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So I read that there are various tax credits for video game companies across Canada. I'm thinking of starting up a video game studio with a friend. Initially it will just be the 2 of us. The expenses will mostly be our salaries, middleware licenses, art assets, and marketing expenses once we launch our first game.
I hear that Quebec has a 37.5% tax credit whereas NS has a 60% credit if you setup shop outside Halifax. Are these for big companies only or does it apply to indie developers as well? I heard that Ontario has a minimum $1 million CAD spend requirement to be eligible for tax credits.
If someone can shed some light on this it would be a big help. Thanks.
I don't know much about the topic, but I found this cool site with news and a blog regarding the video game industry in Montreal, perhaps you can contact them and they can give you some useful info.
50 percent of eligible Nova Scotia labour expenditures; or
25 percent of total expenditures made in Nova Scotia
A 10 percent geographic area bonus on labour expenditures (5 percent bonus on total expenditures) is available for products developed outside the Halifax Regional Municipality.
You may both have the skills to create video games but do you have skills on running a business. If not you should get up to speed by taking some business management courses.
Also you really should have some sort of contract on paper between the two of you on how the business is structured. If this gets big later you'll need this to be in place.
I'll add to the helpful stuff that marc provided -- I'm fairly certain that the Quebec tax credit is only available to corporations (likely NS too), so you'd need to create a corporation in which you and your friend would be the shareholders. You can deal with pretty much any accounting firm for this sort of stuff and they would be able to work out the shareholders' agreement that marc is referring to.
As for the tax credits themselves, notice the key word "eligible labour expenditures". What is "eligible" is province-specific, so you need to go into more detail than the stated rate. There is typically a difference between regular employees and affiliated (non-arm's length) employees: if you're the owner, you could give yourself a higher salary than what you'd give to somebody else. There's nothing wrong with that, but the tax authorities do not want to subsidize that part. I don't know about these specific programs but they're similar to R&D tax credits which I dealt with a long time ago.
I'll add to the helpful stuff that marc provided -- I'm fairly certain that the Quebec tax credit is only available to corporations (likely NS too), so you'd need to create a corporation in which you and your friend would be the shareholders. You can deal with pretty much any accounting firm for this sort of stuff and they would be able to work out the shareholders' agreement that marc is referring to.
As for the tax credits themselves, notice the key word "eligible labour expenditures". What is "eligible" is province-specific, so you need to go into more detail than the stated rate. There is typically a difference between regular employees and affiliated (non-arm's length) employees: if you're the owner, you could give yourself a higher salary than what you'd give to somebody else. There's nothing wrong with that, but the tax authorities do not want to subsidize that part. I don't know about these specific programs but they're similar to R&D tax credits which I dealt with a long time ago.
That's really good info. So I won't get tax credits for salary paid to myself and my friend? Or is it just the part that's higher than average for the industry?
What about payments to contractors? (I'm guessing this would fall under arm's length employees)
That's really good info. So I won't get tax credits for salary paid to myself and my friend? Or is it just the part that's higher than average for the industry?
What about payments to contractors? (I'm guessing this would fall under arm's length employees)
I don't know about any specifics. If I recall correctly from my R&D days, the credit for affiliated persons was lower but there was definitely still something (restrictions, cap in % of time eligible, etc). As for contractors, I can only guess that the treatment for arm's length contractors would parallel employees more closely than, say, expenses not eligible for any special credit. But again, that's just a guess: those programs weren't exactly created to make life easier for business owners from a bureaucratic point of view.
jzhang1, I don't know much about the fiscal aspect of moving to Quebec, but I have a few friends in the graphic design/gaming industry. Based on what they've told me, Montreal is a tremendous city for making contacts in the industry. So many of the big names are here, you could make enough contacts to last you a life-time (career-wise)
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