Administrative and Accreditation Process

1. Role of CAVCO

a) Confirm Initial Eligibility of the Production

It is the responsibility of the Department of Canadian Heritage (through CAVCO) to issue an Accreditation Certificate in respect of a production which confirms that the production initially meets all the requirements of draft Regulation 9300 of the Act. This certificate will be evidence that a production initially meets the requirements of draft Regulation 9300 and will confirm the copyright owner of a production for purposes of the PSTC at the time it is issued.

b) Revoke Accreditation Certificates When Required

An Accreditation Certificate may be revoked by the Minister of Canadian Heritage in accordance with subsection 125.5 (6) of the Act, if an omission or incorrect statement was made for the purpose of obtaining the certificate, or if the production is not an "accredited production". Where an Accreditation Certificate has been revoked, it is deemed never to have been issued and any tax credits already received by an eligible production corporation in respect of a revoked production must be repaid.

2. Procedures to Follow for Accreditation through CAVCO

a) Who Should Apply

The copyright owner(s) must apply to CAVCO using a copy of the application form (attached as Appendix I). For administrative convenience, the copyright owner(s) may appoint an agent known as the "Official Designee" (e.g. the Canadian service provider, a law firm, etc.) to apply for accreditation on its behalf. Where an Official Designee is appointed, the copyright owner(s) must sign and have notarized the Official Designee Affidavit (attached as Appendix II) and provide the requisite documentation confirming copyright ownership to the Official Designee for transmission to CAVCO.

b) What Qualifies as Copyright Ownership

The copyright owner(s) may vary throughout the course of a production. In fact, for the purposes of Canadian copyright law, there may be several copyright owners in respect of various aspects of a production from literary rights to music rights. For the purposes of the PSTC, the copyright owner will be the person(s) or entity(s) which has the rights to produce the accredited production (based on the acquisition of underlying rights sufficient to produce the production) and retains legal copyright ownership of the production. Where, for example, a character previously exists, the owner would not have to acquire all the rights to that character. To be the copyright owner for the PSTC, one would, at minimum, have to acquire a licence to produce a production based on that character and retain legal copyright ownership of the finished production.

CAVCO will require documentation which demonstrates chain-of-title ownership from the initial developer of the story idea to the writing of the final script. The types of documents required are option agreements, transfer agreements, licence agreements, script purchase agreements and script writing agreements. A detailed legal opinion (citing the relevant documents, their contents and the dates on which they were entered into) may be provided in lieu of the chain-of-title documentation. This legal opinion may be provided by independent or in-house counsel licensed to practice in any jurisdiction where the copyright owner (or Official Designee) carries on business. However, CAVCO reserves the right to require all of the chain-of-title documentation to be submitted where the legal opinion is deemed unsatisfactory.


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c) What Happens if Copyright Ownership Changes

i) Before Accreditation

The sale of the copyright ownership, after final script stage but before the completion of production in Canada, may pose some complications for application for the PSTC and will vary depending upon the nature of the ownership:

In the case where the copyright owner is also an "eligible production corporation", then copyright ownership must remain with that entity during the time that the corporation is producing the production in Canada. However, the eligible production corporation may sell the production (after the time at which production in Canada is completed) without affecting its eligibility for the PSTC.

In the case where the copyright owner is not an "eligible production corporation", to be eligible for the PSTC, the "eligible production corporation(s)" must contract directly with the copyright owner. For CAVCO purposes, the copyright owner at the time of the application must apply to CAVCO. Any changes in ownership up to that time will be evidenced in the chain-of-title documentation or detailed legal opinion submitted with the application.

The Accreditation Certificate will be issued with the name of the copyright owner at the time of application. However, any previous copyright owner(s) who contracted with an "eligible production corporation" will also be noted on the certificate where this information is provided at the time of filing.

ii) After Accreditation

If ownership has changed after the Accreditation Certificate has been issued and where work on the production is continuing in Canada, work on the production has not yet begun in Canada or the new copyright owner has entered into additional contracts with eligible production corporations, then an amendment application must be made to CAVCO by the new copyright owner (or their Official Designee). Included with that application will be the original Accreditation Certificate and any sale documentation. An Amended Accreditation Certificate will be issued and the Canada Revenue Agency will be advised of the change of ownership. The original Accreditation Certificate would continue to be valid up to the change of ownership date, after which time, an Amended Accreditation Certificate will be required.

Please note that where work is continuing in Canada or work has not yet begun in Canada, but the work is to be done by the same service provider(s) as contracted by any previous copyright owner, the new copyright owner should enter into a new contract with the service provider(s) or arrange for an assignment of any previous contracts, in order for the service provider(s) to claim a tax credit for work performed after the change in ownership. This action should be considered whether the change of ownership has occurred before or after accreditation by CAVCO.

d) When Should the Copyright Owner Apply to CAVCO

The copyright owner may apply to CAVCO any time after the budget for the production or series is locked and a detailed synopsis of the production or series can be provided. Where the copyright owner is not also the eligible production corporation, and a sale of copyright ownership is contemplated, it may be advisable to wait until after that sale to apply for an Accreditation Certificate to minimize any administrative inconvenience. However, please note that an Accreditation Certificate is required before an eligible production corporation may apply for any tax credit from the Canada Revenue Agency.


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e) Is there a Fee Required

CAVCO operates under a cost recovery system. In keeping with that mandate, there will be an administration fee of $5,000 Cdn payable in respect of each application for an Accreditation Certificate for a production or for a series of episodes[7]. As only the copyright owner (or an Official Designee) can apply for the certificate, that entity will be responsible for paying the fee. Please note that no analysis will be done until the required fee is paid in full.

Where the aggregate tax credit received in respect of an application is less than $25,000 Cdn (excluding amounts which may reduce the tax credit receivable, such as taxes owing), the applicant may be entitled to a partial rebate of the administrative fees payable for accreditation. The rebate entitlement is based on the table below. In order to access the rebate, the applicant must pay the full fee at the time of application. Once all of the tax credit has been claimed in respect of a production or a series of episodes, the applicant may apply to CAVCO for a rebate. The applicant must file a CAVCO Fee Rebate Form (currently being developed) and a copy of all Canada Customs and Revenue Agency tax assessments in respect of the production or series. CAVCO will then confirm the amount of entitlement through confirmation from Canada Revenue Agency.

Aggregate Tax Credit
Aggregate Tax Credit Fee Rebate
$25,001 + $5,000 $0
$20,001 - $25,000 $4,000 $1,000
$15,001 - $20,000 $3,000 $2,000
$10,001 - $15,000 $2,000 $3,000
$ 0 - $10,000 $1,000 $4,000

An additional amendment fee of $1,000 Cdn is required where copyright ownership has changed after an Accreditation Certificate has been issued and an Amended Accreditation Certificate is required. This amount is not subject to the rebate provision.

f) How to Qualify for an Accreditation Certificate

In order to qualify as an "accredited production", the film or video production or series must meet the requirements of draft Regulation 9300 of the Act. There is a two-fold requirement process: a production must meet a cost minimum and must be an eligible genre.

Generally the cost for a production for the 24 month period after principal photography has begun must exceed $1,000,000 Cdn, except in the case of a series consisting of two or more episodes or a pilot for such a series. The cost for each episode in a series, which has a running time of less than 30 minutes, must exceed $100,000 Cdn per episode. The cost for episodes with a longer running time must exceed $200,000 Cdn per episode.

To be an eligible genre, the production cannot be one of the following:

  1. news, current events or public affairs programming, or a programme that includes weather or market reports;
  2. a talk show;
  3. a production in respect of a game, questionnaire or contest;
  4. a sports event or activity;
  5. a gala presentation or an awards show;
  6. a production that solicits funds;
  7. reality television;
  8. pornography;
  9. advertising; or
  10. a production produced primarily for industrial, corporate or institutional purposes.

Please note that each episode in a series is treated as an individual production and must qualify both as to cost minimum and eligible genre. CAVCO is currently drafting criteria in order to define some of the above-named genres of production.


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g) What Documentation is Required [8]

The following documentation must be submitted to CAVCO where an Accreditation Certificate is requested:

  1. Application Form: a copy of the application form (attached as Appendix I), completed in full, signed and dated;

  2. Administration Fee: a cheque in the amount of $5,000 Cdn made payable to the Receiver General for Canada;

  3. a) Chain of Title Documentation: option agreement, transfer agreement, writers' agreement(s), which identify the copyright owner at the time of the application;

    OR

  1. b) Legal Opinion in respect of Copyright Ownership: may be provided in lieu of the Chain of Title Documentation, it must be detailed in nature and reference all those documents which would otherwise be submitted to CAVCO for review. CAVCO reserves the right to require the submission of all Chain of Title Documentation where the legal opinion is deemed unsatisfactory;

  2. a)Budget for a Single Production: summary of the locked budget, signed by the producer; where the production is already completed, a copy of the final cost report summary, signed by the producer [9];

    OR

  1. b) Budgets for a Series: summary of the locked budget for the entire series, summary of a locked episodic budget (one model only) and summary amortization budget, all signed by the producer; where the series has been completed, a copy of the final cost report summaries, signed by the producer[10];

  2. Synopsis: of the production or of the series as a whole; and

  3. Official Designee Affidavit: an original (signed and notarized) of the CAVCO-approved affidavit, where required (attached as Appendix II).

CAVCO reserves the right to require any additional information, affidavits or sworn statements that it deems necessary in order to issue an Accreditation Certificate.

Applicants will be notified of any deficiencies in their applications. Applications are processed on a first-come, first-served basis, with complete applications being given priority.

The following documentation must be submitted to CAVCO where an Amended Accreditation Certificate is requested:

  1. Application Form: a copy of the application form (attached as Appendix I) must be submitted by the new copyright owner or Official Designee, completed in full, signed and dated;

  2. Administration Fee: a cheque in the amount of $1,000 Cdn made payable to the Receiver General for Canada;

  3. a) Sale Documentation in respect of Copyright Ownership: any agreements relating to the sale and chain of title transfer since the original application;

    OR

  1. b) Legal Opinion in respect of Copyright Ownership: may be provided in lieu of Sale Documentation, but must be detailed in nature and reference any changes since the original application. CAVCO reserves the right to require the submission of Sale Documentation where the legal opinion is deemed unsatisfactory;

  2. Budgets: same as original application but only where this has changed significantly (i.e. where the budget minimums are not met);

  3. Synopsis: only where this has changed significantly; and

  4. Official Designee Affidavit: an original (signed and notarized) of the CAVCO-approved affidavit, where required (attached as Appendix II).

As with the original application, CAVCO reserves the right to require any additional information, affidavits or sworn statements that it deems necessary in order to issue an amended Accreditation Certificate.

Applicants will be notified of any deficiencies in their applications. Applications are processed on a first come-first served basis, with complete applications being given priority.


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3. Role of the Canada Revenue Agency

The role of the Canada Revenue Agency with respect to the PSTC is to: interpret and apply section 125.5 of the Act and all other provisions of the Act and Regulations that may have an impact on the PSTC; review and audit the PSTC claim; assess the T2 Corporate Income Tax Return (T2 Return) required to be filed by each corporation; and issue refund cheques, where appropriate.

  1. Confirm Continuing Eligibility of the Production

    It is the responsibility of the Canada Revenue Agency to confirm that a corporation which applies for the PSTC remains an eligible production corporation throughout the year in which a tax credit is claimed; that the production budget continues to meet the regulatory minimums, and, where a production is completed, that is continues to be of an eligible genre. In the latter case, where there is any concern over the eligibility of the genre, the Canada Revenue Agency will seek the expertise of CAVCO. In those instances, a VHS tape of the production (or three representative episodes in a series) must be made available to the Canada Revenue Agency or directly to CAVCO for that purpose.

  2. Filing of PSTC Claim

    Under the Act, each corporation must file a T2 Return at the end of each taxation year. In order to claim the PSTC in respect of an "accredited production", an eligible production corporation must complete Form T1177, Claiming a film or video production services tax credit (see Appendix III) and attach it to its T2 Return, along with the Accreditation Certificate, or a copy thereof. The eligible production corporation must file a separate Form T1177 for each production for which it is claiming a PSTC. However, the Canada Revenue Agency will accept one form for all episodes in a series that is certified as an accredited production.

  3. Issuing Refund Cheque, if any

    Any PSTC receivable by a corporation for a particular year will be reduced by any other taxes owing by the corporation, including corporate income tax, payroll source deductions and Goods and Services Tax (GST). Where there is a surplus credit, a refund cheque will be issued.

4. Processing of the PSTC Claim by the Canada Revenue Agency

If Form T1177 and/or the CAVCO Accreditation Certificate are attached to your T2 Return, your file is considered complete and the Tax Centre will immediately forward your file to the contact person in your Tax Services Office to be selected for review or audit. The objective of the Canada Revenue Agency is to deliver the PSTC to the eligible production corporations within a reasonable time, once the claim is complete. The Canada Revenue Agency's policy is that when no audit is necessary, the cheque will normally be issued within 60 days following receipt of a complete claim. However, when an audit is necessary, the Canada Revenue Agency will normally issue the cheque within 120 days following receipt of a complete claim.

Notes:

  • [7] An application for a series of episodes includes only those episodes produced for one broadcast season. If a pilot episode is applied for under a separate application, an application for the remainder of the episodes in that broadcast season is subject to an additional application fee. Similarly, if episodes for one season are split among applications, a separate fee is payable for each application made.
  • [8] Please note that any documentation submitted to CAVCO in respect of the PSTC application is subject to the restrictions of section 241 of the Act and will be treated in the strictest confidence.
  • [9] A full summary budget for the worldwide production costs need not be submitted where it can be shown that the production costs in Canada in respect of the accredited production will exceed the minimum requirement. In that case, only the Canadian portion of the budget need be submitted. However, a total for the global estimated cost of production will be required on the application form.
  • [10] Same as for a production. However, the model episodic budget and amortized budget, Canadian portions only, need be submitted, where costs spent in Canada exceed the minimum requirements.

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