Qualified corporation

For the purposes of the program, the production company (and the parent company, where applicable) must meet the requirements of the Act and Regulations.

The Department of Canadian Heritage is charged with the regulatory requirement of initially determining whether a company is Canadian-controlled under sections 26 to 28 of the Investment Canada Act.¹ The Canada Revenue Agency is charged with the legislative requirement of determining if the production company is a qualified corporation for the applicable time period. Qualified corporation for a taxation year means a corporation that is throughout the year a prescribed taxable Canadian corporation the activities of which in the year are primarily the carrying on through a permanent establishment (as defined by regulation) in Canada of a business that is a Canadian film or video production business.²

It is important to note that the corporation's primary activity must be in relation to the production of "Canadian films or videos". Consequently, if the business of a corporation includes other activities such as, the rental of equipment or studios, or the distribution of films and videos, or if the corporation is carrying on business outside of Canada, it may not be considered a "qualified corporation" for the purposes of the tax credit program. Furthermore, if the corporation produces films or videos that do not qualify as "Canadian film or video productions", the corporation may also be considered as a non-qualifying corporation. It is therefore conceivable that a corporation may be denied the tax credit by reason of its activities in the year. Production companies should seek to ensure that they are eligible for credit purposes by contacting the Canada Revenue Agency - Income Tax Rulings and Interpretations Directorate.

Furthermore, a corporation that is controlled directly or indirectly in any manner whatsoever by one or more persons, all or part of whose taxable income is exempt from tax under Part I of the Act, or a prescribed labour-sponsored venture capital corporation referred to in section 6701 of the Regulations, is not considered to be a "prescribed taxable Canadian corporation".³

Notes

Subsection 1106(1) of the Regulations, under the definition of "Canadian".
Subsection 125.4(1) of the Act, under the definition of "Qualified Corporation".
Subsection 1106(2) of the Regulations, under the definition of "Prescribed Taxable Canadian Corporation".

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