The Benefits of the BC IDMTC

In this post, we’re going to go over the benefits of applying for the British Columbia interactive digital media tax credit (BC IDMTC). We will also be looking at why it is more beneficial to apply for the BC IDMTC instead of the British Columbia provincial SR&ED tax credit if you are eligible for both.

What is the British Columbia Interactive Digital Media Tax Credit?

The BC IDMTC is a provincial tax credit specific to British Columbia. It is geared towards companies that create “interactive digital media products in B.C. after August 31, 2010 and before September 1, 2023.”1

Interactive digital media products are defined by the British Columbia government as a product, developed in British Columbia, which is meant to be used interactively by an individual. What is meant by “used interactively” is communication between an individual person and a computer, ranging “from a technical interaction on a primary level (menus, cursors, etc.) to verbal exchanges with a computer.”2

According to the Government of British Columbia, other requirements for interactive digital media products for the British Columbia Interactive Digital Media Tax Credit include:

  • Consists of a combination of application files and data files, in a digital format, that are integrated and are intended to be operated together,
  • Is designed primarily to educate, inform or entertain the user,
  • Is capable of presenting information in at least two of the following forms:
    • Text
    • Sound
    • Images
  • Is intended to be used interactively by individuals, and
  • Is developed in British Columbia3

Some examples of interactive digital media are video games, educational software, edutainment products, simulators, and augmented or virtual reality products. However, blogs, online digital news media, slideshows, streaming applications and social media products are not considered interactive digital media for the purposes of the BC IDMTC.4

The BC IDMTC is a tax credit worth 17.5% of a company’s eligible wages and salary incurred in a single tax year.5 Corporations are expected to have evidence that their employees reside in British Columbia during the time of product development, such as the mailing addresses of employees’ T4s.6 However, certain wages are not included in that equation: such wages are wages paid to certain employees, such as employees in administrative, market, or human resources fields, contractors/sub-contractors and as well as those who own 10% or more of the issues shared of capital stock of the corporation.7

Incurred wages that are eligible for the BC IDMTC are those that are:

  • Incurred on or after September 1, 2010, and before September 1, 2023;
  • Directly attributable to eligible activities (activities attributable to the development of interactive digital media like design, artwork, animation, and project management);
  • Paid to individuals who were resident in B.C. on December 31 of the year preceding the end of the corporation’s tax year.8

The IDMTC is calculated based on eligible salaries and wages minus any assistance, other than federal SR&ED, received.9

Taxable Canadian corporations with a permanent establishment in British Columbia, who are registered with the British Columbia Ministry of Finance, are eligible for a BC IDMTC.10 The company must also have eligible salary and wages for the tax year of more than $100,000 and less than $2,000,000, or $2,000,000 or more.11

Corporations must also be registered under Part 2 of the British Columbia Small Business Venture Capital Act in order to apply for the BC IDMTC.12

Why should you apply to the BC IDMTC instead of SR&ED (if you’re in BC)?

BC IDMTC does work in conjunction with federal SR&ED, but not with British Columbia’s provincial SR&ED tax credit (to know more about each province’s SR&ED tax credits, read our comprehensive list here).13 If your work is eligible for British Columbia’s SR&ED, you cannot submit the same expenditures for a BC IDMTC.14 However, the BC IDMTC is more advantageous than the British Columbia SR&ED tax credit for those who are eligible as it offers a higher remuneration of 17.5% while the British Columbia SR&ED tax credit only pays up to 10% of eligible expenditures.1516

Filing options available:

  • Federal SR&ED + BC SR&ED
  • Federal SR&ED + BC IDMTC

Filing options not available:

  • Federal SR&ED + BC IDMTC + BC SR&ED

What does this look like in practice? An Example

Here is an example of a corporation with $500,000 in SR&ED eligible wages working on a project also eligible for BC IDMTC:

Federal SR&ED without BC SR&ED:

T661 Part 4 without BC SR&ED

T661 Part 4 with BC IDMTC

Schedule 31 Part 11 without BC SR&ED

Schedule 31 Part 11 with BC IDMTC

BC IDMTC T2SCH429:

BC IDMTC T2SCH429

The total amount received is Federal SR&ED ITCS $271,250 + BC IDMTC $87,500 = $358,750

Federal SR&ED + BC SR&ED

T661 Part 4 with BC SR&ED

Schedule 31 Part 11 with BC SR&ED

BC SR&ED T666

The total amount received is Federal SR&ED ITCS $244,125 + BC SR&ED $77,500 = $321,625

In this example claiming BC IDMTC increases the amount received by $37,125.

Conclusion

While the BC IDMTC is specifically aimed at certain research and development areas within the province of British Columbia, it is a good tax credit to apply for if you are eligible. It offers multiple benefits over its counterpart, the British Columbia provincial SR&ED. It’s always a good idea to keep tabs on specific tax credits within your own province. Make sure to take a look at our interactive map of SR&ED credits across Canada. As always, consider enlisting the help of a knowledgeable SR&ED consultant if you are feeling lost. If you are interested in learning more about software development and federal SR&ED, please see our post Computer Science, Software Engineering, and Software Development in SR&ED.

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Show 16 footnotes

  1. Government of British Columbia. “Interactive Digital Media Tax Credit.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media?keyword=BC&keyword=IDMTC.
  2. Government of British Columbia. “Interactive Digital Media Tax Credit Frequently Asked Questions.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/idm-faqs?keyword=BC&keyword=IDMTC.
  3. Government of British Columbia. “Interactive Digital Media Tax Credit.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media?keyword=BC&keyword=IDMTC.
  4. Government of British Columbia. “Interactive Digital Media Tax Credit.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media?keyword=BC&keyword=IDMTC.
  5. Canada Revenue Agency. (April 25, 2020). “British Columbia interactive digital media tax credit.” Retrieved January 5, 2021 from https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/british-columbia-provincial-corporation-tax/british-columbia-interactive-digital-media-tax-credit.html.
  6. Government of British Columbia. “Interactive Digital Media Tax Credit Frequently Asked Questions.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/idm-faqs?keyword=BC&keyword=IDMTC.
  7. Government of British Columbia. “Interactive Digital Media Tax Credit Frequently Asked Questions.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/idm-faqs?keyword=BC&keyword=IDMTC.
  8. Government of British Columbia. “Interactive Digital Media Tax Credit Frequently Asked Questions.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/idm-faqs?keyword=BC&keyword=IDMTC.
  9. Government of British Columbia. “Interactive Digital Media Tax Credit Frequently Asked Questions.” Retrieved January 4, 2021 from: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/idm-faqs?keyword=BC&keyword=IDMTC.
  10. Canada Revenue Agency. (August 24, 2018). “T2SCH429 British Columbia Interactive Digital Media Tax Credit.” Retrieved January 4, 2021, from https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch429.html.
  11. Canada Revenue Agency. (August 24, 2018). “T2SCH429 British Columbia Interactive Digital Media Tax Credit.” Retrieved January 4, 2021, from https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch429.html.
  12. Canada Revenue Agency. (August 24, 2018). “T2SCH429 British Columbia Interactive Digital Media Tax Credit.” Retrieved January 4, 2021, from https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch429.html.
  13. Government of British Columbia. “How to Complete the Interactive Digital Media Tax Credit Application for Registration.” Retrieved January 5, 2021, from https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/application-guide?keyword=BC&keyword=IDMTC#eligibility.
  14. Government of British Columbia. “How to Complete the Interactive Digital Media Tax Credit Application for Registration.” Retrieved January 5, 2021, from https://www2.gov.bc.ca/gov/content/taxes/income-taxes/corporate/credits/interactive-digital-media/application-guide?keyword=BC&keyword=IDMTC#eligibility.
  15. SRED. (November 9, 2017). “Provincial Tax Credits – Making the Most of SR&ED.” Retrieved January 5, 2021 from https://www.sreducation.ca/canada-tax-credits-sred/.
  16. Canada Revenue Agency. (April 25, 2020). “British Columbia interactive digital media tax credit.” Retrieved January 5, 2021 from https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/british-columbia-provincial-corporation-tax/british-columbia-interactive-digital-media-tax-credit.html.

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