Ontario is making a play for digital entertainment creators. And for developers of iGaming websites and apps, the Ontario Interactive Digital Media Tax Credit (OIDMTC) is an attractive incentive to come to the table.
First introduced in 1998, the OIDMTC is a refundable tax credit awarded to qualifying companies working on games or interactive digital products whose primary purpose is to entertain their users, of any age, or to educate children under 12. It is available to Canadian corporations (domestic or foreign-owned) set up within the province who can apply for either:
- A 40 per cent tax credit, available to companies that develop and sell their own products (e.g., “non-specified products”)
- A 35 per cent tax credit, available to help fund the development of interactive digital products made by a developer in Ontario on behalf of a party outside of Canada.
- A 35 per cent tax credit if they meet the requirements for a Qualifying Digital Game Corporation or a Specialized Digital Game Corporation.
Applying for the OIDMTC's tax credits is a two-step process. First, companies must submit an application and supporting documents through the Ontario Creates online portal. Then, applicants may wait six months to a year to find out the results—which, it's worth noting, is a much faster timeline for OIDMTC decisions than in previous years. If a company's application meets all the eligibility requirements, it will receive a certificate from Ontario that will need to be submitted to the CRA to secure the credit. Finally, the CRA may decide to accept the claim as filed or conduct an audit of the expenditures claimed.
Positioning to win
Website and app creators in the gambling space are among those eligible for the OIDMTC. Before making the application, however, it pays to understand how Ontario defines the term “game” and which iGaming products will have the best odds of qualifying.
For one, the province's intent behind the OIDMTC isn't to fund games of pure chance. To qualify, digital products must have an interactive element that goes beyond pulling a slot handle or rolling virtual dice. That's not to say the website or app cannot involve playing for money, only that it should include additional interactive elements if the goal is to receive the tax credit.
Here's an example. Recently, one of our clients developed a slot machine app that successfully received the OIDMTC. It did so by incorporating the ability to play differently-themed slot machines from around the world while collecting points to compete against other players. Moreover, the app includes skill-based challenges that elevate it beyond a typical slot machine experience.
This is just one strategy used to successfully position a gambling website or app for the OIDMTC credit. Others might involve breaking up traditional casino activities with mini-games (e.g., match-three, hidden object, etc.) or coding in competitive multiplayer challenges and tournaments. Ultimately, the idea is to pull up to OIDMTC's table with a product that is "primarily" an interactive gaming experience.
Sizing up the field
It can be tricky determining whether an iGaming product has the right elements to qualify for the OIDMTC. It can also be difficult deciding which of the tax credit regimes one can (or should) pursue. In truth, there are many ways to approach applying for the OIDMTC. And, after years of experience in this ever-evolving space, KPMG has developed a solid understanding of which products have the best chances of receiving funding and what separates them from other industry products. This guides us in helping iGaming clients identify their qualifying eligibility, form a solid application, and defend their claims at both the Ontario and CRA levels.
Note, too, that Canada’s Scientific Research and Experimental Development (SR&ED) program is worth consideration when applying for the OIDMTC. Elements of the product’s development (e.g., game engine, mathematic models, artificial intelligence, etc.) may qualify for SR&ED tax incentive and, as such, it may work in a company’s favour to claim SR&ED credits first and approach the OIDMTC program for remaining costs.
Here again, knowing not just what can be claimed but also how to navigate multiple digital development credits is an advantage.
Making your play
Ontario is intent on welcoming more digital content creators into the province. The OIDMTC is an opportunity that all interactive digital developers should pursue—but understanding the nuances of the application process is key to gaining a winning position.
There are a lot of pieces on this digital board. As you start playing with yours, give one of us a call. We’ll help you make sure you’ve considered all possible moves before you need to actually make them.
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