Avoiding unpleasant surprises
Every documentary producer tries to be prepared for every contingency and potential problem – they want to finish their production on-time and on-budget, at the desired quality level. So it can be especially disconcerting to run into issues at the very end of a project. Here are a few suggestions for avoiding unpleasant surprises with a financial impact:
File your personal tax return
Failure to file your personal provincial income tax return may prompt Revenu Québec to reject the production company’s tax credit claim.
File the production company’s tax returns on time
Filing the production company’s provincial tax return more than 18 months after the end of the fiscal year will lead to loss of the provincial tax credit allowable for costs incurred during this period.
Neglecting to claim tax credits as soon as possible may lead to higher borrowing costs by delaying the repayment of loans, if any.
Lastly, filing tax returns after the usual six-month window may lead Revenu Québec to withhold sales tax reimbursements.
Pay as many expenses as possible before filing the company’s taxes
At the provincial level, expenses must be paid before you file the tax return. Failure to pay significant expenses will lead to a one-year delay in tax credit refunds.
Federally, expenses must be booked and wages paid no more than 60 days after the end of the fiscal year.
Hire enough people to maximize tax credits
A mistake in calculating eligible labour costs may reduce the tax credits you can claim. Common errors include mistakenly treating wages paid to non-profit organizations as eligible for federal tax credits, failure to account for a subcontractor’s primary activities when calculating eligible labour costs, or claiming labour costs for deferred expenses.
Conversely, producers sometimes neglect to file a provincial claim for wages paid to unincorporated foreign individuals or do not claim provincial credits for post-production work paid to broadcasters.
Common mistakes
Here are some common mistakes to avoid
Maximizing tax credits
Mistakenly considering, or forgetting to consider, offsetting items when calculating tax credits.
Not considering the provincial tax credit rate for special effects and computer animation.
Not considering the provincial tax credit rate for certain productions without government support.
Taxation
Mistakenly claiming ineligible expenses such as advertising, distribution expenses, website production costs and others.
Miscalculating meal expenses in reducing the calculated federal tax credit by omitting items or subtracting too many.
Neglecting to submit the required forms.
In case of a discrepancy, failing to appeal within 90 days of receiving the notice of assessment.
Not claiming federal tax credits each year starting from the fiscal year in which principal filming began (or, at the provincial level, submitting the application for advance ruling) and attempting to combine several late years.
Not adequately amortizing productions by neglecting to account for net distribution revenues in calculating the capital cost allowance.
If applicable, not claiming investment tax credits for which companies may be eligible.
Regional bonuses
When applying for an advance ruling, neglecting to maximize planned regional labour.
Forgetting to enclose the SODEC certificate (or neglecting to ask for the certificate).
Other points
Failing to follow the rules regarding 75% Quebec or Canadian costs.
Learning late that the production is excluded and will not be eligible for any tax credits.
Mishandling inter-company advances, which could be deemed by tax authorities to be outstanding aid.
Failure to claim final certifications on time.
Filming at widely separated dates, resulting in the loss of potential tax credits on initial expenses or exceeding the allowable time.
Claiming tax credits for unpaid expenses, or paying expenses but not claiming tax credits.
Failing to send the Canada Revenue Agency the Waiver in respect of the normal reassessment period or extended reassessment period (T2029) when there is a delay in obtaining Part B.
Not securing an exhibitor or distributor in order to be eligible for tax credits.
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