Appendix V - Breakdown of Production Costs - Animation

The formula for breaking down production costs is aimed at ensuring that the expenses incurred for the production of a film or video meet the requirements set out in subsection 1106(3) of the Income Tax Regulations. Production costs are divided into four categories: Producer expenses and Key creative personnel expenses, Services costs, Laboratory and post-production costs, and Other expenses. Only in the Services and Laboratories categories is the breakdown done on the basis of Canadian or non- Canadian costs. In a television series or collection of films, each episode in the series or each film in the collection must meet the requirements of the Regulations.

1. Producer expenses

This category includes the remuneration (including travel and living expenses and fringe benefits) of the Canadian producer(s) and co-producer(s). All other incumbents of positions performing a producer-related function are in the Services category. Therefore, included in the Services category are the functions of line producer, executive producer, associate producer and all other personnel related to the producer function.

Key creative personnel expenses

This category includes the remuneration (including travel and living expenses and fringe benefits) of the director(s), screenwriter(s), art director(s), director(s) of photography, picture editor(s) and music composer(s), as well as the two highest paid actors/actresses. The payments to assistants must be included in the Services or Laboratories category, as the case may be.

2. Services

The Regulations stipulate that not less than 75 per cent of the total of all costs for services provided in respect of producing the production (other than excluded costs) was payable to, and in respect of services provided to or by individuals who are, Canadians. Excluded costs are: (a) costs determined by reference to the amount of income from the production; (b) remuneration payable to, or in respect of, the producer or key creative personnel; (c) amounts payable in respect of insurance, financing, brokerage, legal and accounting fees, and similar amounts; and (d) costs relating to the post-production stage.

This category includes the remuneration of incumbents of positions related to the producer function (other than a Canadian producer or co-producer), the remuneration of the creative and technical personnel (other than the key creative personnel), and the benefits and travel and living expenses connected with these functions.

As a rule, the determination as to whether the travel and living expenses are in the Canadian or non-Canadian category is based on the nationality of the person in respect of whom they are incurred. If, during a production, expenses are incurred to enable a Canadian to travel on a non-Canadian airline and stay in a hotel abroad, these expenses are deemed to be in the Canadian category, since they are incurred in respect of a Canadian citizen. However, if these same expenses are incurred in respect of a non-Canadian, even if all the amounts are paid to a Canadian airline and to Canadian hotels and restaurants, they are deemed to be in the non-Canadian category, since they are incurred in respect of a non-Canadian.

This category also includes royalties paid with respect to the story rights, music rights and stock footage, as well as expenses for the rental and purchase of equipment for shooting and of vehicles, location expenses, office expenses and so on. Also included in this category are purchases of raw stock, videotape and magnetic tape needed for the shooting of principal photography/taping. The determination as to whether these expenses are in the Canadian or non-Canadian category is based on the nationality of the supplier.

The completion bond is also included in this category. The determination as to whether this expense is in the Canadian or non-Canadian category is based on the nationality of the individual who makes the decision whether or not to issue the bond.

3. Laboratories

Similarly, not less than 75 per cent of the total of all costs incurred for the postproduction of the production, including laboratory work, sound re-recording, sound editing and picture editing was incurred in respect of services provided in Canada. Excluded costs are: (a) costs determined by reference to the amount of income from the production; (b) remuneration payable to, or in respect of, the producer or key creative personnel; (c) costs relating to services; and (d) amounts payable in respect of insurance, financing, brokerage, legal and accounting fees, and similar amounts.

This category includes all the expenses connected with laboratory and postproduction work and paid in the form of remuneration for services rendered in Canada. It also includes all services provided by individuals and companies in the course of the post-production work, as well as rental costs. All services provided in Canada, whether or not they are provided by a Canadian, are categorized as "Canadian." All services provided outside Canada, even if they are provided by a Canadian, are categorized as "non-Canadian."

Note that purchases of raw stock, videotape and magnetic tape needed for the shooting of principal photography/taping are included in the services category.

4. Other expenses

Included in this category are all expenses excluded from the other categories listed above. These are the expenses not related to production - for example, those for insurance, legal services, auditing, corporate overhead, interim financing and interest fees.

Explanatory Notes

Please Note: The following numbers correspond to the account numbers found on the Breakdown of Costs (form 7) for animation productions.

  1. Story rights/Acquisitions

    Enter costs paid for story rights or script acquisition fees in the Canadian or non-Canadian Services column.

  2. Scenario

    1. Enter the remuneration paid to the screenwriter(s) (including fringe benefits) in the Key creative column.

    2. Enter travel and living expenses related to the screenwriter position in the Key creative column.

    3. Enter consultant, storyboard, script editor, research, clearances/searches, secretary, script reproduction and other expenses in the Canadian or non-Canadian Services column.

  3. Development costs

    Enter all expenses related to the development of the project such as preliminary breakdown, budget preparation, consultant, office expenses, survey/scouting, travel and living expenses and other expenses in the Canadian or non-Canadian Services column. Fees paid to producer(s), director(s), screenwriter(s), etc., should be entered in appropriate accounts.

  4. Production

    4.1 and 4.2

    1. Enter the remuneration (including fringe benefits) of the Canadian producer(s) and Canadian co-producer(s) in the Key creative column.

    2. Enter all travel and living expenses related to Canadian producer(s) and Canadian co-producer(s) function in the Key creative column.

    4.3 to 4.6

    1. Enter the remuneration (including fringe benefits) of line producers, executive producers and associate producers and of all other producter-related personnel (Supervising Producer, Production Supervisor, Production Executive, Production Associate, Executive in Charge of Production, Executive Production Consultant, Supervising Executive, etc.) in the Canadian or non-Canadian Services column.

    2. Enter all travel and living expenses related to these various functions in the Canadian or non-Canadian Services column.

    4.7

    Enter all other expenses related to production personnel such as secretary, travel and living expenses, public relations and other expenses in the Canadian or non-Canadian Services column.

  5. Director
    1. Enter the remuneration (including fringe benefits) of the director(s) in the Key creative column.

    2. Enter all travel and living expenses related to the director function in the Key creative column.

    3. Enter all other costs related to the director function such as second unit director, dialogue director, secretary, travel and living expenses, permits, etc., in the Canadian or non-Canadian Services column.

10. Voices, mock voices, rotoscope talent

  1. Enter the remuneration (including rights payment) of the first or second voice (or first or second leading performer) in the Key creative column.

  2. Enter fees paid to other voices or performers and all other expenses related to voices, mock voices and rotoscope talent in the Canadian or non-Canadian Services columns.

11. Voices recording

  1. Enter the remuneration (including rights payment) of the first or second voice (or first or second leading performer) in the Key creative column.

  2. Enter fees paid to other voices or performers and all other expenses related to voices recording in the Canadian or non-Canadian Services columns.

12. Production labour

Enter the remuneration of the production supervisor, production manager, assistant production manager, unit manager, location manager, 1st , 2nd and 3rd assistant director, production assistant, talent co-ordinator, production secretary, production accountant, bookkeeper, local contact, technical advisor, interpreter, script, etc., in the Canadian or non-Canadian Services column.

13. Storyboard labour

  1. Enter the remuneration of the storyboard supervisor in the Key creative column.

  2. Enter the remuneration of all other storyboard staff in the Canadian or non-Canadian Services columns.

14. Design labour

  1. Enter the remuneration of the design supervisor in the Key creative column.

  2. Enter the remuneration of all other design staff in the Canadian or non-Canadian Services columns.

15. Picture edit (leica test) labour

  1. Enter the remuneration of the picture editor in the Key creative column.

  2. Enter the remuneration of other labour related to the picture edit in the Canadian or non-Canadian Laboratory columns.

16. Voice edit labour

Enter the remuneration of voice edit labour in the Canadian or non-Canadian Laboratory columns.

17. Picture edit (line test) labour

  1. Enter the remuneration of the picture editor (line test) in the Key creative column.

  2. Enter the remuneration of other labour related to the picture edit (line test) in the Canadian or non-Canadian Laboratory columns.

18. to 24.

Enter the remuneration of personnel related to each of these functions in the Canadian or non-Canadian Services columns.

25. Camera labour

  1. Enter the remuneration of camera operator(s) in the Key creative column.

  2. Enter the remuneration of other personnel related to the camera department in the Canadian or non-Canadian Services columns.

26. Office labour

Enter the remuneration related to office labour in the Canadian or non-Canadian Services columns.

27. Fringe benefits

  1. Enter fringe benefits paid to the storyboard supervisor, first or second voice (or first or second performers), design supervisor, picture editor, and camera operator in the Key creative column.

  2. Enter fringe benefits paid to personnel of accounts 10 to 26 [excluding accounts 15, 16, 17, and benefits already included at item 27(i)] in the Canadian or non- Canadian Services columns.

  3. Enter fringe benefits paid to personnel of accounts 15, 16, and 17 [excluding benefits related to the picture editor already included at item 27(i)] in the Canadian or non-Canadian Laboratories columns.

28. Travel and living expenses

  1. Enter all travel and living expenses related to the storyboard supervisor, first or second voice (or first or second performers), design supervisor, picture editor, and camera operator in the Key creative column.

  2. Enter all travel and living expenses related to personnel of accounts 10 to 26 [excluding accounts 15, 16, 17, and expenses already included in 28(i)] in the Canadian or non-Canadian Services columns.

  3. Enter all travel and living expenses related to personnel of accounts 15, 16, and 17 [excluding expenses related to the picture editor already included at item 28(i)] in the Canadian or non-Canadian Laboratories columns.

29. to 32.

Enter costs related to each of these accounts in the Canadian or non-Canadian Services columns. The nationality of the payment is based on the nationality of the suppliers.

33. Production laboratory

  1. Enter costs related to the purchase of raw stock, master videotape and magnetic master stock for shooting of principal photography, rushes/dailies screenings and continuity/production stills, in the Canadian or non-Canadian Services columns.

  2. Enter costs related to negative processing, vacuumate, work print, video cassettes (rushes), take selection, magnetic transfer, synchronization, edge coding, transfer of film to video, sub-masters with time code, viewing copies, etc., in the Canadian or non-Canadian Laboratory columns.

40. Editorial labour

  1. Enter the remuneration (including fringe benefits and travel and living expenses) of the picture editor(s) [for videotaping, enter the remuneration (including fringe benefits and travel and living expenses) of the off-line editor(s)] in the Key creative column.

  2. Enter the remuneration of the on-line editor and of assistants related to picture editing and of the personnel related to sound editing, supervisor/co-ordinator, looping supervisor, dialogue transcription, fringe benefits, travel and living expenses, and all other costs, in the Canadian or non-Canadian Laboratory columns.

41. Editorial equipment

Enter costs related to editing rooms, editing equipment, materials purchases, etc., in the Canadian or non-Canadian Laboratory columns.

42. Video post-production (picture)

Enter all other costs related to video post-production such as costs of equipment, additional machines and materials related to off-line and on-line editing, in addition to the costs of computer load list, digital optical effects machine, graphics, graphics camera, insert studio, protection copies, distribution copies used by producer, viewing copies, etc., in Canadian or non-Canadian Laboratory columns. The remuneration of the off-line editor must be entered at account 40(i).

43. Video post-production (sound)

Enter costs of labour and materials related to audio master, voice-over recording, premix, sweetening, mix, re-stripe, foley track and to the making of the music and effects track (M&E), etc., in the Canadian or non-Canadian Laboratory columns.

44. Film post-production (picture)

Enter costs relating to slash print, negative cutting, answer print, fades/dissolves, interpositive, internegative, C.R.I., check prints, wet gate printing, polishing, release print(s) used by the producer, reduction/blow-up printing, videotapes, vaults/storages, etc., in the Canadian or non-Canadian Laboratory columns.

45. Film post-production (sound)

Enter costs relating to original effects recording, effects library purchases, special sound treatment, narration/voice-over studio, sound transfer, sound slashes/dupes, lip sync band, post-sync recording (A.D.R.), evaluation screenings, interlock screenings, pre-mix, mix of the original tracks and of the M&E, 3 track master, protection copy, M&E track, optical track, reduction/blow-up optical, Dolby noise reduction, Dolby license, etc., in the Canadian or non-Canadian Laboratory columns.

46. Special effects/Foley

Enter costs relating to special effects library purchases, creation, editing, studio and to the foley track in the Canadian or non-Canadian Laboratory columns.

47. Music

  1. (i) Enter the remuneration (including fringe benefits and travel and living) of the music composer in the Key creative column.

    (ii) Enter the remuneration (including fringe benefits and travel and living) of other music personnel such as arranger/orchestrator, conductor/leader, musicians, in the Canadian or non-Canadian Laboratory columns.

  2. Enter music rights in the Canadian or non-Canadian Services columns. The nationality of the rights holder will determine the nationality of the payment.

  3. Enter other costs such as pre-recorded guide track, studio fee, mix, materials, etc., in the Canadian or non-Canadian Laboratory columns.

48. Titles/Opticals/Stock footage

  1. Enter costs related to titles and opticals work in the Canadian or non-Canadian Laboratory column.

  2. Enter costs related to purchases of stock footage in the Canadian or non-Canadian Services column.

49. Final copies

Enter costs related to final copies in the Canadian or non-Canadian Laboratory columns.

50. Versioning

Enter costs related to versioning and closed captioning in the Canadian or non-Canadian Laboratory columns. Are excluded, costs generally associated with the distribution of the production. May be included, costs engaged in relation to the production of simultaneous versions in both official languages.

52. Amortization (series)

Break down and enter costs related to the amortization of television series in the Key creative, in the Services and Laboratories columns or in the Other column, according to the nature of the expenses. CAVCO reserves the right to require a full itemized breakdown of the amortized expenses.

70. Unit Publicity

Enter costs related to unit publicity, publicity/press expenses, stills photography, promotion, videotapes, public relations, trailer, etc., in the Canadian or non-Canadian Services columns. This does not include publicity costs associated with the distribution of the production.

71. General expenses

Enter costs related to insurance, legal fees, audit fees and other costs in the Other column.

72. Indirect costs

Enter costs related to corporate overhead, interim financing, interest fees and other costs in the Other column.

81. Completion guarantee

Enter costs related to the completion guarantee in the Canadian or non-Canadian Services columns (these costs should reflect a no-claims rebate). The nationality of the payment of the completion bond is based on the nationality of the individual who makes the decision whether or not to issue the bond.

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