May 28, 2019 4:25 pm
Updated: May 29, 2019 3:42 pm

Ontario government easing access to tax credits for video game developers

The Ontario Government announced on Tuesday that it will be changing the thresholds for qualifying for the Ontario Interactive Digital Media Tax Credit to make it easier for smaller developers to receive the credit.

EPA/Enric Fontcuberta

Smaller video game development companies in the province are about to get a boost as the Ontario government announced Tuesday its intentions to ease access to tax credits for smaller operations.

As of right now, video game companies can apply for tax credits from the province after completing a game project. The company had to spend at least $1 million each fiscal year in labour cost to qualify for the credit.

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Now, under the new rules, companies will be able to apply annually as opposed to when the game is done, which usually takes several years to complete. On top of that, the spending threshold for labour has been reduced to $500,000 per year in order to make it easier for smaller teams to qualify.

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In a government release, economic development, job creation and trade minister Todd Smith says this proposal is all part of the PC government’s initiative that Ontario is “open for business.”

“We’re committed to making Ontario an even better place for video game developers to do business,” said Smith. “The current tax credit certification process is slow and complex, leaving some companies waiting more than a year for tax credits they’re entitled to.”

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The change, according to the government, is part of the 2019 provincial budget, and is all part of the certification of the Ontario Interactive Digital Media Tax Credit. Eligible companies include those who develop video games and other digital products, such as e-learning tools and virtual reality experiences.

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Jean-Sylvain Sormany, studio head for Snowed In Studios, a developer in Ottawa, says the change will create a huge benefit and advantage for developers in the province, especially the smaller ones.

“I think this change is great. One of the problems is the complexity of the application process,” said Sormany. “The easier access allows them to grow faster in a positive enterprise.”

According to Sormany, the credit can cover between 35 and 40 per cent of costs for labour towards game production, and with the ability to apply for this credit annually, this change aligns the credit with similar ones found in other provinces.

Sormany even goes so far to say that his own company has been able to grow from around 25 developers to 65 in one year thanks, in part, to the tax credit — and that was the older model.

Now the $500,000 minimum to qualify for this credit will apply to smaller development teams which average around 10 employees, but not startups of three or four, Sormany says.

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