Susan Karnay is an entertainment lawyer in the Toronto office of Goodman Phillips & Vineberg.

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On Oct. 29, 1997, the minister of finance announced the details of the new film or video production services tax credit (the Federal Production Services Credit) for non-Canadian content film and television productions produced in Canada.

The Federal Production Services Credit effectively replaced the former system of production services tax shelters which involved limited partnerships ultimately controlled by Canadian investors and organized by Canadian brokers such as Grosvenor Park, Monarch Entertainment or Alliance Equicap, engaged in production services activities on behalf of non-Canadians.

The production services tax shelter transactions were originally scheduled to terminate in December of 1996 and were ultimately grandfathered until Oct. 31, 1997, at which time further transitional relief by the federal government ceased and the shelters were effectively replaced by the Federal Production Services Credit.

The rate of the Federal Production Services Credit is equal to 11% of the total cost of qualifying Canadian labor expenditures, for services rendered by Canadians in Canada from ‘final script’ stage to the end of post-production.

Assuming that Canadian labor expenditures generally represent approximately 50% of the total production budget, the Federal Production Services Credit will net applicants an amount in the range of 5.5%