, Fench and Aboiginal Languages in ode to eflect the divesity of Canadians. Funding is allocated accoding to a selective pocess using an evaluation gid. Fo moe infomation on this gid and the pogam, visit Amount of Contibution Fo the television component the CMF s maximum contibution will be the lesse of: 50% of eligible costs; and $200,000. Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 75% of eligible costs; and $100,000. ENGLISH POINT-OF-VIEW (POV) PROGRAM FUNDING This pogam encouages the poduction of point-ofview documentaies in the English maket. The pojects must be English-language one-off Auteu Point-of- View/Ceative Documentaies. Pojects pesenting infomation pimaily fo entetainment ae not consideed documentaies fo CMF puposes. Amount of Contibution Fo the television component the CMF s maximum contibution will be the lesse of: 49% of eligible costs; and $300,000. Fo the digital media component(s) the CMF s maximum contibution will be the lesse of: 75% of eligible costs; and $200,000. VERSIONING PROGRAM This pogam stives to incease the each of existing pogamming to Canadians though language vesioning. Eligible pojects ae contibuted to by the CMF on a fist come, fist seved basis. Fo moe infomation on this pogam, visit Fo moe infomation on the Convegent Steam pogams, visit

22 19 Official Teaty Co-Poductions Canada is a paty to co-poduction teaties with moe than 50 counties, 12 which notably exclude the United States. Co-poduction teaties ae designed to assist Canadian poduces and thei countepats in one o moe othe counties to collaboate on a poduction. This pooling of the ceative, technical and financial esouces of both poduces helps to educe the vaious isks of poduction and enhances the ability of the co-poduces to finance and poceed with the poduction. Co-poduction teaties also simplify administative and egulatoy pocedues such that goods and equipment used fo poduction can flow easily between the paticipating counties. When a poduction is made in accodance with a co-poduction teaty, the poduction gains Official Teaty Co- Poduction status. In Canada, the cetification of Official Teaty Co-Poductions is handled by the Co-Poductions office of Telefilm Canada. As an Official Teaty Co-Poduction, the poduction is teated as a national poduction of each co-poducing county and is subsequently eligible fo govenment incentives and tax benefits in both counties on a popotionate basis. In Canada, an Official Teaty Co-poduction should qualify fo teatment as a Canadian Film o Video Poduction fo the puposes of the CPTC and as a Canadian pogam fo the puposes of the CRTC. Fo example, if the Canadian co-poduce is esponsible fo 60% of the co-poduction budget, then 60% of the budget is geneally eligible fo Canadian subsidies and the CPTC. The poduction may also be eligible fo benefits unde povincial pogams, and, as a Canadian pogam, may be able to command highe license fees fom boadcastes. It is impotant to note that these ae geneal ules, and that the level and type of govenment suppot available ae subject to the tems of the paticula teaty and the application of specific povincial ules. Co-poduction ageements geneally specify the minimum financial, ceative and technical paticipation equied by each paty, conditions fo paticipation by thid paties and pocedues fo enty and exit of pesonnel and equipment fom paticipating counties. Such ageements also specify the language of the poduction and the co-poduces, and stipulate that all sevices ae to be povided by nationals of the paticipating counties. In geneal, the poduction must be filmed in one o moe of the co-poduces counties. Howeve, appoval to film in a thid-paty county is occasionally ganted. Appoval may also be obtained to use an acto who is not a national of any of the co-poduces counties. Geneally, co-poduces shae esponsibility fo the exploitation of the completed poduction. Exploitation within a co-poduce s home county is the esponsibility of that poduce and poceeds fom such exploitation geneally belong to that co-poduce. Receipts fom exploitation in othe counties ae usually split between co-poduces in popotion to thei contibutions to the poduction budget. Typically, the copyight is shaed, while domestic use of the copyight is contolled by the espective co-poduces. Fo an intenational co-poduction to gain Official Teaty Co-Poduction status, a co-poduction must be appoved by the Co-Poduction office of Telefilm Canada. The appoval pocess begins when the co-poduction ageement and suppoting mateial ae submitted to Telefilm Canada fo an Advance Ruling. This uling will be ganted if the poduction appeas to comply with all aspects of the elevant co-poduction teaty. If the poduction is financed and made in accodance with the co-poduction ageement, Telefilm Canada will geneally gant Final Appoval. Telefilm s appoval will be communicated to CAVCO fo the puposes of cetification and eligibility fo the CPTC (and othe analogous cedits). Any changes to a poject may esult in the loss of Official Teaty Co-Poduction status. Consequently, all changes ae subject to eview by Telefilm. If Canada is not paty to a co-poduction teaty with a specific county, a Canadian poduce may obtain ad hoc appoval fom Telefilm Canada fo Official Teaty Co-Poduction status. Fo Canadian authoities to gant such appoval it must be shown that Official Teaty Co-Poduction status would be beneficial. Howeve, ad hoc appoval is not ge neally ganted fo a Canada-U.S. co-poduction. 12 Fo a cuent list of co-poduction teaties between Canada and othe counties visit