Vancouver: Details of the replacement for Production Services Limited Partnership tax shelter began leaking out during the Vancouver International Film Festival Trade Forum.

A new federal tax credit for foreign producers is expected to take effect Nov. 1 when the current tax shelter, extended to Oct. 31, expires. And the certification and administration of the foreign producer tax credit will become the responsibility of Robert Soucy at cavco.

Not to be confused with the existing Refundable Income Tax Credit that applies to Canadian productions that are cavco-certified and rebates up to 12% of a total budget based on capped eligible labor costs, the new tax credit for foreign producers will pay only 5% to 6% of its total budget (also based on capped eligible labor costs). Productions can make use of only one rebate program.

The rebate will be paid only to Canadian taxable companies, but productions will not require Canadian content. In essence, the federal government is recognizing the need to continue an incentive to foreign producers who create Canadian employment.

Yet to be decided is the makeup of qualifying companies. At issue is whether a Canadian incorporated company needs to be controlled by Canadians or can be controlled by companies such as Disney or mgm. If the u.s. company controls the Canadian taxable company then the rebate can flow directly to the u.s. owner. If Canadians need to control the taxable company then the rebate will flow through them to the u.s. company.

Under the old tax shelter, brokers such as Monarch Entertainment and Grosvenor Park would be able to pay producers about 8.5% of their budgets up front. Under the new tax credit for foreign producers, the rebates will be paid out up to 18 months after projects wrap production.