Manitoba Interactive Digital Media Tax Credit (MIDMTC) Program Guidelines. For questions or assistance regarding the MIDMTC program, please contact:

Transcription

1 Manitba Interactive Digital Media Tax Credit (MIDMTC) Prgram Guidelines Fr questins r assistance regarding the MIDMTC prgram, please cntact: Manitba Jbs and the Ecnmy Science, Innvatin and Business Develpment Divisin (SIBD) Avery Jdin Business Develpment Manager, Interactive Digital Media [email protected] / Laurie Crnell Business Develpment Officer, Interactive Digital Media [email protected] / Guidelines last updated: January 18,

2 TABLE OF CONTENTS 1) WHAT IS THE MANITOBA INTERACTIVE DIGITAL MEDIA TAX CREDIT (MIDMTC)? ) WHAT PROJECTS ARE ELIGIBLE FOR SUPPORT UNDER THE MIDMTC PROGRAM?... 3 Is the applicant cmpany eligible?... 3 Is the prduct being develped eligible?... 4 Are the prject csts being incurred eligible?... 5 What qualifies as eligible labur csts?... 6 What qualifies as eligible marketing and distributin csts? ) HOW DOES GOVERNMENT ASSISTANCE FOR A PROJECT AFFECT ITS MIDMTC CLAIM? Stacking rules Prjects being develped fr a gvernment purchaser ) HOW DOES A COMPANY ACCESS THE MIDMTC PROGRAM? Applying fr a prject estimate sheet: Making a claim fr a MIDMTC tax credit certificate: Submitting a MIDMTC tax credit certificate t the Canada Revenue Agency (CRA): Amendment and revcatin f MIDMTC tax credit certificates: APPENDIX A: The Manitba Interactive Digital Media Tax Credit (MIDMTC) Legislatin APPENDIX B: What des the "sale" requirement mean? APPENDIX C: Hw is a "rich interactive media experience" defined under the MIDMTC prgram? APPENDIX D: When is a prduct cnsidered "primarily prmtinal" in nature? APPENDIX E: The Skills Transfer Allwance (STA) APPENDIX F: Marketing and distributin supprt in the case f c-prductins APPENDIX G: Examples f ptential eligible marketing & distributin csts fr a MIDMTC prject APPENDIX H: The MIDMTC 'grind frmula' APPENDIX I: Stacking rules APPENDIX J: Prjects being develped fr a gvernment purchaser 2

3 1) WHAT IS THE MANITOBA INTERACTIVE DIGITAL MEDIA TAX CREDIT (MIDMTC)? The Manitba Interactive Digital Media Tax Credit (MIDMTC) is a refundable crprate tax credit prgram. Qualifying cmpanies can claim a 40% tax credit n eligible prject csts they incur and pay t develp an eligible interactive digital media prduct in Manitba. The maximum tax credit n an eligible prject is $500,000 (i.e. a maximum f $1,250,000 in eligible prject csts can be claimed per prject x the 40% MIDMTC rate). There is n limit n the number f eligible prjects a qualifying cmpany can have supprted by the MIDMTC prgram. The tax credit is claimed as part f a qualifying cmpany s annual incme tax return (T2) and any refunds are prcessed thrugh the ntice f assessment issued by the Canada Revenue Agency (CRA). The MIDMTC prgram is gverned by legislatin in subsectins 10.5(1) t 10.5(14) f The Incme Tax Act (Manitba): In the event f a discrepancy between the MIDMTC legislatin, these guidelines and/r any ther MIDMTC prgram materials, the legislatin shall prevail. Interested applicants shuld review a cpy f the MIDMTC legislatin, which is prvided as Appendix A. The MIDMTC is als subject t the General Anti-Avidance Rule (GAAR) articulated in Sectin 53.1 f The Incme Tax Act (Manitba). Fr additinal infrmatin n GAAR, cmpanies shuld speak with an accuntant. These guidelines prvide high-level infrmatin n the MIDMTC prgram, its eligibility criteria, and hw the prcesses t apply int the prgram and claim a tax credit wrk. After reviewing these guidelines, cmpanies shuld als review the applicatin & claim instructins fr mre detailed infrmatin n the prgram s applicatin and claim prcesses. It is imprtant t nte that fr an eligible prject t receive MIDMTC supprt, a qualifying cmpany must submit an applicatin fr the prject befre it begins. Additinal infrmatin n this requirement is prvided n page 17. 2) WHAT PROJECTS ARE ELIGIBLE FOR SUPPORT UNDER THE MIDMTC PROGRAM? There are three main criteria that determine whether a prject is eligible fr supprt under the MIDMTC prgram: Is the applicant cmpany eligible? Is the prduct being develped eligible? Are the prject csts being incurred eligible? Each f these three criteria is discussed in detail belw: Is the applicant cmpany eligible? In rder fr a cmpany applying t the MIDMTC prgram (i.e. an applicant cmpany ) t be cnsidered a qualifying crpratin as defined by the MIDMTC legislatin: 1. The applicant cmpany must be incrprated in Canada (either federally r prvincially); 2. The applicant cmpany must nt be exempt frm paying incme tax; 3. At least 25% f the ttal salaries and wages paid by the applicant cmpany ver the duratin f a MIDMTC prject must be paid t emplyees wh are Manitba residents ver the duratin f that prject; and 4. The applicant cmpany must have a permanent establishment in Manitba, which generally means that: It has a fixed place f business in Manitba; It carries n business thrugh an emplyee r agent in Manitba wh has general authrity t cntract fr the cmpany; and It uses substantial machinery r equipment in Manitba. Fr additinal clarificatin n the Canada Revenue Agency s (CRA s) interpretatin f permanent establishments, cmpanies shuld speak with an accuntant. 3

4 Is the prduct being develped eligible? In rder t qualify as an eligible interactive digital media prduct as defined by the MIDMTC legislatin; there are certain things that a prduct must be, and certain things a prduct cannt be. Please nte that whenever the wrd primarily is used in this sectin n prduct eligibility, it is used accrding t the CRA definitin meaning mre than 50%. T qualify as an eligible interactive digital media prduct under the MIDMTC: 1. The prduct must be develped primarily fr sale: T ne r mre purchasers wh deal with the applicant cmpany at arm s length; r T a purchaser wh des nt deal with the applicant cmpany at arm s length, fr resale r licensing t ne r mre persns wh deal with the purchaser and the applicant cmpany at arm s length. It is imprtant t understand hw the MIDMTC administratrs determine whether the sale requirement is met. Cmpanies shuld refer t Appendix B fr clarificatin. 2. The prduct must cnsist f a cmbinatin f digital sftware and data files, which is designed t present infrmatin thrugh sund, images and/r text and prvides users with a rich interactive media experience. It is imprtant t understand hw the MIDMTC administratrs define a rich interactive media experience. Cmpanies shuld refer t Appendix C fr clarificatin. 3. The prduct must be designed primarily t educate, infrm r entertain the user. 4. The prduct cannt be designed t be used primarily fr interpersnal cmmunicatin. 5. The prduct cannt be designed t be used primarily fr marketing r prmting an entity, prduct r idea (which includes prducts with a specific crprate/industrial and mainly prmtinal fcus). This means that prducts which the MIDMTC administratrs cnsider t be primarily prmtinal in nature will nt qualify. It is imprtant t understand hw the MIDMTC administratrs determine whether a prduct will be cnsidered primarily prmtinal in nature. Cmpanies shuld refer t Appendix D fr clarificatin. 6. The prduct cannt be perating system sftware. Enterprise sftware and sme types f sftware platfrms are als generally excluded. 7. In the case f a vide game, the prduct cannt be classified by the Entertainment Sftware Rating Bard (ESRB) Ratings Guide as AO (adults nly). In the case f any ther type f interactive digital media prduct, the prduct cannt be targeted t adults nly r cntain adult cntent. The ESRB Ratings Guide is available at: 8. The prduct cannt cntain hate prpaganda, child prngraphy, r be deemed t be bscene under the Criminal Cde (Canada). 9. The prduct cannt in the pinin f the Minister f Jbs and the Ecnmy be a prduct it wuld be cntrary t public plicy t supprt with public funds. Sme additinal ntes regarding eligible prducts: Eligibility f new versins f prducts: If a cmpany develped a first versin f an interactive digital media prduct (regardless f whether r nt it made a MIDMTC claim fr that prject), the cmpany culd be eligible t apply r reapply t the MIDMTC prgram fr the develpment f subsequent versins f that prduct. In rder t qualify fr MIDMTC supprt fr new versins f a prduct, the fllwing criteria must be met: The new versin f the prduct must qualify as an eligible interactive digital media prduct as defined by the MIDMTC, and the cmpany/prject must meet all the ther eligibility criteria f the prgram. 4

5 The new versin f the prduct must cntain substantially (i.e. 80% r mre) new, interactive cntent that was nt in the previus versin(s) f the prduct (e.g. new levels in a vide game, new interactive functinality in an e-learning prduct, new interactive features in an app, etc.). If the cmpany is develping a new versin f the prduct fr a different platfrm (e.g. creating a new Andrid versin f an existing ios app) the requirement fr 80% new, interactive cntent still applies. The MIDMTC claim(s) fr the new versin f the prduct can nly include eligible prject csts incurred and paid in the develpment f the new cntent. N prir prject csts that were incurred in the develpment f the previus versin(s) f the prduct can be part f the claim(s). Eligibility f cnvergent prducts: Increasingly, interactive digital media prducts are being develped fr a number f ther industry verticals (e.g. driving simulatrs fr the transprtatin industry, health care apps fr the medical industry, vide games fr a film r TV prject, etc.). These prducts can qualify fr MIDMTC supprt prvided they meet the eligibility criteria f the prgram, and cmpanies wuld apply using the same frms and prcesses as fr any ther MIDMTC prject. In the case f a cnvergent interactive digital media prduct that is being develped in cnjunctin with a film r vide prject, it is pssible fr a cmpany t apply fr supprt under bth the MIDMTC and the Manitba Film and Vide Prductin Tax Credit (MFVPTC). It is imprtant t nte, hwever, that nly eligible prject csts assciated with the linear (i.e. film/vide) cmpnent f the prject may be claimed under the MFVPTC, and nly eligible prject csts assciated with the interactive cmpnent f the prject may be claimed under the MIDMTC. Each eligible prject cst must nly be claimed nce (i.e. twards the MFVPTC r MIDMTC n duble cunting), and the cmpany must apply separately int each f the tw prgrams in rder t access supprt. If a cmpany with a cnvergent prject will be applying t bth the MIDMTC and MFVPTC fr supprt, it will have t identify that a MFVPTC claim is being made in its MIDMTC applicatin. The MIDMTC applicatin & claim instructins prvide mre infrmatin n this requirement. Eligibility f prducts develped in Manitba and ther lcatins: If an eligible interactive digital media prduct is develped partly in Manitba and partly in ther lcatins, the eligible part(s) f the prject that are undertaken in Manitba can ptentially qualify fr MIDMTC supprt. Fr example, if the majrity f develpment f a new vide game was undertaken in Manitba, but sme f the prgramming and quality assurance testing fr the game was undertaken elsewhere, a cmpany culd apply fr MIDMTC supprt fr the eligible develpment wrk that was undertaken in ur prvince. Bth the applicant cmpany and the vide game being develped wuld need t meet the eligibility criteria f the MIDMTC, and the cmpany wuld need t apply int the prgram befre any wrk n the prject began. Nte that when a prduct is develped partly in Manitba and partly in ther lcatin(s), the type(s) f develpment wrk undertaken in Manitba may play a rle in determining whether the prject can access MIDMTC supprt. Interested applicants shuld speak t the MIDMTC administratrs fr guidance. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. Are the prject csts being incurred eligible? Under the MIDMTC prgram, an eligible cmpany that is develping an eligible interactive digital media prduct can claim eligible labur csts and (in sme cases) eligible marketing and distributin csts that it incurred and paid as part f the prject. Thrughut these guidelines, yu will ntice a number f terms that sund similar, but are in fact very different (i.e. terms like: ttal prject csts, eligible prject csts, eligible labur csts, etc.). The diagram belw helps t explain hw the varius terms are different; and thrughut the rest f this dcument, the terms appear in clur the same way they d in the diagram belw. Be sure that as yu are reading these guidelines (and especially the sectin belw) yu pay attentin t the specific term being used. If yu are unclear, refer back t this diagram r cntact ne f the MIDMTC administratrs fr assistance. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. 5

6 What qualifies as eligible labur csts? Labur csts must meet a number f criteria in rder t be cnsidered eligible labur csts as defined by the MIDMTC legislatin. The MIDMTC administratrs will be respnsible fr determining whether specific labur csts incurred and paid by a cmpany will be cnsidered eligible labur csts that can be claimed fr MIDMTC supprt. Decisins will be made by the MIDMTC administratrs n a case-by-case basis, and they can request that a cmpany submit any supprting dcumentatin they deem necessary in rder t make a determinatin regarding the labur csts that the cmpany wishes t claim. Once a decisin has been made by the MIDMTC administratrs, it cannt be appealed by the cmpany. Specific labur csts that an applicant cmpany incurs and pays must meet the fllwing criteria in rder t be cnsidered eligible labur csts under the MIDMTC prgram: 1. The labur csts must be directly attributable t develpment f the eligible interactive digital media prduct. Develpment is interpreted by the MIDMTC administratrs as the varius stages f prductin undertaken t cmplete the first cmmercial versin f the prduct (e.g. stages such as: prduct design, prductin and testing). This ften means that develpment includes the stages up t but nt including prduct launch. Fr prducts that launch at a beta stage, with additinal develpment then undertaken t cmplete the prduct based n the beta stage results, that additinal develpment labur can ptentially qualify as eligible labur csts. Fr prducts where the final stages f develpment verlap with the initial stages f launch, thse final stages f develpment can ptentially qualify as eligible labur csts. Fr example, if an eligible interactive website launches with a series f interactive webisdes which require additinal real-time develpment wrk based n users input then that final develpment wrk undertaken befre the interactive website is fully cmmercialized can ptentially qualify as eligible labur csts. Hwever, fr prducts that require nging ptimizatin, versining, debugging, trubleshting, mderatin, supprt, r develpment nce the prduct has been cmpleted r launched; nne f that additinal wrk will qualify as eligible labur csts. Where develpment wrk n a prduct will be cnsidered t end (fr the purpses f a MIDMTC claim) is determined by the MIDMTC administratrs n a case-by-case basis. Cmpanies wh have questins abut what will be cnsidered part f develpment labur fr a specific prject they are undertaking shuld cntact the MIDMTC prgram administratrs fr guidance. Labur csts that are nt directly attributable t develpment f the eligible prduct are cnsidered ineligible labur csts and will nt qualify fr MIDMTC supprt. Examples f ineligible labur csts include: Administrative, legal, accunting, bkkeeping, payrll, business develpment, r management labur ther than prject management labur that is specific t managing the develpment (i.e. creatin) f the eligible prduct. Labur related t marketing, distributin and/r prmtin (thugh fr certain types f prjects, this labur can be claimed as eligible marketing and distributin csts). Mre infrmatin n eligible marketing and distributin csts is prvided n page 11). Labur fr ptimizatin, versining, debugging, trubleshting, mderatin, ther develpment r supprt nce the prduct has been cmpleted r launched (as described abve). Labur t develp prject prpsals: fr funding prgrams (including the MIDMTC), fr interim financing, fr RFPs/ptential cntract purchasers, etc. Additinally, if a prject will include the develpment f bth interactive digital media sftware, as well as assciated hardware/firmware (e.g. that the sftware runs n), nly the labur fr develpment f the interactive digital media sftware will be cnsidered eligible under the MIDMTC prgram. There are ther funding prgrams that can ptentially be accessed t help supprt the develpment f the hardware/firmware. Interested cmpanies can cntact the MIDMTC administratrs fr guidance. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. 2. The labur csts must be reasnable in the circumstances and fall within industry standards. The MIDMTC administratrs will review labur csts incurred and paid by the applicant cmpany t assess whether they appear reasnable (e.g. des the cst f the labur seem apprpriate given the cmplexity/amunt f the specific wrk t be dne?). 6

7 The MIDMTC administratrs will als assess whether labur rates fall within acceptable industry standards. In making this assessment, the MIDMTC administratrs may cnsult infrmatin regarding average interactive digital media salaries in Manitba/Canada (such as data frm the 2012 New Media Census r 2012 Canadian Interactive Industry Prfile). Additinally, if the MIDMTC administratrs determine that supprt fr a certain type f labur is cntrary t public plicy t supprt with public funds, then the MIDMTC administratrs can cnsider that labur cst t be unreasnable in the circumstances and ineligible t be claimed. 3. The labur csts must be incurred and paid within the prject perid, and the prject perid cannt exceed a tw year timeframe. The prject perid is the time between the start date and end date f a MIDMTC prject (called the cmmencement date and cmpletin date in the MIDMTC legislatin). The start date (r cmmencement date) is the first day that the cmpany incurs an eligible labur cst n the prject. This will nrmally be when the cmpany begins develpment wrk n the prduct. The end date (r cmpletin date) is the last day that the cmpany incurs/pays an eligible labur cst n the prject. This will nrmally be when the cmpany finishes develpment wrk n the first cmmercial versin f the prduct, and it is ready fr launch. It is imprtant t highlight the fact that the prject perid (i.e. the prject start date t end date) is calculated based n prduct develpment timelines (i.e. eligible labur csts). Fr prjects that can claim eligible marketing and distributin csts, thse csts are never used t determine the prject start and end dates. Eligible marketing and distributin csts must fall within the prject perid (as defined by eligible labur csts) r within 12 mnths fllwing the prject end date. Since MIDMTC claims are made at the end f each crprate tax year; shuld a prject perid exceed tw years, the MIDMTC administratrs will cap the cmpany s final claim fr that prject by cunting frward tw years frm the prject start date that was established in the cmpany s first interim claim fr the prject. As an example: A cmpany with an eligible MIDMTC prject incurred and paid eligible labur csts frm May 31, 2011 t June 30, 2013 (exceeding the MIDMTC s tw year limit). The cmpany s crprate tax year-end is Nvember 30 th. Over the curse f the prject, the cmpany wuld therefre have made: Its 1 st interim claim at the end f its 2011 crprate tax year (cvering eligible labur csts frm the May 31, 2011 prject start date t Nvember 30, 2011) Its 2 nd interim claim at the end f its 2012 crprate tax year (cvering eligible labur csts frm December 1, 2011 t Nvember 30, 2012) The cmpany wuld make its final claim fr the prject at the end f its 2013 crprate tax year. The MIDMTC administratrs wuld apply the cap by ensuring that the final claim nly cvered eligible labur csts frm December 1, 2012 t the May 31, 2013 tw year cap date. 7

8 Additinally, eligible labur csts must be bth incurred and paid during the prject perid in rder t qualify as part f a MIDMTC claim. As such: any labur perfrmed during the prject perid but paid either befre the prject start date r after the prject end date (e.g. a deferral) is nt eligible t be claimed; and any labur perfrmed befre the prject start date r after the prject end date but paid during the prject perid is nt eligible t be claimed 4. The labur must be perfrmed by individuals wh are Manitba residents during the prject perid, with the exceptin f nn-manitba residents wh are pre-apprved under the Skills Transfer Allwance (STA). Under the MIDMTC prgram, develpment labur must be perfrmed by a Manitba resident in rder t qualify as an eligible labur cst that can be claimed. This rule applies t emplyees f the applicant cmpany, as well as all 3 rd party cntractrs that the applicant cmpany hires t perfrm develpment wrk n the prject (regardless f whether they are individual 3 rd party cntractrs r emplyees f a 3 rd party cmpany). a) Fr emplyees f the applicant cmpany: The MIDMTC administratrs will verify whether each individual emplyee filed his/her persnal incme tax as a Manitban fr the calendar year befre, r the calendar year f, the MIDMTC claim being made. Fr example, if an applicant cmpany has a crprate tax year end f December 31 st, and is claiming eligible labur csts its emplyees incurred and were paid ver the cmpany s 2014 crprate tax year (ending Dec. 31, 2014), then the MIDMTC administratrs will verify that each f the emplyees filed his/her persnal incme tax fr 2014 r 2013 as a Manitban. If the MIDMTC administratrs cannt verify an emplyee s residency based n his/her persnal incme tax filing (e.g. if the individual did nt yet file an incme tax return with CRA), then the MIDMTC administratrs may accept ther dcumentatin t prve an individual s Manitba residency. In these cases, the individual wuld need t prvide cpies f at least tw f the fllwing dcuments fr verificatin (each f which must shw the individual s name and hme address): A Manitba driver s licence; A vehicle registratin card; A recent utility bill; A residential lease; A bank statement r cleared/vided cheque; r A Manitba Health Card. Each emplyee will als be required t sign an emplyee declaratin frm t attest t his/her Manitba residency and the wrk he/she perfrmed n the prject. Mre infrmatin abut this frm is prvided in the MIDMTC applicatin & claim instructins. b) Fr 3rd party cntractrs: In any case where an applicant cmpany hires a 3 rd party cntractr t perfrm eligible labur csts n a prject, the 3 rd party cntractr must be willing t sign a 3 rd party declaratin frm t attest t the wrk that was perfrmed, and that it was perfrmed by a Manitba resident (i.e. in the case f an individual 3 rd party cntractr, that he/she is a Manitba resident; r in the case f a 3 rd party cmpany, that its emplyee(s) wh wrked n the prject are Manitba residents). Given this requirement, if an applicant cmpany is planning t hire 3 rd party cntractrs t perfrm sme f the eligible labur csts n a prject, it shuld cnfirm in advance that the individual(s) wh will be perfrming the labur in questin will be Manitba residents, and that the cntractr/cmpany will be willing t prvide a signed 3 rd party declaratin frm t that effect. Mre infrmatin abut this frm is prvided in the MIDMTC applicatin & claim instructins. As nted abve, there is the ptential fr an applicant cmpany t claim eligible labur csts incurred by a nn-manitba resident but nly if there were n Manitba residents wh were qualified, able and willing t perfrm that labur; and nly if the nn-manitba resident was apprved under the Skills Transfer Allwance (STA) befre the prject began. Detailed infrmatin n the STA criteria and apprval prcess is prvided in Appendix E. It is imprtant t clarify that the MIDMTC prgram des nt prevent cmpanies frm hiring nn-manitba residents (r 3 rd party cmpanies based utside the prvince) t wrk n prjects fr which they will be making a MIDMTC claim. Any number f nn-manitba residents can be wrking n a MIDMTC prject the applicant cmpany simply wn t be able t claim their labur unless thse individuals were pre-apprved under the STA. 8

9 5. The labur csts must be cunted twards the cmpany s MIDMTC claim accrding t the fllwing rates: A 100% f eligible salaries/wages that the applicant cmpany paid t its emplyees, fr eligible labur csts thse emplyees incurred n the prject. B 65% f eligible fees that the applicant cmpany paid t 3 rd party cntractrs, fr eligible labur csts thse 3 rd party cntractrs incurred n the prject. C 100% f eligible salaries/wages r 65% f eligible fees that the applicant cmpany paid t nn- Manitba residents wh were apprved under the Skills Transfer Allwance (STA), fr eligible labur csts thse individuals incurred while wrking in Manitba n the prject. As nted abve, each nn-manitba resident must have been pre-apprved under the STA and meet all the STA criteria utlined in Appendix E. Prvided thse requirements are met, if the nn- resident was: Hired as an emplyee f the applicant cmpany fr the duratin f his/her wrk in Manitba n the prject, then the 100% f eligible salary/wages rate fr his/her eligible labur csts applies. Hired as a 3 rd party cntractr fr the duratin f his/her wrk in Manitba n the prject, then the 65% f eligible fees rate fr his/her eligible labur csts applies. Additinally, the ttal ($) amunt f eligible labur csts that the applicant cmpany can claim fr nn-manitba residents wh were pre-apprved under the STA cannt exceed 20% f the ttal ($) amunt f eligible labur csts that the applicant cmpany is claiming fr emplyees and 3 rd party cntractrs wh are Manitba residents i.e.: C [(A + B) x 20%] As an example, if a cmpany paid $100,000 fr eligible labur csts incurred by its emplyees (wh are Manitba residents), $75,000 fr eligible labur csts incurred by a 3 rd party cntractr it hired (wh is a Manitba resident), and $70,000 fr eligible labur csts incurred by a nn-manitba resident wh was pre-apprved under the Skills Transfer Allwance and hired by the applicant cmpany as a 3 rd party cntractr fr the wrk she perfrmed in Manitba n the prject; then thse eligible labur csts wuld be cunted twards the cmpany s MIDMTC claim fr the prject at the fllwing rates: $100,000 x 100% = $100,000 $75,000 x 65% = $48,750 $70,000 x 65% = $45,500* * Since the maximum amunt f eligible labur csts that can be claimed fr the nn-manitba resident is $29,750 (i.e. [($100,000 + $48,570) x 20%] = $29,750), the $45,500 in eligible labur csts incurred by the nn-manitba resident must be capped at $29,750 in the cmpany s MIDMTC claim fr the prject: $100,000 + $48,750 + $29,750 = $178,500 in ttal eligible labur csts ( x 40% MIDMTC rate) It is imprtant t understand hw the MIDMTC differentiates emplyees frm 3 rd party cntractrs particularly when tw r mre cmpanies wh d nt deal with each ther at arm s length (e.g. a parent cmpany and its subsidiary) each have MIDMTC prjects that were active ver all r a prtin f a given tax year. An emplyee f the applicant cmpany is generally smene that receives a paycheque frm the applicant cmpany, and will receive a T4 frm the applicant cmpany at the end f the year. A 3 rd party cntractr is generally an individual, cmpany r partnership that invices the applicant cmpany fr the wrk they perfrm n the prject (i.e. des nt receive a paycheque r T4 frm the applicant cmpany and is nt n the cmpany s staff). If tw r mre cmpanies wh d nt deal with each ther at arm s length (e.g. a parent cmpany and its subsidiary) each have MIDMTC prjects that were active ver all r part f a given tax year and each f thse cmpanies are claiming eligible labur csts incurred by a specific individual (e.g. an emplyee f the parent cmpany that als perfrmed wrk n the subsidiary s prject) then nly the cmpany that paid that individual s salary/wages can claim his/her labur at the 100% emplyee rate. If the ther nn-arm s length cmpany did nt pay that individual s salary/wages, then it must claim his/her labur at the 65% 3 rd party rate. The nly exceptin t this rule is if bth nn-arm s length cmpanies pay the individual a separate salary/wage fr the wrk that he/she perfrms fr each f their cmpanies. In this case, the MIDMTC administratrs will verify that the eligible labur csts each cmpany is claiming fr that individual at the 100% emplyee rate d nt exceed the ttal eligible salary/wages that that same cmpany paid the individual ver the crprate tax year. 9

10 6. The labur csts can nly include eligible prtins f emplyee salaries/wages and 3 rd party cntractr fees. When an applicant cmpany is calculating its eligible labur csts fr a prject, it may nly be able t cunt certain prtins f the salaries/wages it paid its emplyees fr their eligible develpment wrk n the prduct; and nly certain prtins f the ttal fees it paid t 3 rd party cntractrs fr their eligible develpment wrk n the prduct. a) Fr emplyees: Once an emplyee s earnings/incme amunt is calculated fr a given pay perid (based n his/her hurly rate f pay), there are ($) amunts that may be added r subtracted t arrive at the net amunt f pay that the emplyee ultimately receives fr that pay perid. Sme f thse ($) amunts can be included in the eligible salary/wage number that the applicant cmpany uses when it calculates eligible labur csts the emplyee incurred n a given MIDMTC prject fr that pay perid, but sme f thse ($) amunts cannt be included. The eligible prtin f an emplyee s salary/wages cnsists f: The emplyee s earnings/incme, which must be based n his/her hurly rate f pay. The Canada Pensin Plan (CPP), Emplyment Insurance (EI) and incme tax cntributins that are payable by the emplyee i.e. that are deductins n his/her paycheques. (Nte that the prtin f CPP and EI cntributins that are payable by the cmpany cannt be included in the eligible prtin f the emplyee s salary/wages see belw). Benefits which are taxable t the emplyee, including vacatin pay and emplyer cntributins t a RRSP. The fllwing cannt be included as eligible prtins f an emplyee s salary/wages: Salary, wages r fees determined by reference t prfits r revenues. Stck ptins, signing bnuses, r ther emplyment incentives. The prtin f CPP and EI cntributins that are payable by the cmpany (i.e. the emplyer). Benefits paid by the emplyer which are nt taxable t the emplyee. b) Fr 3 rd party cntractrs: When a 3 rd party cntractr invices the applicant cmpany fr eligible develpment wrk that it perfrmed n a prject, the invice may include GST charges. Thse GST charges cannt be included as an eligible prtin f the 3 rd party fees that the applicant cmpany will be claiming as eligible labur csts fr the prject. Obviusly, the applicant cmpany als cannt include any prtin f the 3 rd party fees (i.e. csts n the invice) that were nt related t eligible develpment wrk n the MIDMTC prject. 7. The labur csts are subject t n duble cunting rules, and MIDMTC supprt fr eligible labur csts will be reduced by ther amunt(s) f gvernment assistance that are used t supprt thse csts. The MIDMTC s n duble cunting rules mean that: If a specific MIDMTC prject qualifies fr marketing & distributin supprt, then a claimable labur cst fr that prject will either qualify as develpment (i.e. an eligible labur cst) r marketing/distributin (i.e. an eligible marketing and distributin cst), but nt bth. An eligible labur cst cannt be claimed twards mre than ne MIDMTC prject. If a labur cst is being claimed twards anther Manitba crprate tax credit, it cannt be claimed as an eligible labur cst fr MIDMTC supprt. As an exceptin t this rule (in rder t encurage the hiring f qualified students and recent graduates) a labur cst being claimed twards the Manitba C-p Educatin and Apprenticeship Tax Credits (which are nw called the Paid Wrk Experience Tax Credits) can als be claimed as an eligible labur cst fr MIDMTC supprt. If a labur cst is being claimed twards a crprate tax credit in anther Canadian prvince r territry, it cannt be claimed as an eligible labur cst fr MIDMTC supprt. Subject t certain rules, a cmpany can claim an eligible labur cst fr MIDMTC supprt and include that same cst in its claim fr a federal SR&ED credit (prvided the cst wuld be cnsidered eligible under that prgram as well). Please refer t page 15 fr detailed infrmatin n hw MIDMTC supprt is affected when ther surces f gvernment assistance are being accessed fr a prject (e.g. ther grant prgrams, Manitba tax credits, SR&ED, etc.). 10

11 What qualifies as eligible marketing and distributin csts? As nted abve, marketing and distributin supprt can nly be accessed fr certain types f MIDMTC prjects: First, the applicant cmpany must be undertaking an eligible MIDMTC prject where it will be claiming all r substantially all (i.e. 80% r mre) f the eligible labur csts being incurred t develp an eligible interactive digital media prduct. This means that a cmpany cannt apply nly fr marketing and distributin supprt if it will nt be accessing an acceptable level f develpment supprt fr the prject. Secnd, the applicant cmpany cannt be undertaking a fee-fr-service prject where it is develping the prduct under the terms f an agreement with an arm s length purchaser (i.e. the develped under cntract scenari that is utlined in Appendix B). This means that an eligible MIDMTC prject will generally nly qualify fr marketing and distributin supprt if the applicant cmpany is develping and cmmercializing its wn prduct (i.e. the develped independently scenari in Appendix B), r if the applicant cmpany is a whllywned subsidiary develping a prduct that its parent cmpany will be cmmercializing (prvided that the parent cmpany will nt be selling the prduct under cntract r t nn-arm s length purchaser(s)). An eligible MIDMTC prject culd als qualify fr marketing and distributin supprt if the prduct is being develped and cmmercialized under the terms f a c-prductin agreement between the applicant cmpany and ne r mre arm s length partner(s), and the applicant cmpany is deemed t have an acceptable wnership/revenue stake in the prject. The decisin as t whether r nt a prject f this type will qualify is made by the MIDMTC administratrs n a case-by-case basis, and is explained in greater detail in Appendix F. If a given prject des qualify fr marketing and distributin supprt, the MIDMTC administratrs will be respnsible fr determining whether specific marketing and/r distributins csts incurred and paid by the cmpany will be cnsidered eligible marketing and distributin csts as defined by the MIDMTC legislatin. Decisins will be made by the MIDMTC administratrs n a case-by-case basis, and they can request that a cmpany submit any supprting dcumentatin r ther prf they deem necessary in rder t make a determinatin regarding the marketing r distributin csts that the cmpany wishes t claim. Once a decisin has been made by the MIDMTC administratrs, it cannt be appealed by the cmpany. Specific marketing and distributin csts that an applicant cmpany incurs and pays must meet the fllwing criteria in rder t be cnsidered eligible marketing and distributin csts under the MIDMTC prgram: 1. The marketing and distributin csts must be directly attributable t advertising r prmting the eligible prduct, r distributing the eligible prduct t custmers r ptential custmers. In rder t claim an eligible marketing and distributin cst fr a MIDMTC prject, the applicant cmpany must be able t prve that the cst was incurred and paid t market, prmte r distribute the specific prduct that was (r is being) develped under that MIDMTC prject (i.e. the MIDMTCeligible prduct). If the cst is nt exclusive t that specific prduct, but is still directly attributable t it in part, then the MIDMTC administratrs may allw a prprtinal amunt f the cst t be claimed. If, hwever, the cst is nly attributable t the cmpany r its prducts/services/capabilities in general and isn t directly attributable t the MIDMTC-eligible prduct t any meaningful degree then the MIDMTC administratrs will nt allw the cst t be claimed. Fr example: A cmpany is develping a vide game, and the prduct has been deemed eligible fr MIDMTC supprt. The cmpany pays t design a banner ad t prmte the vide game. If the cmpany can shw that the ad design nly prmted that specific vide game (and nt ther prducts as well, r just the cmpany in general), then the design csts culd qualify as eligible marketing and distributin csts fr the MIDMTC prject. A cmpany is develping three new vide games, and ne f thse prducts has been deemed eligible fr MIDMTC supprt. The cmpany pays a number f csts t attend a game develpment trade shw. Unless the cmpany can shw that all f its time at the trade shw was devted nly t prmting the MIDMTC-eligible prduct, the MIDMTC administratrs will likely assess that the cmpany attended the trade shw t prmte its varius prducts under develpment (and perhaps even its cmpany in general). The MIDMTC administratrs will cnsider whether a definable amunt f the cmpany s time at the trade shw can be reasnably attributed t prmting the MIDMTC-eligible prduct; and based n that assessment, the MIDMTC administratrs may allw a prprtinal amunt (i.e. percentage) f the trade shw csts t qualify as eligible marketing and distributin csts fr the cmpany s MIDMTC prject. A cmpany is develping a vide game, and the prduct has been deemed eligible fr MIDMTC supprt. The cmpany pays t cmpletely re-design its crprate website. Since the csts fr the new website are nt directly attributable t the MIDMTC-eligible prduct, even in part (i.e. they prmte the cmpany and its capabilities in general), thse csts will nt qualify fr MIDMTC supprt. 11

12 It is imprtant fr cmpanies t understand hw they prve that a specific marketing r distributin cst they wish t claim is directly attributable t a MIDMTC-eligible prduct (either in whle r in part). Cmpanies shuld refer t the applicatin & claim instructins fr this infrmatin, and fr full details n hw t prepare a MIDMTC claim submissin. In all cases, hwever, it is the MIDMTC administratrs wh will review the prf that the cmpany submits, in rder t decide whether the specific marketing r distributin cst will ultimately be cnsidered directly attributable t the MIDMTC-eligible prduct in whle r in part (and whether all, a prtin, r nne f the cst will be claimable as an eligible marketing and distributin cst as a result). 2. The marketing and distributin csts must be reasnable in the circumstances and fall within industry standards. The MIDMTC administratrs will review marketing and distributin csts incurred and paid by the applicant cmpany t assess whether they appear reasnable; and will als assess whether rates fr any marketing and/r distributin labur csts fall within acceptable industry standards. Generally, a specific marketing r distributin cst must als be ver $50 t be included in a MIDMTC claim. Additinally, if the MIDMTC administratrs determine that supprt fr a certain type f marketing r distributin cst is cntrary t public plicy t supprt with public funds, then the MIDMTC administratrs can cnsider that cst t be unreasnable in the circumstances and ineligible t be claimed. 3. The marketing and distributin csts must be incurred and paid by the applicant cmpany within the prject perid r within 12 mnths after the prject end date. As nted n page 7 abve, the prject perid (i.e. the prject start date t end date) is calculated based n prduct develpment timelines (i.e. eligible labur csts) and cannt exceed a tw year timeframe. Eligible marketing and distributin csts must fall within the prject perid r within 12 mnths after the prject end date. Additinally, eligible marketing and distributin csts must be bth incurred and paid during the prject perid r within 12 mnths after the prject end date in rder t qualify as part f a MIDMTC claim. Any marketing and/r distributin csts incurred during that timeframe but paid either befre r after it are nt eligible t be claimed. Similarly, any marketing and/r distributin csts incurred befre r after that timeframe but paid during it are nt eligible t be claimed. Finally, since the MIDMTC prgram was enhanced t include marketing and distributin eligibility in 2013, nly qualifying MIDMTC prjects with prject start dates that fall after December 31, 2012 can claim eligible marketing and distributin csts. 4. The marketing and distributin csts can be labur r nn-labur, and can be incurred in Manitba r elsewhere, but they must have been paid by the applicant cmpany. In cntrast t the criteria fr eligible labur csts, marketing and distributin csts d nt have t be labur nr d they have t be incurred in Manitba r by a Manitban in rder t ptentially qualify as eligible marketing and distributin csts. They must hwever, meet all f the criteria utlined in these guidelines and in the MIDMTC legislatin in rder t qualify. Regardless f the type f marketing r distributin cst that is incurred, hwever, the cst must be paid by the applicant cmpany in rder fr that cmpany t claim it as an eligible marketing and distributin cst fr MIDMTC supprt. A marketing r distributin cst paid by anther individual, entity r grup cannt be claimed as an eligible marketing and distributin cst by the applicant cmpany. Examples f different types f eligible marketing and distributin csts are prvided in Appendix G alng with infrmatin n additinal eligibility criteria that the MIDMTC prgram enfrces fr certain types f marketing and distributin csts in particular. 5. The marketing and distributin csts must nt relate directly t prcessing an rder by, r shipping an eligible prduct t, a cnsumer wh purchased the eligible prduct directly frm the cmpany. 12

13 6. Marketing and distributin labur csts can nly include eligible prtins f emplyee salaries/wages r 3 rd party cntractr fees. Nn-labur marketing and distributin csts can nly include eligible prtins f the payment the applicant cmpany made fr the gds/services. As is the case fr eligible labur csts, when an applicant cmpany is calculating its eligible marketing and distributin csts fr a prject, it may nly be able t cunt certain prtins f the salaries, wages r fees it paid fr eligible marketing and/r distributin labur; and nly certain prtins f the csts it paid fr eligible, nn-labur marketing and/r distributin gds/services. a) Fr marketing r distributin labur csts: If the eligible marketing r distributin wrk was perfrmed by an emplyee f the applicant cmpany, the eligible prtin f that emplyee s salary/wages (that the applicant cmpany will use when it calculates the eligible marketing and distributin csts that the emplyee incurred n the prject) is defined using the same criteria as the MIDMTC enfrces fr eligible labur csts i.e.: The eligible prtin f an emplyee s salary/wages cnsists f: The emplyee s earnings/incme, which must be based n his/her hurly rate f pay. The Canada Pensin Plan (CPP), Emplyment Insurance (EI) and incme tax cntributins that are payable by the emplyee i.e. that are deductins n his/her paycheques. (Nte that the prtin f CPP and EI cntributins that are payable by the cmpany cannt be included in the eligible prtin f the emplyee s salary/wages see belw). Benefits which are taxable t the emplyee, including vacatin pay and emplyer cntributins t a RRSP. The fllwing cannt be included as eligible prtins f an emplyee s salary/wages: Salary, wages r fees determined by reference t prfits r revenues. Stck ptins, signing bnuses, r ther emplyment incentives. The prtin f CPP and EI cntributins that are payable by the cmpany (i.e. the emplyer). Benefits paid by the emplyer which are nt taxable t the emplyee. If the eligible marketing r distributin wrk was perfrmed by a 3 rd party cntractr that the applicant cmpany hired, the invice that the 3 rd party cntractr/cmpany submitted t the applicant cmpany fr payment may have included GST, HST r ther sales tax(es). Thse charges cannt be included as an eligible prtin f the 3 rd party fees the applicant cmpany will be claiming as eligible marketing and distributin csts fr the prject. Obviusly, the applicant cmpany als cannt include any prtin f the 3 rd party fees (i.e. csts n the invice) that were nt related t eligible marketing r distributin wrk n the MIDMTC prject. b) Fr nn-labur marketing and distributin csts: If the payment fr an eligible, nn-labur marketing r distributin cst included GST, HST r ther sales tax(es), thse charges cannt be included as part f that eligible marketing and distributin cst fr the prject. Obviusly, if a given payment included charges fr bth an eligible marketing and distributin cst and ther, ineligible cst(s); the applicant cmpany can nly include the prtin f the payment that was specific t the eligible marketing and distributin cst in its MIDMTC claim. 7. The marketing and distributin csts are cunted twards the applicant cmpany s MIDMTC claim at 100% f the eligible csts that were incurred and paid by the cmpany with the exceptin f marketing csts that are meals r entertainment (which are cunted at 50%). This 100% cunt rate applies regardless f whether the eligible marketing and distributin csts are labur r nn-labur; incurred in Manitba r elsewhere; and (in the case f marketing/distributin labur), regardless f whether the wrk was perfrmed by emplyees f the applicant cmpany r 3 rd party cntractrs; Manitba residents r nn-manitba residents. As nted abve, the nly exceptin t the 100% cunt rate is fr eligible marketing and distributin csts fr meals r entertainment, which are cunted at 50%. Nte that alchl is nt eligible t be claimed as part f meals r entertainment (r as part f any ther eligible marketing r distributin cst). 13

14 As an example: A cmpany is develping a new mbile app, and the prduct has been deemed eligible fr MIDMTC supprt. As part f its app develpment prject, the cmpany paid: - $20,000 t hire a New Yrk marketing firm t develp a marketing strategy fr the app s launch; - $5,000 t pst banner ads that prmted the new app nline; - $2,000 t its emplyees, fr wrk they perfrmed t design the banner ads; and - $200 in meal csts (excluding alchl) fr a dinner meeting in New Yrk that was held t discuss a ptential distributin deal fr the prduct. Thse eligible marketing and distributin csts wuld be cunted twards the cmpany s MIDMTC claim fr the prject at the fllwing rates: $20,000 x 100% = $20,000 $5,000 x 100% = $5,000 $2,000 x 100% = $2,000 $200 x 50% = $100 = $27,100 in ttal eligible marketing & distributin csts ( x 40% MIDMTC rate) 8. The eligible marketing and distributin csts being claimed cannt exceed $100,000. Fr any MIDMTC prject that qualifies fr marketing and distributin supprt, the applicant cmpany may nly claim the eligible marketing and distributin csts that it incurred and paid n the prject (which is determined based n the criteria abve). Shuld thse eligible marketing and distributin csts exceed $100,000; hwever, the amunt f eligible marketing and distributin csts that the cmpany can claim fr the prject will be capped at $100,000. As such: If a cmpany pursuing an eligible MIDMTC prject incurs and pays $45,000 in eligible marketing and distributin csts, it will be able t claim $45,000 ( x 40% MIDMTC rate) If a cmpany pursuing an eligible MIDMTC prject incurs and pays $135,000 in eligible marketing and distributin csts, it will be able t claim $100,000 ( x 40% MIDMTC rate) 9. The marketing and distributin csts are subject t n duble cunting rules, and MIDMTC supprt fr eligible marketing and distributin csts will be reduced by ther amunt(s) f gvernment assistance that are used t supprt thse csts. The MIDMTC s n duble cunting rules mean that: If a specific MIDMTC prject qualifies fr marketing and distributin supprt, then a claimable labur cst fr that prject will either qualify as marketing/distributin (i.e. an eligible marketing and distributin cst) r develpment (i.e. an eligible labur cst), but nt bth. An eligible marketing and distributin cst cannt be claimed twards mre than ne MIDMTC prject (unless the MIDMTC administratrs determine that prprtinal amunts f the verall cst can be claimed twards mre than ne f the applicant cmpany s MIDMTC prjects). If a marketing r distributin cst is being claimed twards anther Manitba crprate tax credit, it cannt be claimed as an eligible marketing and distributin cst fr MIDMTC supprt. As an exceptin t this rule (in rder t encurage the hiring f qualified students and recent graduates) an eligible labur cst being claimed twards the Manitba C-p Educatin and Apprenticeship Tax Credits (which are nw called the Paid Wrk Experience Tax Credits) can als be claimed as an eligible marketing and distributin cst fr MIDMTC supprt. If a marketing r distributin cst is being claimed twards a crprate tax credit in anther Canadian prvince r territry, it cannt be claimed as an eligible marketing and distributin cst fr MIDMTC supprt. The next sectin f these guidelines prvides detailed infrmatin n hw MIDMTC supprt is affected when ther surces f gvernment assistance are being accessed fr a prject (e.g. ther grant prgrams, Manitba tax credits, etc.). 14

15 3) HOW DOES GOVERNMENT ASSISTANCE FOR A PROJECT AFFECT ITS MIDMTC CLAIM? As nted abve, MIDMTC supprt fr eligible labur csts and (if applicable) eligible marketing and distributin csts is reduced by ther amunt(s) f gvernment assistance being used t supprt thse csts. This means that nce the ttal eligible prject csts fr a MIDMTC prject have been calculated, the ($) amunt(s) f any ther surce(s) f gvernment assistance that the applicant cmpany is accessing t supprt the prject will grind dwn the MIDMTC tax credit that the applicant cmpany will be entitled t receive. If, hwever, a cmpany is nt accessing any ther surces f gvernment assistance fr a prject; then its MIDMTC tax credit fr the prject will nt be affected by any grind. There are a variety f different types f gvernment assistance that a cmpany culd be accessing t supprt a particular MIDMTC prject. As articulated in the MIDMTC legislatin: "gvernment assistance" means assistance that the crpratin receives r is entitled t receive frm a gvernment, municipality r ther public authrity whether as a grant, subsidy, frgivable lan, deductin frm tax, investment allwance r any ther frm f assistance, ther than (a) assistance including an amunt paid r payable t the crpratin by The Canada Media Fund that is recupable r repaid; and (b) the tax credit under this sectin r sectin 10.1 (c-p educatin and apprenticeship tax credit), received r receivable by the crpratin. Different types f gvernment assistance grind dwn the MIDMTC tax credit fr a prject in different ways, but accrding t a set frmula that the MIDMTC administratrs will apply whenever a MIDMTC prject is accessing ne r mre ther surce(s) f gvernment supprt. The MIDMTC grind frmula is explained in detail in Appendix H. Fr infrmatin n when/hw an applicant cmpany must identify ther surces f gvernment assistance it may be accessing fr a prject, cmpanies shuld refer t the applicatin & claim instructins. Stacking rules In additin t the MIDMTC grind frmula that is applied when a prject is accessing ther surce(s) f gvernment assistance; the MIDMTC prgram als stipulates that n mre than 100% f ttal prject csts can be financed by gvernment assistance (including the ($) amunt f MIDMTC tax credit(s) that the cmpany receives fr the prject). It is imprtant t nte that many ther gvernment funding prgrams and tax credits als enfrce stacking caps fr their prgrams (fr example, the prvincial Cmmercializatin Supprt fr Business (CSB) prgram stipulates that n mre than 50% f ttal prject csts can be financed thrugh surces f gvernment assistance). As a result, when a MIDMTC prject is accessing ne r mre ther surces f gvernment supprt, the MIDMTC administratrs will determine what stacking caps (if any) that each f thse ther prgrams enfrces; in rder t identify the lwest stacking cap that applies t the prject (r if nne f the ther prgrams enfrce stacking caps, then the 100% MIDMTC cap will apply). The MIDMTC administratrs will then add up the ($) amunts f MIDMTC tax credit(s) and ther surces f gvernment assistance that are being used t supprt the prject t ensure that the ttal ($) amunt f supprt des nt exceed the maximum percentage f ttal prject csts that the lwest stacking cap enfrces. It is imprtant that the lwest stacking cap be used in this calculatin; as therwise, MIDMTC supprt fr the prject might push it ver the stacking rules f ne f the ther funding prgrams being accessed (and may create issues fr the verall prject financing). It is als imprtant t nte that althugh surces f repayable gvernment assistance and supprt frm the Canada Media Fund (CMF) will nt grind dwn the MIDMTC tax credit fr a prject, tax plicy dictates that any ($) amunt(s) f repayable gvernment assistance r CMF funding used t supprt a prject must be included in the MIDMTC stacking rules calculatin. Appendix I prvides mre infrmatin n the MIDMTC stacking rules, hw repayable assistance and CMF funding are included in the calculatin, and examples f hw stacking caps are applied t MIDMTC prjects. 15

16 Prjects being develped fr a gvernment purchaser When an applicant cmpany is develping a prduct fr sale r licence primarily t a gvernment purchaser, it may limit the MIDMTC tax credit that the cmpany can claim fr that prject. Whether r nt the limit will apply depends n the type f gvernment purchaser that the prduct is being develped fr. If a prject is being develped primarily fr sale r licence t a type f gvernment purchaser that will limit the applicant cmpany s MIDMTC claim, then the limit is applied in the fllwing ways: 1. First, the cmpany must wait until the prject is cmplete t make a MIDMTC claim fr the prject (this is explained in greater detail in the MIDMTC applicatin & claim instructins). 2. Secnd, the MIDMTC tax credit fr the prject will be capped by the calculatin utlined belw: Appendix J prvides a detailed list f the types f gvernment purchasers that will and will nt limit a cmpany s MIDMTC claim as well as examples f hw the calculatin abve is applied. As a last pint f clarificatin, the MIDMTC definitin f gvernment assistance states that: gvernment assistance means assistance that the crpratin receives r is entitled t receive frm a gvernment, municipality r ther public authrity... Given this definitin: Gvernment assistance fr a MIDMTC prject that an applicant cmpany receives directly will grind dwn MIDMTC supprt fr that prject (accrding t the grind frmula explained in Appendix H). Gvernment assistance that an applicant cmpany may receive indirectly, r receives fr activities/purpses that are nt linked t a MIDMTC prject, will nrmally nt grind dwn MIDMTC supprt fr the prject. Fr example: A cmpany is develping an interactive learning app that has been deemed eligible fr MIDMTC supprt. The cmpany is als receiving a gvernment grant t train its accunting staff n a new payrll/hr system that the cmpany is implementing. The training grant is nt supprting any activities related t the MIDMTC prject, nr are any f the accunting staff wh will be receiving the training invlved in any eligible wrk n the MIDMTC prject. As a result, the grant funding the cmpany is receiving will nt grind dwn its MIDMTC claim fr the eligible prject. As anther example: A nn-prfit cmmunity rganizatin receives an annual perating grant frm gvernment (as part f its verall public/private peratinal funding). The rganizatin hires a cmpany t develp an interactive digital media prduct fr a specific prject it is pursuing. If the cmpany is eligible t receive MIDMTC supprt fr that prject, the mney invested int the prject by the cmmunity rganizatin (i.e. their payment f the fee-fr-service cntract they signed with the cmpany) wuld nt grind dwn the MIDMTC tax credit that the cmpany culd claim. This is because the grant was nt prvided t the nn-prfit fr the purpse f supprting the prject; and even if sme f thse funds may ultimately have been used t pay the applicant cmpany t develp the prduct, that cmpany was nt entitled t receive thse funds. If, hwever, the MIDMTC administratrs determine that an applicant cmpany was entitled t receive gvernment assistance fr a MIDMTC prject even if it received that assistance indirectly then MIDMTC supprt fr the prject will be grund dwn (again, accrding t the grind frmula in Appendix H). Fr example: A lcal cmpany is participating in a cnsrtium that successfully applies fr a large gvernment grant t supprt a multi-prject initiative. Thugh anther partner in the cnsrtium is awarded the actual funding, the cmpany was named as a prject partner in the funding prpsal that was submitted. If the ther partner (i.e. the direct recipient f the grant) prvides sme f the funding t the cmpany s that it may undertake ne f the prjects that was utlined in the prpsal and that prject is eligible fr MIDMTC supprt then the funding that the partner prvided wuld grind dwn the cmpany s MIDMTC tax credit fr the prject. This is because the grant was prvided fr the purpse f supprting the prject (as part f the larger initiative the cnsrtium is undertaking), and the cmpany was entitled t receive that assistance by virtue f having been named as a prject partner in the funding applicatin. 16

17 4) HOW DOES A COMPANY ACCESS THE MIDMTC PROGRAM? There are three main prcesses that an applicant cmpany must undertake in rder t apply fr and claim a MIDMTC tax credit fr an eligible prject: 1. Applying fr a prject estimate sheet befre the prject begins; 2. Making a claim fr a MIDMTC tax credit certificate at the end f each crprate tax year the eligible prject is/was underway; and 3. Submitting the MIDMTC tax credit certificate it receives t the Canada Revenue Agency (CRA) as part f the cmpany s annual incme tax return (T2), in rder t claim the tax credit earned. These guidelines prvide high-level infrmatin n each f the three prcesses, but detailed infrmatin that applicants require fr each f the applicatin and claim stages f the MIDMTC prgram is prvided in the MIDMTC applicatin & claim instructins. Applicants shuld refer t that dcument whenever they are making an applicatin r claim fr a MIDMTC prject. 1. Applying fr a prject estimate sheet: The first step in accessing MIDMTC supprt fr a prject is t apply fr a prject estimate sheet (which is called a certificate f eligibility in the MIDMTC legislatin). As nted abve, this applicatin must be submitted t the MIDMTC administratrs befre the prject begins. It is recmmended, hwever, that a cmpany submit its applicatin fr a prject estimate sheet at least three weeks befre the prject s anticipated start date. If a cmpany is planning t apply t the MIDMTC prgram fr the first time r if after reading these guidelines and the applicatin & claim instructins a cmpany is unsure whether its specific prject will qualify fr supprt it is recmmended that the cmpany cntact the MIDMTC administratrs befre submitting an applicatin fr a prject estimate sheet. The MIDMTC administratrs can prvide guidance as t whether a planned prject is likely t meet the eligibility criteria f the prgram r nt, and whether r nt the cmpany shuld mve frward in submitting an applicatin as a result. It is imprtant t nte that a successful applicatin fr a prject estimate sheet des nt guarantee that a cmpany will qualify fr MIDMTC supprt. This initial apprval nly signals that the MIDMTC administratrs anticipate that the prject being undertaken will qualify, and prvides an estimate f the MIDMTC tax credit that the cmpany culd be eligible t receive (based the planned prject budget that the cmpany prvides at this initial applicatin stage). The actual assessment f whether a prject will qualify fr MIDMTC supprt (and what ($) amunt f MIDMTC tax credit the cmpany will be eligible t receive) is made by the MIDMTC administratrs each time that a cmpany submits a claim fr a tax credit certificate fr the eligible prject. As a result: If a cmpany successfully applies fr a prject estimate sheet, but ver the curse f the prject the applicant cmpany, the prduct being develped, r sme ther aspect f the prject changes in a way that renders that cmpany r prject ineligible fr MIDMTC supprt, then the MIDMTC tax credit that the cmpany is claiming fr the prject will nt be apprved (and any ($) amunt f MIDMTC tax credit(s) that may previusly been prvided fr the prject are recverable frm the cmpany). Als, the ($) amunt f MIDMTC supprt that is prvided fr an eligible prject is based n the actual eligible prject csts that the cmpany incurs/pays and claims fr the prject nt n the estimates that the cmpany prvided in its planned prject budget at the initial applicatin stage. As such, if actual eligible prject csts end up being higher than anticipated (i.e. the planned budget increased ver the curse f the prject), then the cmpany culd end up receiving a larger MIDMTC tax credit fr the prject than was listed n its prject estimate sheet. Cnversely, if actual eligible prject csts end up being lwer than anticipated, the cmpany culd end up receiving a smaller MIDMTC tax credit than was listed n its prject estimate sheet. Fr detailed instructins n hw t apply fr a prject estimate sheet, cmpanies shuld refer t the applicatin & claim instructins. 17

18 2. Making a claim fr a MIDMTC tax credit certificate: Each year, at its crprate tax year end, a cmpany must prepare and submit claims fr all f its MIDMTC prjects: 1. That are currently underway (i.e. interim claims); 2. That were cmpleted ver the curse f the tax year (i.e. final claims); and/r 3. That incurred eligible marketing and distributin csts after the final claim and within 12 mnths after the prject s end date (i.e. additinal marketing and distributin claims). A new, streamlined annual claim prcess has been intrduced fr the MIDMTC prgram. The new prcess is structured t enable cmpanies with multiple MIDMTC prjects that were active ver all r a prtin f a given tax year t submit a single, annual claim package fr thse prjects. This streamlines key aspects f the claim submissin prcess fr cmpanies, while facilitating cmpnents f the claim audits undertaken by the MIDMTC administratrs (e.g. t ensure that cmpanies are nt duble cunting any eligible prject csts acrss multiple MIDMTC claims that they may be submitting fr a given tax year). Thugh cmpanies with multiple MIDMTC prjects will nw submit a single, annual claim package, it is imprtant t nte that the submissin is still structured t identify the specific MIDMTC claims that the cmpany is making fr each, individual prject. The prject claims are still technically separate, will be assessed fr eligibility independently, and separate MIDMTC tax credit certificates will still be issued t the cmpany fr each f the eligible prjects included in its annual claim package. Detailed instructins t assist cmpanies in preparing their annual MIDMTC claims are prvided in the applicatin & claim instructins. Cmpanies shuld review that dcument carefully especially infrmatin n the three claim frmats that cmpanies can chse t use when submitting supprting dcumentatin that is required as part f their annual claim package. If a cmpany is making its first annual MIDMTC claim, r has questins abut the claim prcess r three MIDMTC claim frmats, it is recmmended that the cmpany cntact the MIDMTC administratrs fr guidance. When MIDMTC claims are submitted, they are prcessed by the MIDMTC administratrs n a first-cme, first-served basis. Prcessing times may depend n the vlume f claims and is dictated by the cmpleteness f the claims submitted. Incmplete claims, r claim requiring crrectins r clarificatin may have delayed prcessing times. When a claim is cmplete, the MIDMTC administratrs will seek t cmplete their audit (and issue a MIDMTC tax credit certificate, if the claim is apprved) within a six week perid. 3. Submitting a MIDMTC tax credit certificate t the Canada Revenue Agency (CRA): Once a cmpany has made its annual claim fr the MIDMTC prject(s) it had active ver all r a prtin f a given tax year, the MIDMTC administratrs will audit the cmpany s claim package and MIDMTC tax credit certificate(s) will be issued fr each eligible prject that was included in the cmpany s annual claim. MIDMTC tax credit certificates cntain the fllwing infrmatin: The qualifying cmpany s name, address and business number; The name f the eligible prject fr which a MIDMTC tax credit is being issued; The ($) amunt f MIDMTC tax credit being issued, and the crprate tax year that the tax credit applies t; and The date by which the tax credit certificate must be filed with the Canada Revenue Agency (CRA) in rder t claim the tax credit. When MIDMTC tax credit certificate(s) are issued t a qualifying cmpany, it must claim the ttal ($) amunt f MIDMTC tax credit(s) listed n the certificate(s) n line 614, Schedule 5 f its T2 incme tax return fr the crprate tax year listed n the certificate(s). The certificate(s) must be filed with the cmpany s T2 incme tax return r held by the cmpany if the return is filed electrnically. The Canada Revenue Agency (CRA) will prcess the MIDMTC tax credit(s) as part f the cmpany s T2 incme tax return and include the tax credit(s) in the cmpany s ntice f assessment fr the year. 18

19 As utlined in the MIDMTC legislatin, a MIDMTC tax credit certificate must be filed with the CRA within 18 mnths f the last day f the crprate tax year that the tax credit applies t. Fr example, if a cmpany has a crprate tax year end f December 31 st, and receives a MIDMTC tax credit certificate fr its 2013 tax year, then the tax credit certificate must be filed with the CRA prir t June 30, 2016 (i.e. the date that is 18 mnths after December 31, 2013) in rder fr the cmpany t claim its tax credit. Despite this 18-mnth windw t file a MIDMTC tax credit with the CRA, it is recmmended that cmpanies submit their annual claim packages t the MIDMTC administratrs as sn as pssible fllwing the end f each crprate tax year: Since cmpanies must file their annual T2 incme tax returns within six mnths f their tax year-end, this apprach helps ensure that cmpanies will have received any MIDMTC tax credit certificate(s) earned fr the year in time t claim thse MIDMTC tax credit(s) when it files its T2 return fr the year. Cmpanies must apply t have the CRA reassess their T2 return fr a given tax year if they wish t claim a MIDMTC tax credit after their T2 return fr that year has already been filed. Amendment and revcatin f MIDMTC tax credit certificates: A MIDMTC tax credit certificate may be amended t crrect an errr and, under certain circumstances, may be revked. Subsectin 10.5(10) f The Incme Tax Act (Manitba) allws fr the revcatin f a MIDMTC tax credit certificate r prject estimate sheet (called a certificate f eligibility in the MIDMTC legislatin) if any infrmatin prvided by the cmpany t btain the certificate is false r misleading r fails t disclse a material fact. A prject estimate sheet may als be revked if the prject is nt carried ut as prpsed and ceases t be an eligible prject. It may als be revked if the prject is nt cmpleted within 36 mnths f its issuance. An amended MIDMTC tax credit certificate r prject estimate sheet replaces any certificate/estimate sheet previusly issued t the cmpany fr the prject in questin. If a MIDMTC tax credit certificate r prject estimate sheet is revked, the revked certificate/estimate sheet is deemed t never have been issued. If the MIDMTC administratrs determine that there has been an verpayment f the tax credit fr a particular eligible prject, the excess is recverable frm the cmpany and is a debt due by the cmpany t Her Majesty in right f Manitba. If, after reading these guidelines and the MIDMTC applicatin & claim instructins yu still have questins abut the MIDMTC prgram and/r hw t apply, please cntact the MIDMTC administratrs: Manitba Jbs and the Ecnmy Science, Innvatin and Business Develpment Divisin (SIBD) Avery Jdin Business Develpment Manager, Interactive Digital Media [email protected] / Laurie Crnell Business Develpment Officer, Interactive Digital Media [email protected] /

20 APPENDIX A: The Manitba Interactive Digital Media Tax Credit (MIDMTC) Legislatin Excerpt frm The Incme Tax Act (Manitba) available at: Versin belw is current as f January 15, 2016 / in effect since January 1, 2016 Interactive digital media tax credit 10.5(1) Subject t subsectins (2) t (2.3), a qualifying crpratin is deemed t have paid n its balance-due day fr a taxatin year, n accunt f its tax payable under this Act fr that year, such amunt as is claimed by the crpratin, but nt exceeding the ttal f all amunts each f which is the lesser f (a) 40% f the crpratin's eligible prject csts in relatin t an eligible prject fr the year; and (b) the amunt by which $500,000 exceeds the ttal f all amunts each f which is an amunt claimed by the crpratin as a tax credit under this subsectin in relatin t the eligible prject fr a previus taxatin year. Eligible prject csts fr the year 10.5(1.1) A crpratin's eligible prject csts in relatin t an eligible prject fr a taxatin year is the ttal f (a) the crpratin's eligible labur csts in relatin t the eligible prject fr the year; and (b) the lesser f (i) the crpratin's eligible marketing and distributin csts in relatin t the eligible prject fr the year, and (ii) the amunt by which $100,000 exceeds the ttal f all amunts each f which is the crpratin's eligible marketing and distributin csts in relatin t the eligible prject fr a previus taxatin year in which an amunt was claimed under subsectin (1). Eligible labur csts fr the year 10.5(1.2) A crpratin's eligible labur csts in relatin t the eligible prject fr a taxatin year is the amunt, if any, by which (a) the ttal f the crpratin's labur expenses in relatin t the eligible prject as at the end f the year; exceeds the aggregate f (b) the ttal f all gvernment assistance in respect f the crpratin's labur expenses in relatin t the eligible prject; and (c) the ttal f all amunts each f which is the amunt f the crpratin's eligible labur csts in relatin t the eligible prject fr a previus taxatin year in which an amunt was claimed under subsectin (1). Eligible marketing and distributin csts fr the year 10.5(1.3) A crpratin's eligible marketing and distributin csts in relatin t the eligible prject fr a taxatin year is the amunt, if any, by which the aggregate f (a) 50% f the ttal f the crpratin's marketing and distributin expenses fr meals r entertainment in relatin t the eligible prject as at the end f the year; and (b) the ttal f all ther marketing and distributin expenses f the crpratin in relatin t the eligible prject as at the end f the year; exceeds the aggregate f (c) the ttal f all gvernment assistance in respect f the crpratin's marketing and distributin expenses in relatin t the eligible prject; and (d) the ttal f all amunts each f which is the amunt f the crpratin's eligible marketing and distributin csts in relatin t the eligible prject fr a previus taxatin year in which an amunt was claimed under subsectin (1). Transitinal eligible marketing and distributin csts 10.5(1.4) N amunt may be claimed as eligible marketing and distributin csts in relatin t a prject with a cmmencement date befre Claim fr credit 10.5(2) N amunt may be claimed under subsectin (1) in respect f an eligible prject after the filing-due date fr the taxatin year fllwing the taxatin year in which the prject was cmpleted. Prf f credit 10.5(2.1) A crpratin is nt entitled t a credit under this sectin fr a taxatin year unless the tax credit certificate fr that credit is (a) filed with the crpratin's return fr that year; r (b) if the return is filed electrnically, held by the crpratin and filed with the Minister f Natinal Revenue upn request. 20

21 Limitatin fr prjects fr gvernment 10.5(2.2) Despite subsectin (1), if the eligible prject cnsists f an interactive digital media prduct being develped primarily fr sale r licence t the gvernment r an agency f the gvernment, a Manitba municipality r an agency f a Manitba municipality, r a crpratin cntrlled by the gvernment r by such a municipality r agency, (a) the credit under that subsectin may be claimed nly after the prject is cmpleted; and (b) the amunt f the credit under that subsectin cannt exceed the amunt, if any, by which exceeds (i) the taxpayer's ttal cst f the prject, (ii) the taxpayer's prceeds frm the sale r licence f the prduct. Limitatin n credit due t gvernment cntributin 10.5(2.3) Despite subsectin (1), the ttal f a crpratin's credits under that subsectin in relatin t an eligible prject, including credits claimed in relatin t the prject fr previus taxatin years, must nt exceed the amunt by which (a) the crpratin's ttal cst f the prject; exceeds (b) the ttal f all assistance which the crpratin receives r is entitled t receive frm a gvernment, municipality r ther public authrity in respect f the eligible prject ther than a tax credit under this sectin that is nt repaid by the crpratin befre the day that is three years after the prject's cmpletin date. "Qualifying crpratin" defined 10.5(3) Fr the purpse f this sectin, a crpratin is a qualifying crpratin in relatin t an eligible prject if (a) thrughut the prject perid, it is a taxable Canadian crpratin with a permanent establishment in Manitba; and (b) at least 25% f the salary and wages paid by the crpratin t its emplyees fr the prject perid was paid t emplyees wh are Manitba residents fr the prject perid. Other definitins 10.5(4) The fllwing definitins apply in this sectin. "cmmencement date", in relatin t an eligible prject f a crpratin, means the date n which the crpratin first incurs an expense t be included in the crpratin's labur expenses fr the prject. («date de début») "eligible prduct", in relatin t an eligible prject, means the interactive digital media prduct t be develped in the curse f the eligible prject. («prduit admissible») "eligible prject" means a prject f a crpratin, certified by the minister t be an eligible prject f the crpratin, t develp an interactive digital media prduct primarily fr sale t (a) ne r mre purchasers wh deal with the crpratin at arm's length; r (b) a purchaser wh des nt deal with the crpratin at arm's length fr resale r licensing by the purchaser t ne r mre ther persns, mst f whm deal at arm's length with the purchaser and the crpratin. («prjet admissible») "gvernment assistance" means assistance that the crpratin receives r is entitled t receive frm a gvernment, municipality r ther public authrity whether as a grant, subsidy, frgivable lan, deductin frm tax, investment allwance r any ther frm f assistance, ther than (a) assistance including an amunt paid r payable t the crpratin by The Canada Media Fund that is recupable r repaid; and (b) the tax credit under this sectin, sectin 7.3 (research and develpment tax credit) r sectin 10.1 (paid wrk experience tax credit), received r receivable by the crpratin. («aide guvernementale») "interactive digital media prduct" means a prduct that (a) cnsists f a cmbinatin f sftware and data files, in digital frmat, that are designed t be perated tgether, interactively by the user, t present infrmatin using sund, text and images, r any tw f them; (b) is designed primarily t educate, infrm r entertain the user; (c) in the case f a vide game, is classified by the Entertainment Sftware Rating Bard as anything ther than "AO" (adults nly); and (d) is nt (i) perating system sftware, (ii) a prduct t be used primarily fr interpersnal cmmunicatin, 21

22 (iii) a prduct t be used primarily fr marketing r prmting f an entity, a prduct r an idea, (iv) a prduct that cntains hate prpaganda r child prngraphy as defined in the Criminal Cde (Canada) r is deemed t be bscene under that Act, r any ther material the publicatin, sale r pssessin f which is an ffence under that Act, r (v) a prduct that, in the pinin f the minister, it wuld be cntrary t public plicy t supprt with public funds. («prduit utilisant des médias numériques interactifs») "labur expense" f a crpratin in relatin t an eligible prject means any f the fllwing amunts, t the extent that the amunt is reasnable in the circumstances, directly attributable t the prject and incurred and paid befre 2020 and within the prject perid: (a) an amunt n accunt f salaries and wages paid by the crpratin t its emplyees wh are Manitba residents fr the prject perid; (b) 65% f the fee paid by the crpratin t (i) an individual wh is a Manitba resident fr the prject perid and is nt an emplyee f the crpratin fr services perfrmed by the individual r by ne r mre emplyees f the individual wh are Manitba residents fr the prject perid, (ii) a taxable Canadian crpratin with a permanent establishment in Manitba fr services perfrmed n its behalf by ne r mre emplyees wh are Manitba residents fr the prject perid, r (iii) a partnership carrying n business in Canada fr services perfrmed n its behalf by ne r mre individuals wh are emplyees r members f the partnership and are Manitba residents fr the prject perid; (c) 20% f an amunt that wuld be included under clause (a) r (b) in respect f services perfrmed in Manitba fr the prject by an individual wh is nt a Manitba resident fr the prject perid if (i) the individual were a Manitba resident fr the prject perid, and (ii) n amunt were included in respect f the benefits r allwances that are included (r wuld be included if the individual were an emplyee resident in Canada) in the incme f the individual under sectin 6 f the federal Act. («frais de main-d'œuvre») "Manitba resident", in relatin t a prject perid, means resident in Manitba n any December 31 within the perid r, if the perid des nt include that day, n December 31 f the year in which the perid ends. («résident du Manitba») "marketing and distributin expense" f a crpratin in relatin t an eligible prject means an expense that (a) is reasnable in the circumstances and directly attributable t advertising r prmting the eligible prduct r distributing the eligible prduct t custmers r ptential custmers; (b) is incurred and paid by the crpratin (i) during the prject perid r within 12 mnths after the day n which the prject perid ends, and (ii) after 2012 and befre 2020; (c) des nt relate directly t prcessing an rder by, r shipping an eligible prduct t, a cnsumer wh purchased the eligible prduct directly frm the crpratin; (d) des nt relate t an eligible prduct that is develped (i) under the terms f an agreement between the crpratin and a purchaser that deals at arm's length with the crpratin, and (ii) fr the purpse f sale r license by the purchaser t ne r mre persns any f whm deals at arm's length with the purchaser; (e) is nt an amunt referred t in clause (5)(a) r subclause (5)(b)(ii) r (iii); and (f) is nt included in cmputing (i) the crpratin's eligible labur csts in relatin t the eligible prject, (ii) the crpratin's eligible prject csts in relatin t any ther prject, r (iii) the eligible prject csts f any ther crpratin. («frais de cmmercialisatin et de distributin») "minister" means the minister appinted by the Lieutenant Gvernr in Cuncil t administer this sectin. («ministre») "prject perid", in relatin t an eligible prject, means (a) in the case f a prject fr which n tax credit is claimed befre the prject is cmpleted, the perid that begins n its cmmencement date r the day that is 24 mnths befre its cmpletin date, whichever is later, and ends n its cmpletin date; and (b) in the case f a prject fr which a tax credit is claimed befre the prject is cmpleted, the perid that begins n its cmmencement date r the day that is 24 mnths befre its estimated cmpletin date, whichever is later, and ends n the actual cmpletin date r n the day that is 24 mnths after the first day f the prject perid, whichever is earlier. («péride de prjet») 22

23 Interpretatin f "labur expense" 10.5(5) Fr the purpse f the definitin "labur expense" in subsectin (4), (a) n amunt may be included in respect f the fllwing: (i) salary, wages r fees determined by reference t prfits r revenues, (ii) stck ptins, signing bnuses, r ther emplyment incentives, (iii) ancillary emplyment benefits that are nt required by law t be prvided, (iv) any benefits r remuneratin prescribed by regulatin, (v) an amunt that is included in cmputing the crpratin's eligible labur csts in relatin t any ther prject r the eligible labur csts f any ther crpratin, (vi) an amunt that is included in cmputing a tax credit claimed under any ther sectin f this Act ther than sectin 10.1 (paid wrk experience tax credit), r under any Act f anther prvince r territry f Canada; and (b) an amunt is nt cnsidered t be directly attributable t an eligible prject if it is paid fr (i) services related t distributin, marketing r prmtin, (ii) administrative, payrll r management services, ther than management services cnsisting f managing the prject, r (iii) any ther service prescribed by regulatin. Certificate f eligibility 10.5(6) Upn applicatin by a crpratin prpsing t develp an interactive digital media prduct, the minister may issue t the crpratin a dcument that (a) identifies the prject and certifies it t be an eligible prject; (b) sets ut the crpratin's prpsed cmmencement date and estimated cmpletin date fr the prject; (c) prvides an estimate f the tax credit; and (d) includes any ther infrmatin that the minister cnsiders apprpriate r necessary. Applicatin fr certificate f eligibility 10.5(7) A crpratin's applicatin fr a certificate f eligibility under subsectin (6) must be made in a frm apprved by the minister and befre the cmmencement date f the prject, and must include the fllwing: (a) the name, address and business number f the crpratin; (b) a descriptin f the interactive digital media prduct t be develped; (c) if the prduct is t be develped fr sale t a purchaser fr resale r licensing t thers, the name and address f the purchaser and, if requested by the minister, a cpy f the agreement between the crpratin and the purchaser; (d) if clause (c) des nt apply r the purchaser referred t in that clause has nt been identified, a cpy f the crpratin's plan fr marketing the prduct; (e) an estimate f the crpratin's eligible labur csts and eligible marketing and distributin csts fr the prject; (f) the prpsed cmmencement date and an estimated cmpletin date fr the prject; (g) any ther infrmatin requested by the minister. Tax credit certificate 10.5(8) The minister, upn applicatin by a qualifying crpratin in accrdance with subsectin (9), and upn being satisfied that the crpratin qualifies fr a tax credit fr an eligible prject, must issue a tax credit certificate that sets ut (a) the name, address and business number f the crpratin and the identifier f the prject; (b) the amunt f the tax credit; (c) the taxatin year t which the tax credit applies; and (d) any ther infrmatin that the minister cnsiders apprpriate r necessary. Applicatin fr tax credit certificate 10.5(9) A crpratin's applicatin fr a tax credit certificate fr an eligible prject must be made in a frm apprved by the minister and must set ut r include the fllwing: (a) the name, address and business number f the crpratin; (b) a cpy f the certificate f eligibility fr the prject; (c) the cmmencement date f the prject and the date f its cmpletin r the estimated date f its cmpletin, if it has nt yet been cmpleted; (d) a statement f the labur expenses and marketing and distributin expenses; 23

24 (e) infrmatin the minister requires in rder t verify r be satisfied (i) that the crpratin is a qualifying crpratin in relatin t the prject, (ii) that the prject has been cmpleted and satisfies all the requirements fr an eligible prject, (iii) that the amunts claimed as labur expenses qualify as labur expenses, and (iv) that the amunts claimed as marketing and distributin expenses qualify as marketing and distributin expenses; (f) any ther infrmatin relating t the prject r the crpratin that the minister cnsiders apprpriate r necessary fr the administratin f the tax credit. Revcatin f certificate 10.5(10) The minister may revke a certificate f eligibility r a tax credit certificate issued t a crpratin fr a prject if any infrmatin prvided by the crpratin t btain the certificate is false r misleading r fails t disclse a material fact. The minister may als revke a certificate f eligibility fr a prject if (a) the prject is nt carried ut as prpsed and ceases t be an eligible prject; r (b) the prject is nt cmpleted within 36 mnths after the certificate was issued. Effect f revcatin 10.5(11) If a certificate is revked under subsectin (10), it is deemed never t have been issued. Recvery f verpayment f tax credit 10.5(12) If the Minister f Finance fr Manitba determines that all r any part f an amunt paid r applied under subsectin (1) did nt qualify as a tax credit f the persn t whm it was paid r fr whse benefit it was applied, that amunt r part f the amunt is recverable frm the persn and is a debt due by the persn t Her Majesty in right f Manitba. Regulatins 10.5(13) The Lieutenant Gvernr in Cuncil may make regulatins (a) defining any term used in this sectin but nt defined in this Act; (b) prescribing benefits r remuneratin expenses t be excluded frm the definitins "labur expenses" and "marketing and distributin expense" in subsectin (4); (c) prescribing services the csts f which are nt t be cnsidered directly attributable t an eligible prject; (d) respecting infrmatin t be prvided by a persn claiming a tax credit under this sectin; (e) respecting the maintenance f bks and recrds, and the prvisin f infrmatin r access t infrmatin, fr the purpse f verifying the validity f a claim fr a tax credit under this sectin; (f) respecting any ther matter that the Lieutenant Gvernr in Cuncil cnsiders necessary t carry ut effectively the intent and purpse f this sectin. Delegatin 10.5(14) The minister may delegate any pwer, duty r functin f the minister under this sectin t (a) an emplyee f the gvernment; r (b) an fficer f New Media Manitba Inc. 24

25 APPENDIX B: What des the sale requirement mean? As utlined n page 4 abve, in rder t qualify fr MIDMTC supprt, an interactive digital media prduct must be develped primarily fr sale: T ne r mre purchasers wh deal with the applicant cmpany at arm s length; r T a purchaser wh des nt deal with the applicant cmpany at arm s length, fr resale r licensing t ne r mre persns wh deal with the purchaser and the applicant cmpany at arm s length. In the case f a prduct being develped fr sale t ne r mre purchasers wh deal with the applicant cmpany at arm s length, there are three ptential scenaris: 1. The applicant cmpany is develping its wn prduct, and will be selling/cmmercializing it nce the prduct is cmpleted (t ne r many ptential buyers/users). This scenari is called develped independently (thugh the applicant cmpany may be wrking with ne r mre channel partners t sell/distribute the prduct nce it is develped). 2. The applicant cmpany is develping a prduct fr an arm s length purchaser under the terms f a feefr-service agreement. This scenari is called develped under cntract. 3. The applicant cmpany is develping a prduct under the terms f a c-prductin agreement with an arm s length partner, and either the applicant cmpany r the partner (r bth cmpanies) will be selling/cmmercializing the prduct nce it is cmpleted (t ne r many ptential buyers/users). There are a number f ptential scenaris fr a prduct being develped fr a purchaser wh des nt deal with the applicant cmpany at arm s length. In any f these scenaris, hwever, the nn-arm s length purchaser must be selling/cmmercializing the prduct t ne r mre arm s length buyers/users. Fr example: If the applicant cmpany is a whlly-wned subsidiary that is develping a prduct fr its parent cmpany, then the parent cmpany must be selling/cmmercializing the prduct t ne r many buyers/users wh deal with bth the parent and the subsidiary at arm s length. If the applicant cmpany is develping a prduct under the terms f a c-prductin agreement with a nn-arm s length partner, and the applicant cmpany is nt ging t be selling/cmmercializing the prduct, then the nn-arm s length partner must be selling/cmmercializing it t ne r many buyers/users wh deal with bth c-prductin partners at arm s length. Depending which sale scenari applies t a prject that is seeking MIDMTC supprt, the applicant cmpany will either have t submit a cmmercializatin plan, signed cntract, r bth, as part f its MIDMTC applicatin/claim(s). These are required in rder fr the MIDMTC administratrs t determine whether the manner in which the prduct is being cmmercialized will qualify as an eligible sale under the definitin f the MIDMTC prgram (mre infrmatin n this requirement is prvided in the MIDMTC applicatin & claim instructins). It is imprtant t nte that enhancements made t the MIDMTC prgram in 2013 added flexibility t the MIDMTC definitin f an eligible sale, in rder t take int accunt the innvative ways that interactive digital media prducts are ften cmmercialized and mnetized (e.g. freemium prducts). In all cases, hwever, the cmmercializatin plan and/r cntract submitted by the applicant cmpany must shw hw the prduct will generate revenue nce it is cmpleted and launched. The prduct cannt generate revenue simply by enhancing the applicant cmpany s (r anther entity s) existing prduct r service ffering the prduct itself must be mnetized in a way that the MIDMTC administratrs cnsider acceptable. This means that prducts which are develped by an applicant cmpany fr its internal use, r simply t imprve/enhance its prduct(s) r service ffering(s) will nt be cnsidered eligible fr supprt under the MIDMTC prgram. If, hwever, an applicant cmpany is develping a prduct fr an arm s length purchaser under a fee-fr-service agreement, then that purchase fulfills the MIDMTC sale requirement and the arm s length purchaser des nt have t cmmercialize the prduct (i.e. it can purchase the prduct fr internal use r t imprve/enhance it prduct(s) r service ffering(s)). If an applicant cmpany is develping a prduct with an arm s length c-prductin partner, either the applicant cmpany r the partner must be cmmercializing the prduct in a way that meets the MIDMTC sale requirement. If an applicant cmpany is develping a prduct with a nn-arm s length parent r partner, either the applicant cmpany r the parent/partner must be cmmercializing the prduct in a way that meets the MIDMTC sale requirement. Fr additinal clarificatin n the interpretatin f arm s length, cmpanies shuld speak with an accuntant. 25

26 APPENDIX C: Hw is a rich interactive media experience defined under the MIDMTC prgram? As utlined n page 4 abve, in rder t qualify fr MIDMTC supprt, an interactive digital media prduct must prvide users with a rich interactive media experience. The MIDMTC prgram defines a rich interactive media experience using many f the same criteria that have been adpted by the Canada Media Fund (CMF) and ther prvinces with interactive digital media tax credits namely that: The prduct must prvide a participatry experience between the user and the prduct, r the user and ther users as enabled by the prduct. The prduct must have multimedia cntent that requires interactin frm the user t cmplete an experience. Multiple paths are pssible, based n the user s specific input. This enables the user t becme a participant nt simply a reader r spectatr. Prducts that nly allw the user t chse, access r arrange linear cntent (like vide, audi, images r text) but dn t enable any additinal interactivity between the user and that cntent, r the user and ther users as enabled by that cntent will nt qualify. The assessment f whether a prduct prvides users with a rich interactive media experience r nt is made by the MIDMTC administratrs n a case-by-case basis, by lking at characteristics such as: feedback, cntrl and adaptatin: Feedback is the degree t which a prduct respnds t a user s specific input. Fr example: When a user cmpletes a test in an interactive educatinal prduct, if the prgram generates an evaluatin and/r suggests additinal practice exercises that are tailred t the specific areas where that user had difficulty in the test, that wuld likely be cnsidered t prvide a mre rich interactive media experience than if every user wuld see the same evaluatin and/r practice exercises fllwing the test, regardless f their specific input. Cntrl is the degree t which a user can chse the frm and sequence in which infrmatin is presented; and/r influence hw his/her experience unflds as he/she uses the prduct. Fr example: In a vide game, the user can cntrl his r her actins in a way that influences hw he/she advances thrugh the game. This creates a gameplay experience that is smewhat persnalized t each user based n his/her chices, decisin making, actins/reactins and strategy. Fr example: An interactive educatinal prduct that presents cntent thrugh matching games, memry games, drag-and-drp games, etc. prvides the user with a higher level f cntrl ver his/her experience than simple true/false, multiple chice, r ther pint-and-click exercises and wuld therefre be cnsidered t prvide a mre rich interactive media experience t the user. Adaptatin is the degree t which the prduct can tailr the interactive experience/cntent that it presents t a user based n that user s specific skill level, preferences, decisin-making, actins/reactins r ther input creating a highly r slightly persnalized prduct/experience fr each user. Fr example: In a driving simulatin game, if the simulatr is able t assess particular areas f weakness fr each individual driver (i.e. user), and mdify the simulatr experience that driver receives as a result (i.e. a driver with prblems in slippery cnditins wuld receive a highway-driving simulatin in rainy cnditins, while a driver with tendencies t speed wuld receive a city-driving simulatin with lts f traffic and stplights), then the prduct is prviding a highly adapted experience t each individual user. In additin t the pints abve, it is als imprtant t nte that: When the MIDMTC administratrs assess whether a prduct prvides users with a rich interactive media experience r nt, they cnsider the interactivity f the prduct as a whle. As such, an eligible prduct may cntain bth interactive and linear cmpnents, as lng as the MIDMTC administratrs are satisfied that the verall user experience invlves a sufficient degree f interactivity. A prduct des nt need t shw a sufficient level f interactivity in each f the three characteristics that the MIDMTC administratrs assess (i.e. feedback, cntrl and adaptatin) but rather a sufficient level f interactivity acrss the three characteristics. As such, a prduct that des nt prvide a significant level f feedback but des prvide a significant level f cntrl may still be cnsidered t prvide a rich interactive media experience verall. The MIDMTC administratrs als cnsider the nature and cmplexity f the prduct in their assessment f whether r nt it prvides users with a rich interactive media experience. It stands t reasn that a simple, small-scale prduct culd have mre basic/limited interactivity while still prviding users with a rich interactive media experience; whereas a cmplex, large-scale prduct that has nly basic r very limited interactivity may nt be cnsidered t prvide users with a rich interactive media experience. Cmpanies wh are unsure whether their prduct will meet the MIDMTC definitin f a rich interactive media experience r nt are encuraged t cntact the MIDMTC prgram administratrs fr additinal clarificatin and guidance. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. 26

27 APPENDIX D: When is a prduct cnsidered primarily prmtinal in nature? As utlined n page 4 abve, in rder t qualify fr MIDMTC supprt, an interactive digital media prduct cannt be primarily prmtinal in nature (i.e. designed primarily t market r prmte an entity, prduct r idea). The MIDMTC administratrs are respnsible fr determining whether a prduct will be cnsidered primarily prmtinal r nt, and this assessment is made n a case-by-case basis. In each case, hwever, the MIDMTC administratrs are cnsidering a number f specific questins. Sme f these questins are utlined belw, in rder t help applicant cmpanies better understanding hw the determinatin is made. It is imprtant t nte that mst ften, n ne questin frm the list belw will decide whether a prduct is cnsidered primarily prmtinal r nt the MIDMTC administratrs decisin will be based n an assessment f a number f criteria, including (but nt limited t) the fllwing: Is the interactive prduct being used t market r sell prducts/services, r t enhance a sales experience? Fr example: An interactive app is being develped fr a lcal landscaping cmpany. The app is used by custmers t design landscaping imprvements fr their yards and bk thse landscaping services with the cmpany. The app wuld be cnsidered primarily prmtinal in nature as it serves t prmte/sell the landscaping cmpany s services. Fr example: A cmpany is hired t develp an interactive, nline strefrnt fr lcal independent retailers. The website wuld be cnsidered primarily prmtinal in nature as it is used by the varius retailers wh jin the site t sell their prducts. Is the interactive prduct driving a cnnectin t a cmpany r entity t assist that cmpany/entity in prmting itself? Fr example: A grcery stre chain funds the develpment f an interactive recipe website. Thugh the website itself is nt cmmercialized under the grcery chain s brand, the site is saturated with cntent aimed slely at prmting the grcery chain (fr example, pp-up ads that appear t encurage users t shp at thse grcery stres; a requirement that users insert an address t access the site (which is used t send users prmtinal ffers frm the grcery chain); etc.). If the MIDMTC administratrs are f the pinin that the website was develped primarily t drive a cnnectin between users and the grcery chain in rder t help the grcery chain prmte itself then the website wuld likely be cnsidered primarily prmtinal in nature. If the interactive prduct cntains branded cntent, t what degree is the user s interactive experience with the prduct tied t that branded cntent? Fr example: A cmpany is hired under a fee-fr-service cntract t develp a vide game using the characters frm a ppular TV shw. Prvided that the vide game isn t saturated with cntent aimed slely at prmting the TV shw (as per the example abve), then the vide game likely wuldn t be cnsidered primarily prmtinal in nature given that the interactive aspects f the game (e.g. specific challenges in each level, riddles t slve, etc.) d nt serve simply t prmte the branded, TV shw cntent. Cnversely, if a cmpany is hired t develp an interactive website fr a prfessinal sprts team, the website wuld likely be cnsidered primarily prmtinal in nature, given that the interactive features f the site (like player trivia games, game day cntests, etc.) are geared directly at prmting the team brand. Where/hw will users be accessing the interactive prduct? Fr example: A cmpany is develping an independent, interactive app that will enable users t design an electrnic scrapbk using their favrite family phts. The app will run n mbile devices and be sld n the Apple App and Ggle Play stres. This app likely wuldn t be cnsidered primarily prmtinal in nature by the MIDMTC administratrs. Cnversely, if the cmpany were hired by a scrapbking supplies retailer t develping the app t run n kisks in its stres, then that app might be cnsidered primarily prmtinal in nature (if the MIDMTC administratrs determine that the app is being develped primarily t sell prducts that are available at the scrapbking stres). As per the varius examples abve, it is imprtant t nte that a prduct can be primarily prmtinal (and thus, ineligible fr MIDMTC supprt) regardless f wh r what it is prmting. Even if an applicant cmpany is develping a prduct that prmtes anther cmpany/entity rather than itself, the applicant cmpany will nt be able t access MIDMTC supprt fr that prduct. Applicants wh are unsure whether a prduct they will be develping will be cnsidered primarily prmtinal in nature are encuraged t cntact the MIDMTC administratrs fr additinal clarificatin and guidance. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. 27

28 APPENDIX E: The Skills Transfer Allwance (STA) As utlined n page 8 abve, if there are n Manitba residents wh are qualified, able and willing t perfrm a certain type f eligible labur that is required fr a MIDMTC prject and the applicant cmpany has identified a nn-manitba resident wh is qualified, able, and willing t cme t Manitba t undertake that prject wrk then the applicant cmpany can apply fr a Skills Transfer Allwance (STA) in rder t claim the eligible labur csts that the nn-resident incurs while wrking in Manitba n the prject. As a requirement f the STA, during his/her time in Manitba, the apprved nn-resident will need t prvide relevant training t a Manitba resident wh is als wrking n the prject. In rder t apply fr a Skills Transfer Allwance (STA), an applicant cmpany must fllw the steps belw: Step 1: As part f its prject planning (i.e. befre the prject begins), the applicant cmpany will identify ne r mre specific wrk activities that it believes a nn-manitba resident must be hired t perfrm (i.e. because the applicant cmpany is nt aware f any Manitbans wh are qualified, able and willing t perfrm the wrk). The applicant cmpany must als have identified a nn-manitba resident wh is qualified, able, and willing t cme t Manitba t perfrm the wrk. It is imprtant t nte that the specific type(s) f wrk that the applicant cmpany has identified as requiring a nn-manitba resident must be types(s) f wrk that are cnsidered eligible labur csts under the MIDMTC prgram. If it is wrk that is cnsidered ineligible labur under the MIDMTC, then the applicant cmpany will nt be able t apply fr a Skills Transfer Allwance t claim that labur. Step 2: Befre the prject begins, the cmpany will apply fr a prject estimate sheet by filling in and submitting a MIDMTC applicatin & claim frm fr the prject. In the STA sectin f the applicatin & claim frm, the cmpany lists the type(s) f required, eligible prject wrk that it believes n Manitba resident is qualified, able and willing t perfrm. Step 3: When the MIDMTC administratrs begin their review f the cmpany s applicatin & claim frm, they will frward the list f wrk activities that the applicant cmpany inserted int the STA sectin f the frm t ne r mre lcal industry assciatins (i.e. New Media Manitba (NMM), the ICT Assciatin f Manitba (ICTAM), r On Screen Manitba (OSM), depending upn the type(s) f wrk activities that the applicant cmpany listed). It is imprtant t nte that nly the applicant cmpany s name, cntact infrmatin, and the list f specific wrk activities it identified will be prvided t the industry assciatin(s). They will nt be prvided any cpy (in whle r in part) f the cmpany s applicatin & claim frm fr the prject, r any ther infrmatin abut the cmpany/prject. Step 4: The industry assciatin(s) will help the applicant cmpany determine whether there are lcal Manitba prfessinals that culd ptentially perfrm the type(s) f wrk it had identified as requiring a nn- Manitba resident. The assciatin(s) will wrk with the cmpany t ensure they have an accurate understanding f what the cmpany is lking fr, and will then cmpile a list f Manitba prfessinals that culd ptentially perfrm the type(s) f wrk required. The assciatin(s) will assist the applicant cmpany in reaching ut t the individual(s) it identified, s that the cmpany can determine whether any f thse Manitba residents are qualified, able and willing t perfrm the wrk r nt. Step 5: If any f the Manitba prfessinals are fund t be suitable matches fr the cmpany, then the cmpany will be able t claim the eligible labur csts that thse Manitba prfessinal(s) incur and are paid n the prject, accrding t the nrmal prcess fr claiming eligible labur under the MIDMTC. If nne f the Manitba prfessinals are suitable matches, the cmpany will cmplete additinal parts f the STA sectin f its MIDMTC applicatin & claim frm fr the prject and submit the revised frm back t the MIDMTC administratrs. Step 6: The MIDMTC administratrs will review the additinal STA infrmatin prvided by the cmpany and if they are satisfied that: 1) nne f the Manitba prfessinals were qualified, able and willing t perfrm the required wrk; and 2) the training the cmpany has indicated that the nn-manitba resident will prvide during his/her time in Manitba is acceptable, then the MIDMTC administratrs will apprve the STA request and finalize their review f the cmpany s applicatin fr a prject estimate sheet. Step 7: Prvided that the prject estimate sheet was granted, each time that the cmpany makes a MIDMTC claim fr the prject, the MIDMTC administratrs will verify that any nn-manitba residents fr whm eligible labur csts are being claimed were apprved under the STA prcess at the prject estimate sheet stage (i.e. befre the prject began). The MIDMTC administratrs will als require that the applicant cmpany submit a Skills Transfer Allwance Declaratin Frm that has been filled in and signed by bth the nn-resident(s) and the lcal prfessinal(s) they trained in rder t verify that the nn-manitba resident(s) did indeed cme t Manitba fr the duratin f their eligible wrk n the prject, and did indeed prvide training t ne r mre Manitba residents wh were als wrking n the prject. 28

29 APPENDIX F: Marketing and distributin supprt in the case f c-prductins As utlined n page 11 abve, if an applicant cmpany is undertaking an eligible MIDMTC prject under the terms f a c-prductin agreement with an arm s length partner, the prject may r may nt qualify fr marketing and distributin supprt. The decisin as t whether r nt the prject will qualify is made by the MIDMTC administratrs n a case-by-case basis, and is based n whether the applicant cmpany is deemed t have an acceptable wnership/revenue stake in the prject. Once a decisin is made by the MIDMTC administratrs, it cannt be appealed by the cmpany. T infrm their decisin, the MIDMTC administratrs will review the cntract r written agreement gverning the c-prductin (which will have been submitted by the applicant cmpany when it applied fr a prject estimate sheet) and assess: The degree t which the applicant cmpany is investing int the develpment f the prduct (i.e. the amunt f ttal prject csts being financed by the applicant cmpany); Whether r nt the applicant cmpany will wn the prduct nce it is develped (r will have sme degree f wnership ver the final prduct); and Whether r nt the applicant cmpany will receive a share f the revenues that will be generated by the prduct nce it is cmmercialized (and if s, what (%) share f revenues the applicant cmpany will receive). Based n their assessment, if the MIDMTC administratrs determine that the applicant cmpany has an acceptable wnership/revenue stake in the prject, then the MIDMTC administratrs may allw the applicant cmpany t access marketing and distributin supprt fr the prject. This supprt will nt exceed the $100,000 cap n eligible marketing and distributin csts that can be claimed per MIDMTC prject, but the MIDMTC administratrs may als impse a lwer cap amunt, based n the applicant cmpany s specific wnership/revenue stake: Fr example: An applicant cmpany has an eligible MIDMTC prject where it is develping and cmmercializing an eligible interactive digital media prduct under the terms f a c-prductin agreement with an arm s length partner. If under the terms f the c-prductin agreement, the applicant cmpany will have full wnership f the final prduct and will receive 75% f the revenues generated by that prduct, then the MIDMTC administratrs culd decide t allw the applicant cmpany t claim eligible marketing and distributin csts it incurs and pays n the prject, up t a $75,000 cap fr the prject (i.e. 75% f the MIDMTC prgram s $100,000 cap n eligible marketing and distributin csts that can be claimed per prject). The MIDMTC administratrs wuld have decided t impse the $75,000 cap fr the prject based n their assessment f the applicant cmpany s specific wnership/revenue stake in the prject. It is imprtant t nte that if the applicant cmpany des nt have a true wnership/revenue stake in the prject (e.g. if the applicant cmpany will nly be receiving ryalties frm the prduct; r a flat amunt f revenue that the prduct generates, regardless f its ptential level f success n the market), then the prject will nt qualify fr marketing and distributin supprt. Similarly, if the prduct is being sld by ne r mre f the c-prductin partners t ne r mre purchasers under cntract, the prject will nt qualify fr marketing and distributin supprt. Finally, if an applicant cmpany is undertaking an eligible MIDMTC prject under the terms f a c-prductin agreement with an arm s length partner, and the MIDMTC administratrs decide that the prject can claim eligible marketing and distributin csts (up t $100,000 r a lwer cap amunt the MIDMTC administratrs impse fr the prject), then nly the eligible marketing and distributin csts that were incurred and paid by the applicant cmpany will be able t be claimed. N marketing and distributin csts that were incurred and/r paid by the c-prductin partner (r any entity ther than the applicant cmpany) will be cnsidered eligible marketing and distributin csts that the applicant cmpany can claim fr MIDMTC supprt. 29

30 APPENDIX G: Examples f ptential eligible marketing and distributin csts fr a MIDMTC prject This appendix prvides a list f sme ptential types f eligible marketing and distributin csts fr MIDMTC prjects. The list is nt exhaustive; and as nted n page 11 abve, the MIDMTC administratrs are respnsible fr deciding whether r nt a specific marketing r distributin cst that an applicant cmpany incurs and pays n a prject will be cnsidered an eligible marketing and distributin cst that can be claimed fr MIDMTC supprt. If a specific MIDMTC prject des nt qualify fr marketing and distributin supprt, then any marketing and/r distributin csts that the cmpany incurs during the prject perid wuld be cnsidered ineligible labur csts r ineligible nn-labur csts in its MIDMTC prject budget (and bviusly culd nt be claimed). Similarly, if a MIDMTC prject des qualify fr marketing and distributin supprt, but a specific marketing r distributin cst fr the prject des nt meet the MIDMTC criteria fr eligible marketing and distributin csts (as described n pages 11 t 14 f these guidelines), then that cst wuld be cnsidered an ineligible labur cst r ineligible nn-labur cst fr the prject (and bviusly culd nt be claimed). Eligible marketing and distributin csts fr a MIDMTC prject culd include labur and/r nn-labur csts fr: Marketing strategies that are specific t the eligible prduct, and/r wrk t market r prmte the eligible prduct (e.g. by marketing managers/cnsultants/strategists, publicists, salespeple, etc.); Advertising the eligible prduct in print and/r electrnic media (including design and preparatin); Direct mail marketing and/r telemarketing (including design and preparatin); Attending trade shws and/r ther events r meetings t prmte the eligible prduct; Media events, prmtinal events, news releases, and/r media kits (including design and preparatin); Market research and/r fcus grup testing that is specific t the eligible prduct; Designing and prducing branding and/r visual identity (e.g. lgs) fr the eligible prduct; Prduct trailers, previews and/r dems; Merchandising and/r prmtinal prducts (e.g. t-shirts) that are specific t the eligible prduct (including design and preparatin); Preparing the eligible prduct fr display r demnstratin; In-stre prmtins and/r prduct samples; and Distributin f the eligible prduct (e.g. web hsting and/r server expenses) with the exceptin f csts related t prcessing an rder by, r shipping an rder t, a cnsumer wh purchased the eligible prduct directly frm the cmpany. The fllwing shuld be nted with respect t the ptential types f eligible marketing and distributin csts listed abve: Sales wrk that relates t prmting/marketing the eligible prduct (e.g. t target clients) can be claimed as an eligible marketing and distributin cst fr the prject, but sales wrk that relates t clsing r prcessing an actual sale cannt be claimed. When attending trade shws and/r ther events/meetings t prmte the eligible prject, cmpanies can ptentially claim the fllwing types f csts (prvided that the trade shw/event/meeting is lcated utside f Winnipeg r the city/twn in which the cmpany is based): primary travel t get t/frm the event (e.g. airfare); accmmdatins (fr day(s) that eligible marketing and distributin csts are being incurred); trade shw/event/meeting fees r csts (e.g. cnference registratins); business meals and/r entertainment csts that are directly related t prmting the eligible prduct (e.g. hsting a dinner meeting t discuss a ptential distributin deal fr the prduct). Csts fr incidentals while at the trade shw/event/meeting cannt generally be claimed (e.g. taxis r ther grund transprtatin while at the event, parking charges, meals and snacks (that are nt directly related t prmting the eligible prduct), gratuities, per diems and/r ther miscellaneus csts). The applicant cmpany must actually pay fr the marketing r distributin cst it wishes t claim. Any cst that the cmpany cvers using pints r credits cannt be claimed as an eligible marketing and distributin cst. Fr example, a cmpany cannt cver the cst f a flight t a trade shw using frequent flyer pints it has accumulated and then claim the cst f that flight as an eligible marketing and distributin cst fr the prject. A spnsrship cst can nly be claimed as an eligible marketing and distributin cst if it buys an pprtunity t prmte the eligible prject (and nt simply the cmpany r its verall prducts/services in general). Alchl is never eligible t be claimed as part f an eligible marketing and distributin cst fr a prject. Generally, an eligible marketing and distributin cst must be ver $50 t be included in a MIDMTC claim. 30

31 APPENDIX H: The MIDMTC grind frmula As utlined n page 15 abve, MIDMTC supprt fr eligible prject csts is reduced by any ther surce(s) f gvernment assistance being used t supprt thse csts. Different types f gvernment assistance grind dwn MIDMTC supprt fr a prject in different ways, but always accrding t the MIDMTC grind frmula, which is explained in detail in this Appendix. Each time that a cmpany applies fr a prject estimate sheet r submits a claim fr a MIDMTC tax credit certificate fr an eligible prject, it will have t prvide infrmatin n: Hw the csts f the prject are being financed; and Whether r nt any f the csts included in its MIDMTC prject budget/claim are being claimed twards anther Manitba crprate tax credit (r crprate tax credit in anther Canadian prvince/territry (P/T). If the surce(s) f financing that the cmpany identifies include any gvernment assistance (as defined by the MIDMTC legislatin); r if any f the prject csts are being claimed twards anther Manitba r P/T tax credit, then the MIDMTC grind frmula will apply. Additinally, at a claim stage, if any f the prject csts incurred in the claim perid have nt yet been paid (i.e. deferrals), the value f thse deferrals must be listed as part f the prject financing fr the perid and will be included in the grind calculatin. The MIDMTC grind frmula mves chrnlgically thrugh three steps: 1. Deferrals 2. Other tax credit claims 3. Supprt frm grants / ther funding prgrams If ne f the steps in the frmula des nt apply t a prject at a certain applicatin r claim stage (e.g. at a claim stage, if the applicant cmpany did nt receive any grants t supprt the ttal prject csts it incurred ver the crprate tax year being claimed), then that step f the grind frmula is skipped. Step 1: Deferrals: Deferrals may grind a MIDMTC claim because f the requirement that eligible labur csts and eligible marketing and distributin csts must be bth incurred and paid in rder t qualify fr MIDMTC supprt. If at a certain claim stage, there are prject csts that have been incurred but nt yet paid by the applicant cmpany, thse csts shuld still be included as part f the ttal prject csts fr the claim perid that the cmpany will identify in its MIDMTC applicatin & claim frm fr the prject. The cmpany will have t identify the ($) amunt f the csts that were deferred, hwever, and nne f thse csts can be claimed as eligible labur csts fr the perid (nte that the MIDMTC applicatin & claim instructins prvide detailed infrmatin n hw this prcess is undertaken). Each time that deferrals are identified, the ($) amunt f thse deferrals will be remved frm the MIDMTC prject (i.e. frm ttal prject csts and, if applicable, eligible prject csts) until such time as they are paid by the applicant cmpany. Eligible csts that are deferred in a given MIDMTC claim perid (e.g. crprate tax year), but paid by the applicant cmpany in a subsequent claim perid (e.g. tax year), can be included in the cmpany s MIDMTC claim fr that subsequent perid prvided that: Payment f the eligible csts still ccurred within the prject perid (r within 12 mnths f the prject end date, in the case f eligible marketing and distributin csts); and Payment f the csts was nt ultimately determined by reference t prfits r revenues (as these types f csts are nt cnsidered eligible fr MIDMTC supprt see pages 10 and 13 abve). The example belw shws hw Step 1 f the MIDMTC grind frmula is applied when a cmpany has deferred payment f prject csts it incurred in a given claim perid: Over the first crprate tax year a cmpany s MIDMTC prject was underway (i.e. its first interim claim perid), the cmpany incurred ttal prject csts f $280,000 f which $220,000 were eligible prject csts as defined by the MIDMTC prgram. Of the $280,000 in ttal prject csts fr the perid, the cmpany had deferred $10,000 f $20,000 in csts incurred fr 3D prgramming wrk perfrmed by ne f the cmpany s emplyees, and a full $5,000 in accunting csts fr wrk perfrmed by a 3 rd party cntractr that the cmpany had nt yet paid. Step 1 f the MIDMTC grind frmula is therefre applied as fllws: Step 1a): Ttal prject csts ver the claim perid ttal deferrals ver the claim perid $280,000 ($10,000 + $5,000) $265,000 = new ttal prject csts after Step 1 f the MIDMTC grind frmula Step 1b): Ttal eligible prject csts ver the claim perid SUM f: (each cst ver the claim perid that was deferred, in whle r in part amunt f each cst that was deferred) x MIDMTC cunt rate fr that type f cst--i.e. 100%, 65% r 0%) 31

32 Step 2: Other tax credit claims: $220,000 ((($20,000 $10,000) x 100%) + (($5,000 $5,000) x 0%)) $210,000 = new eligible prject csts after Step 1 f the MIDMTC grind frmula Ntice that all deferrals reduce the value f ttal prject csts fr a given claim perid, but nly deferrals that wuld therwise have been cnsidered eligible prject csts fr the perid reduce the value f ttal eligible prject csts fr the perid (since any ineligible csts deferred wuld nt have been claimable fr MIDMTC supprt even if they wuld have been paid in the perid). As nted n pages 10 and 14 abve, the MIDMTC legislatin prhibits any cst that is being claimed twards anther Manitba tax credit r a tax credit in anther Canadian P/T frm being included in a MIDMTC prject budget/claim (i.e. n duble cunting ). Once exceptin t this rule is fr the Manitba C-p Educatin and Apprenticeship Tax Credits (nw called the Manitba Paid Wrk Experience Tax Credits). In rder t encurage the hiring f qualified students and graduates in the prvince, a prject cst being claimed t that tax credit prgram can als be included in a MIDMTC prject budget; and, if it qualifies as an eligible prject cst, can be claimed twards a MIDMTC tax credit withut any grind. Because a cmpany will knw if specific MIDMTC prject csts are ging t be claimed twards anther Manitba r P/T tax credit (like the Manitba Film and Vide Prductin Tax Credit (MFVPTC), fr example), it is easiest fr the cmpany t simply mit thse csts frm its MIDMTC budget/claim(s) (i.e. nt include any f thse csts in its calculatin f ttal prject csts (and therefre, eligible prject csts) at any f the applicatin r claim stages f its MIDMTC prject). If the cmpany des chse t include any f thse csts in its MIDMTC budget/claim(s), then it must identify the ($) amunt f thse csts, and they will be subtracted frm the ttal prject csts and, if applicable, eligible prject csts fr the prject using the same calculatin as is used fr deferrals. Using the same example as abve, Step 2 f the MIDMTC grind frmula is applied as fllws: After Step 1 f the MIDMTC grind frmula, a cmpany has ttal prject csts f $265,000 and eligible prject csts f $210,000. In additin t deferrals, the cmpany has identified that $30,000 f $60,000 in animatin csts it paid t a 3 rd party cntractr will be included in a MFVPTC claim it is making (as the animatin wrk is being used bth in the interactive prduct and in an assciated film prject that the cmpany is undertaking). Step 2 f the MIDMTC grind frmula is therefre applied as fllws: Step 2a): Ttal prject csts ver the claim perid (after Step 1 f the MIDMTC grind frmula) ttal value f prject csts ver the claim perid that are being claimed t ther Manitba r P/T tax credit(s) $265,000 $30,000 $235,000 = new ttal prject csts after Steps 1&2 f the MIDMTC grind frmula Step 2b): Ttal eligible prject csts ver the claim perid (after Step 1 f the MIDMTC grind frmula) SUM f: (each cst ver the claim perid that is being claimed, in whle r in part, t anther Manitba r P/T tax credit amunt f each cst that is being claimed t the ther credit) x MIDMTC cunt rate fr that type f cst--i.e. 100%, 65% r 0%) $210,000 (($60,000 $30,000) x 65%) $190,500 = new eligible prject csts after Steps 1&2 f the MIDMTC grind frmula As was the case fr deferrals, all csts being claimed t anther Manitba r P/T tax credit reduce the value f ttal prject csts fr a given claim perid, but nly thse csts that wuld therwise have been cnsidered eligible prject csts fr the perid reduce the value f ttal eligible prject csts fr the perid. SR&ED and the Manitba R&D Tax Credit: As nted n page 10 abve, it is pssible fr a cmpany t claim bth a MIDMTC Tax Credit and federal Scientific Research & Experimental Develpment (SR&ED) Tax Credit fr a given prject prvided that the csts being claimed under each prgram are eligible under each prgram, and prvided that the cmpany s SR&ED claim is grund dwn based n the MIDMTC supprt that was received fr eligible csts it is including in its SR&ED claim. If a cmpany is making bth a SR&ED claim and MIDMTC claim fr a given prject, it must first claim all its eligible prject csts under the MIDMTC prgram regardless f what it is claiming under SR&ED. Then, when the cmpany submits its SR&ED claim (fr the eligible csts it incurred under the criteria f that prgram), it will need t grind dwn that claim based n any eligible csts that were already claimed fr MIDMTC supprt. If the cmpany is als claiming a Manitba R&D Tax Credit fr the prject, nne f the csts the cmpany had included in its MIDMTC claim can be claimed again fr Manitba R&D Tax Credit supprt (as per Step 2 abve). Cmpanies wh are interested in accessing the MIDMTC, SR&ED and/r the Manitba R&D Tax Credit fr a given prject shuld speak with an accuntant. 32

33 Step 3: Supprt frm grants / ther funding prgrams The MIDMTC prgram splits grants and ther funding prgrams that a cmpany may be accessing fr a given prject int tw main categries: 1. Grants/funding prgrams that prvide repayable supprt; and 2. Grants/funding prgrams that prvide nn-repayable supprt. As per the MIDMTC legislatin, repayable funding that a cmpany receives t help supprt a prject will nt grind dwn MIDMTC supprt fr that prject. Tax plicy dictates that the ($) amunt(s) f repayable assistance received fr the prject must, hwever, be included in the MIDMTC stacking cap calculatins fr the prject (see mre infrmatin abut this requirement in Appendix I). Nn-repayable funding that a cmpany receives t help supprt a prject will grind dwn MIDMTC supprt fr that prject. The way the grind is applied depends n the type f nn-repayable funding being received. Again, the MIDMTC prgram splits prgrams int tw categries: 1. Grants/funding prgrams that prvide very selective supprt t specific, pre-determined prject csts (which the MIDMTC administratrs refer t as targeted grant funding ); and 2. Grants/funding prgrams that prvide mre general supprt t a prject/cmpany verall (which the MIDMTC administratrs refer t as general grant funding ). Hw are targeted grant funding and general grant funding different? As nted abve, sme grants/funding prgrams are quite selective (r targeted ) in the supprt that they prvide. Generally, they prvide smaller amunts f funding fr specific, pre-determined prject csts that are ften quite narrw in scpe. Specific prject csts that the prgram funding will supprt are usually identified at the discretin f the funder, nt the applicant, and can be set in advance f the funding being apprved. As a result, with these grants/prgrams, the applicant cmpany will be able t clearly identify (and the MIDMTC administratrs will be able t clearly verify) which specific csts in a MIDMTC prject budget/claim are being supprted (in whle r in part) by surce(s) f targeted grant funding. The ($) value f the targeted grant funding (e.g. that is received in a given claim perid) will therefre be subtracted frm ttal prject csts and, if applicable, eligible prject csts, using the same calculatin as fr deferrals and ther tax credit claims (i.e. Steps 1 & 2 f the MIDMTC grind frmula abve). Other grants/funding prgrams are mre general in their supprt aiming t help fund an verall prject, r even cmpany, rather than just a very targeted set r type f csts. It is imprtant t nte that these grants/prgrams will nrmally still identify types f csts that can and cannt be supprted, but this eligibility criteria is brader in scpe, and the underlying intent is t prvide mre general/flexible supprt t a qualifying prject r cmpany. In sme cases f general grant funding, the applicant cmpany will nt be able t clearly identify (r the MIDMTC administratrs will nt be able t clearly verify) which specific csts in the MIDMTC prject budget/claim are being supprted by the funding. Or, in cases where the specific prject csts culd be identified, they wuld likely apply t a wider range f prject csts r t csts that the cmpany had the discretin t select (based n brad, verall criteria fr eligible/ineligible csts that the prgram set ut fr applicants). As a result, the MIDMTC grind calculatin fr general grant funding will nt fllw the same frmat as the grind calculatin fr deferrals, ther tax credit claims and targeted grant funding. Instead, it reduces the cmpany s MIDMTC claim fr an eligible prject by prrating the amunt f general grant funding that went t eligible prject csts vs. ineligible prject csts (accrding t the calculatin belw). Generally, very few grants/funding prgrams will be cnsidered targeted grant funding fr the purpses f the MIDMTC grind frmula. The vast majrity f grants and ther, nn-repayable funding prgrams that a cmpany is likely t be accessing fr a MIDMTC prject fall int the general grant funding categry. It is als imprtant t nte that the decisin as t whether supprt a cmpany is accessing will be cnsidered targeted grant funding, general grant funding, r repayable grant funding (fr the purpses f the MIDMTC prgram) is made by the MIDMTC administratrs, nt the applicant cmpany. Additinally, cmpanies receiving general grant funding fr a prject cannt chse t direct it t set f specific prject csts in an attempt t have the MIDMTC administratrs cnsider it as targeted grant funding fr the prject. 33

34 Using the same example as abve, Step 3 f the MIDMTC grind frmula is applied as fllws. Nte that if a cmpany is accessing bth targeted grant funding and general grant funding fr a prject (e.g. in a given claim perid), the grind fr targeted grant funding is always calculated befre the grind fr general grant funding: After Steps 1 & 2 f the MIDMTC grind frmula, a cmpany has ttal prject csts f $235,000 and eligible prject csts f $190,500. In additin t deferrals and its MFVPTC claim, the cmpany has identified that ver the tax year (i.e. the current claim perid), it received $40,000 in CSB stream 1 funding t help supprt the develpment f the prduct; and $10,000 in CSB stream 3 funding, t cver 50% f apprved csts it paid t attend a trade shw t prmte the prduct. Since the MIDMTC administratrs cnsider CSB stream 1 t be general grant funding, and CSB stream 3 t be targeted grant funding, Step 3 f the MIDMTC grind frmula is applied as fllws: Step 3a): Targeted grant funding calculatin: Ttal prject csts ver the claim perid (after Steps 1&2 f the MIDMTC grind frmula) ttal value f targeted grant funding received ver the claim perid $235,000 $10,000 $225,000 = new ttal prject csts after Steps 1, 2 & 3a f the MIDMTC grind frmula Ttal eligible prject csts ver the claim perid (after Steps 1&2 f the MIDMTC grind frmula) SUM f: (each cst ver the claim perid that was supprted, in whle r in part, by targeted grant funding amunt f each cst that was supprted by targeted grant funding) x MIDMTC cunt rate fr that type f cst--i.e. 100%, 65% r 0%) $190,500 (($20,0000 $10,000) x 100%) $180,500 = new eligible prject csts after Steps 1, 2 & 3a f the MIDMTC grind frmula THEN: Step 3b): General grant funding calculatin: 1) Ttal eligible prject csts after Steps 1, 2 & 3a f the MIDMTC grind frmula ttal prject csts after Steps 1, 2 & 3a f the MIDMTC grind frmula = % f ttal prject csts that are eligible prject csts 2) Ttal value f general grant funding received ver the claim perid x % f ttal prject csts that are eligible prject csts = Value f general grant funding ver the claim perid that supprted eligible prject csts 3) Ttal eligible prject csts after Steps 1, 2 & 3a f the MIDMTC grind frmula general grant funding ver the claim perid that supprted eligible prject csts = new eligible prject csts after the full MIDMTC grind frmula has been applied $180,500 $225,000 = $40,000 x = $32,089 $180,500 $32,089 = $148,411 = eligible prject csts after the full MIDMTC grind frmula has been applied Nte that general grant funding will nly reduce eligible prject csts it will nt reduce ttal prject csts the way deferrals, ther tax credit claims and targeted grant funding d. As such, the last value f ttal prject csts that is calculated as the MIDMTC administratrs mve thrugh the applicable steps f the MIDMTC grind frmula fr a given prject will be used as the ttal prject csts fr that prject after the full MIDMTC grind. Fr the example abve: $225,000 = ttal prject csts after the full MIDMTC grind frmula has been applied 34

35 APPENDIX I: Stacking rules As utlined n page 15 abve, in additin t the MIDMTC grind frmula that is applied when a prject is accessing ther surce(s) f gvernment assistance; the MIDMTC prgram als stipulates that n mre than 100% f ttal prject csts can be financed by gvernment assistance (including the ($) amunt f MIDMTC tax credit(s) that the cmpany receives fr the prject). Many ther gvernment funding prgrams and tax credits als enfrce stacking caps. Fr example, the Cmmercializatin Supprt fr Business (CSB) prgram stipulates that n mre than 50% f ttal prject csts can be financed thrugh surces f gvernment assistance. As a result, when a MIDMTC prject is accessing ne r mre ther surces f gvernment supprt, the MIDMTC administratrs will determine what stacking caps (if any) that each f thse ther prgrams enfrces; in rder t identify the lwest stacking cap that applies t the prject (r if nne f the ther prgrams enfrce stacking caps, then the 100% MIDMTC cap will apply). The MIDMTC administratrs will then add up the ($) amunts f MIDMTC tax credit(s) and ther surces f gvernment assistance that have been prvided t supprt the prject t ensure that the ttal ($) amunt f supprt des nt exceed the maximum percentage f ttal prject csts that the lwest stacking cap enfrces. It is imprtant that the lwest stacking cap be used in this calculatin; as therwise, MIDMTC supprt fr the prject might push it ver the stacking rules f ne f the ther funding prgrams being accessed (and may create issues fr the verall prject financing). There are tw imprtant ntes regarding hw targeted grant funding and repayable grant funding are handled fr the purpses f the MIDMTC stacking cap calculatin: First, thugh the MIDMTC grind frmula remves any targeted grant funding frm a cmpany s MIDMTC claim (i.e. reducing ttal prject csts and (if applicable) eligible prject csts by the amunt f targeted grant funding received in a given claim perid; that targeted grant funding must be accunted fr when the MIDMTC stacking rules fr the prject are applied. As such, the MIDMTC stacking cap calculatin uses the ($) value f ttal prject csts that was calculated after the full MIDMTC grind frmula, plus the ($) value f targeted grant funding (if any) that had been remved as part f that grind calculatin. If the targeted grant funding prgram has a stacking cap, it will be included when the lwest applicable stacking cap fr the prject is identified. Secnd, thugh repayable grant funding is nt included in the MIDMTC grind frmula (as nted abve), tax plicy dictates that it must be included in the stacking cap calculatin. All r a prtin f the MIDMTC tax credit a cmpany earned fr an eligible prject may be withheld if the sum f repayable grant funding + gvernment assistance + MIDMTC tax credit(s) fr the prject exceeds the lwest stacking cap enfrced amng thse funding prgrams. If, hwever, all r a prtin f the repayable grant funding that was accessed by the cmpany is repaid within three years f the MIDMTC prject end date, the cmpany can apply t have the MIDMTC administratrs red the stacking rules calculatin fr the prject. Shuld the repaid funding bring the ttal f: [repayable assistance nt yet repaid (if any) + ther gvernment assistance used t supprt the prject + MIDMTC tax credit(s) issued fr the prject] back under the lwest applicable stacking cap fr the prject, all r a prtin f the MIDMTC tax credit that was withheld due t stacking limits may be issued t the cmpany at that pint. An example f hw the MIDMTC stacking rules are applied t prjects is prvided belw: After the full MIDMTC grind frmula (as utlined in Appendix H abve), a cmpany has ttal prject csts f $225,000 and eligible prject csts f $148,411. In additin t all the surces f gvernment assistance that were utlined in the grind frmula, the cmpany als received $10,000 frm the Western Innvatin Initiative (WINN) and $10,000 frm the Canada Media Fund (CMF) Experimental Stream. Since bth f these prgrams are cnsidered repayable grant funding under the MIDMTC prgram, the MIDMTC stacking rules calculatin fr the prject is applied as fllws: 1) Based n eligible prject csts, prir t the stacking rules calculatin, the cmpany is eligible t receive a MIDMTC tax credit f $59,364 (i.e. $148,411 x 40%). 2) The ttal amunt f gvernment assistance (including MIDMTC credit) + repayable grant funding supprting the prject currently is: $50,000 CSB 50% stacking cap $10,000 WINN 50% stacking cap $10,000 CMF 100% (n stacking cap) $59,364 MIDMTC 100% stacking cap $129,364 = Ttal amunt f gvernment assistance (including MIDMTC credit) + repayable grant funding 35

36 3) The lwest stacking cap that applies t the prject is 50%. As a result, the maximum amunt f ttal prject csts that can be financed thrugh gvernment assistance + MIDMTC + repayable grant funding = (Ttal prject csts after the full MIDMTC grind frmula has been applied + ttal ($) value f targeted grant funding (if any) that was remved during the MIDMTC grind frmula) x lwest stacking cap that applies t the prject = ($225,000 + $10,000) x 50% = $117,500 Since the stacking cap is being exceeded (i.e. since $129,364 > $117,500), the MIDMTC administratrs wuld reduce the MIDMTC tax credit fr the prject t $47,500. This wuld ensure that the ttal amunt f gvernment assistance (including MIDMTC credit) + repayable grant funding wuld nt exceed $117,500. If, within three years f the MIDMTC prject s end date, hwever, the cmpany repaid bth the $10,000 in WINN and $10,000 in CMF funding it had received fr the prject, then the cmpany culd apply t have the MIDMTC administratrs red the stacking rules calculatin. With the WINN and CMF funding remved, ttal gvernment assistance (including MIDMTC) fr the prject wuld ttal $97,500; the lwest applicable stacking cap wuld remain 50%; and the maximum amunt f ttal prject csts that culd be financed thrugh gvernment assistance wuld remain $117,500 (i.e. ($225,000 + $10,000) x 50%). Since the stacking cap fr the prject wuld n lnger be exceeded (i.e. since $97,500 < $117,500), the MIDMTC administratrs wuld issue the cmpany the $11,864 in earned MIDMTC tax credit fr the prject that had previusly been withheld (i.e. $59,364 - $47,500). Given hw stacking rules can affect a MIDMTC claim, when a cmpany is cnsidering which surces f gvernment assistance it might use t help finance a prject, the cmpany may wish t cnsider criteria like: the types f prject csts that each prgram can supprt; the relative level f funding that each prgram culd ptentially prvide the prject; and the level f stacking cap (if any) that each prgram wuld impse n the prject verall. Based n thse criteria, it may make sense fr the cmpany t access certain funding prgrams fr a specific prject as ppsed t thers. This cnsideratin becmes even mre relevant fr cmpanies wh are lking t access multiple surces f gvernment assistance fr a given prject. If, at a certain claim stage, a cmpany submits eligible prject csts that were supprted by anther funding prgram and that funding prgram enfrces a stacking cap which is lwer than the MIDMTC s 100% cap the cmpany cannt remve thse prject csts at a later claim stage, in rder t lift the stacking cap that the funding which supprted thse csts has nw impsed n the prject verall (even if that cap is nw ptentially limiting the cmpany s current/future MIDMTC claim(s) fr the prject). Als nte that the MIDMTC administratrs (nt applicant cmpanies) are respnsible fr applying the stacking rules calculatin t MIDMTC prjects. The MIDMTC administratrs can prvide cmpanies with infrmatin n the specific stacking caps that ther funding prgrams enfrce, and this infrmatin is nrmally included in the prgram guidelines fr thse ther funding prgrams as well. Cntact infrmatin fr the MIDMTC administratrs is prvided n the cver page f these guidelines. 36

37 APPENDIX J: Prjects being develped fr a gvernment purchaser As utlined n page 16 abve, if an applicant cmpany is develping a prduct fr sale r licence primarily t a gvernment purchaser, it may limit the MIDMTC tax credit that the cmpany can claim fr that prject. Whether r nt the limit will apply depends n the type f gvernment purchaser that the prduct is being develped fr. The fllwing types f gvernment purchasers will limit the MIDMTC claim fr an eligible prject: The Gvernment f Manitba r an agency f the Gvernment f Manitba; A crpratin cntrlled by the Gvernment f Manitba r by an agency f the Gvernment f Manitba (e.g. a crwn crpratin); A Manitba municipality r agency f a Manitba municipality; and A crpratin cntrlled by a Manitba municipality r by an agency f a Manitba municipality. The fllwing types f gvernment purchasers will nt limit the MIDMTC claim fr an eligible prject: The federal gvernment r an agency f the federal gvernment; A crpratin cntrlled by the federal gvernment r by an agency f the federal gvernment; Anther Canadian prvincial gvernment r an agency f anther Canadian prvincial gvernment; A crpratin cntrlled by anther Canadian prvincial gvernment r by an agency f anther Canadian prvincial gvernment; A nn-manitba municipality r agency f a nn-manitba municipality; A crpratin cntrlled by a nn-manitba municipality r by an agency f a nn-manitba municipality; A nn-canadian gvernment r an agency f a nn-canadian gvernment; and A crpratin cntrlled by a nn-canadian gvernment r by an agency f a nn-canadian gvernment. When the type f gvernment purchaser will limit a prject s MIDMTC claim, that cap is calculated as fllws: Example #1: Ttal prject csts = $100,000 and eligible prject csts = $80,000 Gvernment f Manitba paid $100,000 fr the prduct; and Gvernment f Manitba did nt subsequently sell/licence the prduct: Amunt f MIDMTC tax credit must be [$100,000 ($100,000 - $0)] Amunt f MIDMTC tax credit must be $0 = N MIDMTC tax credit can be claimed Example #2: Ttal prject csts = $150,000 and eligible prject csts = $80,000 Gvernment f Manitba paid $100,000 fr the prduct; and Gvernment f Manitba did nt subsequently sell/licence the prduct Amunt f MIDMTC tax credit must be [$150,000 ($100,000 - $0)] Amunt f MIDMTC tax credit must be $50,000 Amunt f MIDMTC tax credit = eligible prject csts x 40% = ($80,000 x 40%) Amunt f MIDMTC tax credit = $32,000 Since $32,000 $50,000 = cmpany can claim the full $32,000 MIDMTC tax credit earned Example #3: Ttal prject csts = $100,000 and eligible prject csts = $80,000 Gvernment f Manitba paid $100,000 fr the prduct; and Gvernment f Manitba subsequently licensed the prduct fr $25,000 Amunt f MIDMTC tax credit must be [$100,000 ($100,000 - $25,000)] Amunt f MIDMTC tax credit must be $25,000 Amunt f MIDMTC tax credit = eligible prject csts x 40% = ($80,000 x 40%) Amunt f MIDMTC tax credit = $32,000 Since $32,000 is nt $25,000 = cmpany can nly claim a $25,000 MIDMTC tax credit 37