Online-only projects now eligible for CAVCO tax credits

Web series no longer need a broadcaster on board to access the federal funding.
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The Canadian Audio-Visual Certification Office (CAVCO) has rejigged its “shown in Canada” policy to make projects distributed solely via online platforms eligible for the Canadian Film or Video Production Tax Credit (CPTC).

The new rule paves the way for Canadian-produced web series to receive federal tax credits, on the condition that they are produced by a Canadian production company and have a license agreement with a Canadian distributor, which must in turn have an agreement with the online platform. The amended policy came into effect Monday.

Under the new rules, projects intended solely for services such as iThentic, Shudder, Crackle.com, as well as a raft of domestically available YouTube channels including Geek & Sundry, Shut up Cartoons!, Refinery 29, Funny or Die, Revry tv and Maker Studios channels are now eligible. 

Previously, online-distributed domestic productions were eligible to receive tax credits only if they were also shown on television, in movie theatres or on DVD in Canada.

In order for the online platforms to comply with CAVCO’s amended regulations they must be accessible to Canadians in Canada; be a service where Canadians are likely to seek audio-visual content; and be a platform that carries other content (it cannot be, for example, a standalone website created solely for one project).

Content such as websites, games, podcasts, personal video blogs and apps are not eligible for CPTC certification.

Andra Sheffer, Independent Production Fund (IPF) CEO, told Playback Daily the new ruling will provide a valuable source of additional funding for web series producers, with typical projects potentially seeing between $20,000 and $50,000 in tax credits. While web series budgets could increase with access to the CPTC, the next challenge for digital producers, she added, will be working out how to interim finance these sums while tax credit applications are being processed.

In a public notice, CAVCO said the policy was introduced to allow creators and producers the flexibility to make their projects available on the platform that makes most sense for them, from both a creative and a business perspective.

“CAVCO recognizes that Canadian audiences increasingly view linear audio-visual content on online platforms, and that it is important for the Government to support the growth and global success of the Canadian audio-visual production industry,” read the public notice.

The tax credit administrator initially made a public call for comments in February 2016 and the new rules are the result of decisions based on the feedback from those comments. It received 106 submissions from independent production companies, broadcasters, industry associations and other federal and provincial funders.

In theory, the new ruling makes projects that are going straight to Netflix, for example, eligible for the Canadian Film or Video Production Tax Credit if a Canadian distributor is on board. However, projects such as this already qualify under the Film or Video Production Services Tax Credit (PSTC). As well, such a production would lose out on CMF television money and OMDC provincial tax credits by virtue of being an online-only production, which means it would likely not be financially viable.

The CPTC is available exclusively to Canadian-owned and controlled production companies that have an agreement with a CRTC-licensed Canadian broadcaster or a Canadian distributor.

The new policy will be the subject of ongoing review, according to CAVCO, and can be amended in the case that it does not work as intended.

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