Ontario Media Development Corporation (OMDC) An Agency of the Ontario Ministry of Tourism, Culture and Sport

Transcription

1 Ontario Media Development Corporation (OMDC) An Agency of the Ontario Ministry of Tourism, Culture and Sport (OSRTC) Guidelines UPDATED FEBRUARY 2017 Ontario Media Development Corporation La Société de Développement de L Industrie des Médias de L Ontario 2017

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3 TABLE OF CONTENTS PAGE OVERVIEW... 3 WHAT IS IT?... 3 HOW MUCH IS THE TAX CREDIT?... 3 WHO IS ELIGIBLE?... 3 WHAT KIND OF EXPENDITURES ARE ELIGIBLE?... 4 WHO IS AN EMERGING CANADIAN ARTIST?... 4 WHAT TYPES OF SOUND RECORDINGS ARE ELIGIBLE?... 4 IS AN ACKNOWLEDGEMENT REQUIRED IN THE ALBUM NOTES?... 4 HOW IS THE CREDIT ADMINISTERED?... 5 LEGISLATIVE REQUIREMENTS... 5 WHAT TYPES OF CORPORATIONS ARE ELIGIBLE?... 5 WHAT TYPES OF SOUND RECORDINGS ARE ELIGIBLE?... 5 WHAT IS A QUALIFYING MUSIC VIDEO?... 6 HOW MUCH IS THE CREDIT?... 7 ELIGIBLE EXPENDITURES... 7 INELIGIBLE EXPENDITURES... 8 GOVERNMENT ASSISTANCE... 8 ADMINISTRATIVE PROCESS OMDC ROLE CANADA REVENUE AGENCY ROLE APPLYING FOR A CERTIFICATE OF ELIGIBILITY CONTACT INFORMATION DOCUMENTS CHECKLIST DECLARATION OF CITIZENSHIP AND RESIDENCY LEGISLATION REGULATIONS Page 1

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5 THE (OSRTC) GUIDELINES Please note that the 2015 Ontario Budget announced that the OSRTC will be phased out. A qualifying corporation may claim an OSRTC for eligible sound recordings that commenced before April 23, However, a tax credit can only be claimed on eligible expenditures incurred before May 1, 2016 and the qualifying corporation cannot receive an amount from the Ontario Music Fund in respect of the expenditures claimed under OSRTC. The Guidelines: These guidelines have been prepared to assist sound recording companies when applying for an Ontario Sound Recording Tax Credit. Please note that the OSRTC legislation (section 94 of the Taxation Act, 2007) and OSRTC regulation (Regulation 37/09) take precedence over any provision in these Guidelines. A. Overview of the OSRTC What Is It? The OSRTC is a refundable tax credit, which means that the amount of the credit, minus any Ontario taxes payable, will be paid to the eligible sound recording company. The OSRTC is based upon eligible production and marketing costs incurred by an eligible sound recording company, during a taxation year, with respect to an eligible Canadian sound recording. How Much Is the Tax Credit? The OSRTC is calculated as 20% of qualifying expenditures incurred by an eligible sound recording company before May 1, 2016 with respect to an eligible Canadian sound recording by an emerging Canadian artist or group that was commenced before April 23, Who Is Eligible? An eligible sound recording company is a Canadian-controlled corporation that has carried on a sound recording business in Ontario for at least 12 months as a corporation or, prior to incorporation, as a sole proprietorship or partnership. An eligible sound recording company must earn more than 50% of its taxable income in Ontario for the preceding taxation year and more than 50% of the company s business must be related to sound recording activities. An eligible sound recording company must have implemented a distribution plan for at least one sound recording in the preceding taxation year. An eligible sound recording company must enter into contracts with its artists and must bear the financial risks associated with its business or be related to a company that bears the risks. Only a sound recording company that is incorporated can claim the OSRTC when filing its tax return. Companies incorporated federally or in any Canadian province may be eligible for the OSRTC. Corporations must be Canadiancontrolled and have a permanent establishment in Ontario. For information on incorporating in Ontario contact: the Ontario Ministry of Government and Consumer Services, Suite 200, 393 University Avenue, Toronto, ON, M5G 2M2, Tel: (416) or Page 3

6 What Kind of Expenditures Are Eligible? Qualifying expenditures include recording production costs, such as artists royalties, musicians session fees, graphics, digital scanning, programming and testing; production costs for music videos that are directed by a qualified Canadian or made at a production facility in Ontario; and direct marketing expenditures including consultants fees and certain costs to launch the recording. Touring and performing costs are not eligible. 100% of qualifying expenditures incurred primarily in Ontario are eligible; 50% of expenditures incurred outside Ontario for marketing and music video production are eligible. Qualifying expenditures must be incurred in the 24-month period beginning when the first qualifying expenditure is incurred in respect of the recording. Expenditures must be incurred before May 1, 2016 to be eligible for the OSRTC. Government assistance received by the sound recording company in respect of the qualifying expenditures reduces the eligible expenditures. Who Is an Emerging Canadian Artist? An individual is an emerging Canadian artist if, at the time they signed the recording contract and when the master recording was made, they are a Canadian citizen or permanent resident ordinarily resident in Canada and if they have not had a gold recording as an individual or as part of a group in the USA and either Canada, UK, France, Germany, Asia or Latin America. A group is an emerging Canadian group if at least 75% of its members are emerging Canadian artists. What Types of Sound Recordings Are Eligible? A sound recording is generally an eligible sound recording if the music or the lyrics, if any, on the recording are performed by an emerging Canadian artist and if: the music was primarily composed by qualified Canadians; or the lyrics were primarily written by qualified Canadians; or substantially all of the activities to produce the recording took place in Ontario (a qualified Canadian is a Canadian citizen or permanent resident ordinarily resident in Canada at the time of composition or writing) the total playing time is at least 15 minutes the eligible sound recording company produced the recording and has control of the master tape for at least 5 years after completion the eligible sound recording company must have a distribution plan approved by OMDC the sound recording is not primarily spoken word or wildlife or nature sounds, nor for instructional use or advertising or promotional purposes the sound recording is not capable of inciting hatred against an identifiable group or does not contain undue exploitation of sex and crime, horror, cruelty or violence. Is an Acknowledgement Required in the Album Notes? Acknowledgement for an Ontario tax credit is not required, due to the fact that tax information is considered confidential. However, such an acknowledgement is certainly a welcome and appropriate way to recognize taxpayer support. Should you wish to provide a credit for an Ontario tax credit, we would suggest the following wording: with the assistance of the Government of Ontario The Ontario Sound Recording Tax Credit. Page 4

7 How Is the Credit Administered? The OSRTC is jointly administered by the Ontario Media Development Corporation (OMDC) and the Canada Revenue Agency (CRA). In order to obtain an OSRTC, a qualifying corporation must apply to the OMDC for a Certificate of Eligibility, which certifies eligibility of the corporation and the sound recording. The corporation claims the OSRTC by filing its federal tax return and a claim form, T2SCH562 with the CRA, along with a Certificate of Eligibility issued by the OMDC. The CRA processes the claim, reducing the credit amount payable by any Ontario taxes owing and, if applicable, issues a refund cheque. If no Ontario taxes are payable, the OSRTC will be refunded in full. Please note that the OSRTC is treated as income which is subject to tax. B. LEGISLATIVE REQUIREMENTS The following is an overview and commentary on the OSRTC legislative requirements. The OSRTC legislation and regulation are reproduced in Appendices 4 and 5, respectively. WHAT TYPES OF CORPORATIONS ARE ELIGIBLE? A Sound Recording Business is a company whose principal activities are managing artists, publishing music, producing sound recordings, marketing and distributing sound recordings or a combination of those activities. An eligible sound recording corporation must have carried on a sound recording business for 12 months prior to the year in which it is claiming the credit. As well, the corporation must have implemented a plan for the distribution of at least one sound recording within twelve (12) months before the start of the first taxation year in which it is claiming the credit. There are exceptions for new corporations that have been formed as a result of an amalgamation or merger, for subsidiary corporations wound up into a parent corporation, and for new corporations that previously carried on business as a sole proprietorship or partnership. Applicant corporations who do not meet the minimum time requirements for being in business may still qualify under these exceptions and should consult the legislation and regulation. A business is carried on in Ontario if it is allocating more than 50% of its revenues through a permanent establishment (office(s), studio, warehouse) situated in Ontario and reports taxable income in Ontario to the Canada Revenue Agency. A permanent establishment generally refers to a fixed place of business. However, whether a fixed place of business is a permanent establishment is a question of fact which must be determined on a case-by-case basis. In interpreting the term permanent establishment, the courts have considered factors such as: the degree of the corporation s control over the place of business, the degree of continuity and permanence of the place of business and the presence of personnel and routine activities. A Canadian-controlled corporation is generally a corporation that is more than 50% owned by Canadians, as determined under sections 26 to 28 of the Investment Canada Act (Canada). WHAT TYPES OF SOUND RECORDINGS ARE ELIGIBLE? Eligible Canadian Sound Recording The sound recording must meet one of three requirements; that the music is composed primarily by qualified Canadians or that the lyrics were written primarily by qualified Canadians or that substantially all of the activities to produce the recording were performed in Ontario. "Primarily" means "more than 50%" and "substantially" means "at least 90%". Activities to produce the recording include recording, mixing and mastering. Page 5

8 The applicant corporation must have produced the eligible Canadian sound recording and have exclusive contractual control of the master tape for five (5) years after its completion. The expression "produced the sound recording" does not refer to the individual Producer who works with the artist or group in the studio to record the album, but the various activities involved in creating and packaging the sound recording. There should be an agreement between the applicant corporation and the artist or group specifying that the corporation has exclusive control of the master tape. The music, or the lyrics, if any on an eligible Canadian sound recording must be performed by an emerging Canadian artist or group, and the artist or group must be an emerging Canadian artist or group (see below) when they enter into a contract with the eligible sound recording company and when the master is completed. The eligible sound recording company must have a plan for the distribution of the recording that OMDC considers appropriate for the commercial exploitation of the recording. A plan for distributing the recording is generally considered appropriate for commercial exploitation if there is a clearly articulated strategy and implementation plan, identified goals or results and the resources to achieve those results. The OSRTC can only be claimed on eligible sound recordings that were commenced before April 23, Ineligible Sound Recordings Ineligible recordings include recordings that consist primarily (more than 50%) of spoken word or of wildlife and nature sounds, and recordings that are produced for use as an instructional tool or for advertising purposes. The minimum total playing time for recordings is 15 minutes. The requirement regarding the minimum length of the recording applies to the total playing time, which may include bonus tracks. Recordings for which public financial support would in the opinion of the OMDC be contrary to public policy may include recordings which are capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, sex, sexual orientation or ethnic origin and products whose dominant characteristic is the undue exploitation of sex, violence or of sex and one or more of crime, horror, cruelty or violence. Emerging Canadian Artists or Groups To be an emerging Canadian group, 75% of the members of the group must be emerging Canadian artists as described below. Qualified Canadian means an individual who is ordinarily resident in Canada and who is either a Canadian citizen or permanent resident. The artist or group does not have to be resident in Ontario. In addition to being a qualified Canadian at the the time they entered into a contract with the sound recording company and the master recording was made, an emerging Canadian artist cannot have received a gold record (as an indivdual artist or as a member of a group) in the U.S. and one of Canada, UK, France, Germany, Asia or Latin America. Proof of citizenship or permanent residency status will be required to confirm that an individual is a qualified Canadian. In addition, applicants must have proof of residency at the time the indivdual entered into a contract with the applicant. The OMDC provides forms to assist the applicant establishing citizenship and residency. WHAT IS A QUALIFYING MUSIC VIDEO? The video must meet one of two requirements; that the Director is a qualified Canadian or that the production facility where the video is filmed and produced is in Ontario. Page 6

9 A qualifying music video s primary purpose must be to promote and sell the eligible Canadian sound recording and the principal performer in the audio component of the video must be the same emerging Canadian artist or group who performed on the eligible Canadian sound recording. The applicant corporation must have produced the eligible video for the related album and have exclusive contractual control of the copyright of the video for five (5) years after its completion. The applicant may hire a company to produce the music video on their behalf and still be considered to have produced the video. There should be an agreement between the applicant corporation and the artist or group that the corporation has exclusive contractual control of the copyright of the video. Where applicants are unsure whether a video is contrary to public policy, they may request an advance ruling from the OMDC prior to applying for an OSRTC. If the video is determined by the OMDC not to be contrary to public policy, an application for the OSRTC could then be made. HOW MUCH IS THE CREDIT? The OSRTC is caluclated by multiplying the corporation s qualifying expenditures for a taxation year less government assistance by the rate of 20%. Eligible Expenditures 100% of expenditures incurred on account of property that is used primarily in Ontario for production, music video production and marketing and 50% of expenditures used outside Ontario for music video production and marketing are eligible for the tax credit. As well, expenditures must be reasonable in the circumstances. Where property or services are bartered as part of an arm s-length transaction, the cost of the services, property or capital property acquired is equal to the total value of the consideration given by the applicant. The value of the bartered services as included in the income of the applicant company must correspond to the price which the supplier would normally have charged for the services or property. Those amounts may be claimed by the applicant company as an expense for the tax credit. Eligible expenditures are expenses for property that is used primarily in Ontario and for services that are provided primarily in Ontario. If a non-ontario resident provides services in Ontario, these expenses would be eligible. Similarly, the expense for equipment rented from a non-ontario company but used in Ontario would be an eligible expense. Eligible launch costs include facility rental; 50% of food and beverages; invitation printing; event planning; and location licenses and permits. If the launch is held outside Ontario, 50% of eligible launch costs are eligible for the credit. If the launch is held in Ontario, 100% of eligible launch costs are eligible. Expenditures for direct marketing of the recording are eligible for the tax credit. If distribution fees are part of a contract for the marketing or merchandising of an eligible sound recording, then the expenditure would be eligible. If distribution fees are for the cost of packaging, mailing or delivering the eligible sound recording, then the fees would be considered a part of manufacturing costs and would not be a qualifying expenditure. A review of the underlying purpose of each fee is necessary to determine eligibility. Expenses eligible for the OSRTC are expenses incurred within the 24 month period that begins after the corporation has incurred its 1 st eligible expense for the recording. In most cases the 1 st eligible expense is a production expense, so the 24 month period will generally begin before the album is released. Page 7

10 Ineligible Expenditures Expenditures related to touring and live performances are not eligible expenditures for the OSRTC. Expenditures incurred on or after April 24, 2015 on an eligible sound recording may only be claimed if: i) the eligible sound recording was commenced before April 23, 2015; ii) the expenditure was incurred before May 1, 2016; and iii) the applicant did not receive an amount from the Ontario Music Fund in respect of the expenditure. Government Assistance The OSRTC for an eligible sound recording is equal to 20% of qualifying expenditures for a taxation year less government assistance. Assistance from government which the qualifying corporation has received, is entitled to receive or can reasonably expect to receive must be deducted. The definition of assistance is found in paragraph 12(1) (x) of the Income Tax Act (Canada). Government assistance does not include assistance received from a private fund or source. Funding from FACTOR is not considered government assistance and therefore is not deducted in calculating an OSRTC. Applicants are encouraged to contact the OMDC regarding the treatment of specific funding sources in the calculation of the tax credit. Page 8

11 ADMINISTRATIVE PROCESS The OSRTC is jointly administered by the OMDC and the Canada Revenue Agency, as described below. 1. OMDC Role (i) Issuance of Certificates of Eligibility The OMDC is responsible for issuing Certificates of Eligibility, which the qualifying corporation files with the Canada Revenue Agency with its corporate tax return for the applicable taxation year in order to claim the OSRTC. A Certificate of Eligibility sets out the eligibility of an applicant corporation and the eligibility of a sound recording and must be issued for each sound recording, for each year in which the corporation incurs eligible expenditures. OMDC reserves the right to ask any question necessary to determine eligibility issues. As issues and fact patterns will differ depending on the specifics of any application, so too may the line of inquiry. Please note that receipt of a certificate for one product may not be relied upon as a guarantee of certification for subsequent filings. (ii) Amendment and Revocation of Certificates of Eligibility A Certificate of Eligibility may be amended to correct an error, and under certain circumstances, may be revoked by the OMDC. An amended Certificate of Eligibility replaces any Certificate of Eligibility previously issued for the sound recording. If a Certificate of Eligibility is revoked by the OMDC, the revoked Certificate of Eligibility is treated as if it had never been issued. Please note that as of January 1, 2017 there is a fee for requesting an amended Certificate of Eligibility. 2. Canada Revenue Agency Role The Canada Revenue Agency is responsible for assessing the Corporations Tax Return T2 along with Schedule T2SCH562 which must be filed by a qualifying corporation in order to claim the OSRTC and will review or audit such return. (i) Filing of a Corporate Tax Return Canada Revenue Agency (CRA) will administer both Federal and Ontario corporate taxes for taxation years ending after December 31, A corporation must file its T2 for a taxation year with the CRA within six (6) months after the end of the corporation s taxation year. To claim the OSRTC a corporation must file its Federal corporate tax return (T2) with Schedule T2SCH562 and the Certificate of Eligibility with the CRA. The CRA audits the return and then issues a notice of assessment and, if applicable, a refund. The amount of the credit may be reduced by any Ontario taxes owing by the qualifying corporation. Please note that the OSRTC will reduce the cost of the eligible product for tax purposes. In the event that your Certificate of Eligibility is not available at the time of submitting your Corporation's Tax Return to the CRA, we recommend that you enter your own estimate of the OSRTC on Schedule T2SCH562 and include this schedule with your corporate tax return. Once the Certificate of Eligibility is received from the OMDC, submit the Certificate (or a copy of it) to the CRA. The CRA will process the claim once they have received the Certificate of Eligibility as well as the T2 Corporation Income Tax Return and applicable schedules. Page 9

12 The T2 Corporation Income Tax Return and applicable schedules are available on the CRA website at: For additional information, visit the following CRA website: Inquiries should be made to CRA s Toronto Film Services Unit at (416) or (416) (ii) Payment of an OSRTC Refund If a corporate tax refund (which may include an OSRTC) is payable, a cheque made payable to the qualifying corporation is sent by the Canada Revenue Agency to the qualifying corporation. 3. Applying for a Certificate of Eligibility (i) Who Applies to the OMDC? The qualifying corporation submits a completed OSRTC Application to the OMDC for each eligible sound recording. For administrative convenience, the qualifying corporation may appoint an agent to apply on its behalf, but any Certificate of Eligibility issued will be in the name of the qualifying corporation. (ii) When Should Application Be Made to the OMDC? Application can be made to the OMDC once the eligible sound recording has been completed and before the end of the taxation year. Please note that as of January 1, 2017 there is a fee for filing claims that are more than 24 months old. (iii) Is there an Application Fee? A non-refundable Application Fee is payable with respect to each OSRTC application submitted to the OMDC. Application Fees are used to offset operating costs of the OSRTC program. The Application fee is calculated as 0.12 per cent of the Total Estimated Eligible Expenditures for the application. The minimum Application Fee is $50 and the maximum Application Fee is $200 per application. In addition, the total maximum Application Fees payable per corporation per fiscal year are $3,000. For example, where Total Estimated Eligible Expenditures are $60,000, the Application Fee is calculated as follows: Application Fee = Total Estimated Eligible Expenditures x = $60,000 x = $72 Fees are payable by cheque or money order made payable to the Ontario Media Development Corporation at the time the OSRTC application is submitted to the OMDC. Payment of the Application Fee is required in order for the application to be reviewed. Please note: Effective January 1, 2017 there is an additional filing fee of $100 applied to applications for the first Certificate of Eligibility for the recording received more than 24 months after the first year-end of the claim. Please note: Effective January 1, 2017, there is a fee of $100 for Amended Certificates that are requested. Page 10

13 (iv) What Documentation is Required? Where a Certificate of Eligibility is requested, the applicant must submit to the OMDC the documents set out in the OSRTC Documents Checklist. In some cases the OMDC may also require additional documentation or information in order to issue a Certificate of Eligibility. All documentation or information received from an applicant is subject to the confidentiality provisions of the Taxation Act and will be maintained in strictest confidence by the OMDC and the Canada Revenue Agency. (v) How Long Does the Process Take? OSRTC online applications will be processed by the OMDC Tax Credits Department on a first-come, first-served basis and processing time will depend on the volume of applications received and the completeness of such applications. Companies which file incomplete applications will be notified about deficiencies with their filing. Where significant delays are encountered in obtaining responses from applicants, the OMDC reserves the right to close the file after 30 days. (vi) Online Application: In an effort to streamline our tax credit administration process, the OMDC has a mandatory policy that all OMDC tax credit applications must be submitted via our Online Application Portal. Please ensure that your application includes all of the required documentation and information as only complete applications can be transmitted through the Online Application Portal. When you start an application on the OAP you can save your work and come back to it before submitting the application online. However, please note that once you have started the application on the OAP you have 90 days to submit it before the application expires. Page 11

14 CONTACT INFORMATION OMDC TAX CREDITS DEPARTMENT WHO S WHO Listed below are the members of the Tax Credits Department who work on the OSRTC. For general information, forms or information on the status of an application, please contact the Programs Officer. For specific questions on eligibility, labour expenditure calculations, definitions or any issue concerning a specific project; please contact the Tax Credits Phone Duty line (416) or mailbox at taxcredits@omdc.on.ca. Please leave a detailed message including your name, company, phone number and which tax credit or file you are inquiring about. Phone calls and s will be responded to within one business day. Policy issues may be addressed to the Director. Director Jennifer Blitz jblitz@omdc.on.ca (416) Team Leader Monica Szenteszky mszenteszky@omdc.on.ca (416) Team Leader Manya Rouben mrouben@omdc.on.ca (416) Business Officer Deborah Morris dmorris@omdc.on.ca (416) Business Officer Angela Zehr azehr@omdc.on.ca (416) Programs Officer Paritosh Mehta pmehta@omdc.on.ca (416) Business Officer Christine Pond cpond@omdc.on.ca (416) Page 12

15 DOCUMENTS CHECKLIST REQUIRED FOR CERTIFICATE OF ELIGIBILITY REVIEW Applicants must register on the OMDC Online Application Portal to access the OSRTC Application Form 1. Required Authorization Document: Applicant Declaration Download Declaration form from Online Application, sign and return to OMDC. 2. Application Fee Application fee, payable to the Ontario Media Development Corporation. The fee is calculated as 0.12 per cent of the Total Estimate Eligible Expenditures. The minimum application fee is $50 and the maximum is $200 per application. In addition, the total maximum application fees payable per corporation per fiscal year are $3,000. Effective January 1, 2017: - There is an additional filing fee of $100 for applications that are submitted more than 24 months from the company s relevant year-end; and - There is a fee of $100 for requests for amended Certificates. 3. Applicant Corporate Information and Declaration (Part A&D) To be submitted upon request by the OMDC to verify eligibility of Applicant Corporation for taxation years not in the original OSRTC application. The Part D must be signed by a signing officer of the Applicant Corporation. Part A&D can be downloaded from the Online Application Portal. 4. A Copy of all applicable Financial Statements for Taxation Year End 1, 2, and 3 as listed in Eligible Sound Recording Information Section on Application Form. Plus Financial Statement for tax year immediately preceding Tax Year 1. (if already on file with OMDC Tax Credits, provide updates, amendments and revisions) 5. A Copy of the Incorporation Documents (Certificate of Incorporation) (if already on file with OMDC Tax Credits, provide updates, amendments and revisions) 6. A List of the Applicant Company s Shareholders or Corporate Chart for Applicable Fiscal year(state name, citizenship and percentage of shares held by each individual) attach a corporate chart if necessary 7. A Copy of the Applicant Corporation s Contract with the Artist or Group 8. Most Recent Copy of Company s Catalogue/List of Sound Recordings Including Distributor(s) (if already on file with OMDC Tax Credits, provide updates, amendments and revisions) 9. A Copy of the Applicant Corporation s Distribution Agreement(s) or Distribution Plan(s) (You must provide a distribution agreement if the sound recording has a distributor or a distribution plan where the sound recording does not have a distributor.) 10. A Copy of the Sound Recording as released on CD, or DVD. 11. A Copy of all Lyric Sheets for Sound Recordings where lyrics are NOT included in the CD liner notes. 12. A Copy of the Music Video(s) for Each Sound Recording on DVD format (where applicable) 13. Proof of Citizenship & Residency for each Artist or Group Member Listed for each Sound Recording. (Each individual should complete in full, sign and date a copy of the Citizenship & Residency Declaration form available for download from the OMDC website.) Page 13

16 APPENDIX Proof of Citizenship & Residency for each Lyricist(s), Composer(s) and Music Video Director(s), for each sound recording. (Each individual should complete in full, sign and date a copy of the Citizenship & Residency Declaration form available for download from the OMDC website.) 15. Documentation to confirm that the Company has incurred costs for production of the recording if not clearly outlined in the contract or agreement (i.e. invoices for recording, mixing, mastering or general ledger of accounts). 16. Invoices to confirm that substantially all of the activities carried out to produce the recording were performed in Ontario (required if a deciding criteria for eligibility). Page 14

17 Ontario Sound Recording Tax Credit DECLARATION OF CITIZENSHIP AND RESIDENCY (To be completed by artists, lyricists, composers and music video directors) Instructions: Please complete all sections of this form. Recording Title: Your Legal Name: Your Alias: Check all that apply: Artist or Group Member Lyricist Composer Music Video Director Current Address: (full address including postal code) _ With respect to the above recording, I hereby certify and confirm that: 1. I am (please check one of the following) a Canadian citizen by birth a Canadian citizen by naturalization (date of naturalization: ) a permanent resident of Canada within the meaning of the Immigration Act (date of admission as permanent resident: ) 2. For artists or group members: Date of contract with sound recording company: I was ordinarily resident in Canada at the time my contract was signed and when the master recording was made, and my address at that time was: same as above For lyricists: (full address indicating postal code) Page 15

18 Period during which the lyrics were written: I was ordinarily resident in Canada during the time the lyrics were written, and my address at that time was: same as above (full address indicating postal code) (over) For composers: Period during which the music was composed: I was ordinarily resident in Canada during the time the music was written, and my address at that time was: same as above (full address indicating postal code) For music video directors: Date(s) the music video was shot: I was ordinarily resident in Canada when the music video was shot, and my address at that time was: same as above (full address indicating postal code) For all: 3. I understand that the sound recording company will be relying on this Declaration for its application for an Ontario Sound Recording Tax Credit (OSRTC), which is jointly administered by the Ontario Media Development Corporation (OMDC) and the Canada Revenue Agency and may be subject to government audit. I hereby warrant that the above-noted information is true and correct. 4. I authorize the OMDC to disclose any and all of the foregoing information to the Canada Revenue Agency. 5. The information obtained in connection with this Declaration is collected pursuant to section 94 of the Taxation Act. The above-noted information shall be used for the purpose of processing the sound recording company s application for a tax credit under the OSRTC. Questions about this collection should be directed to the Director of Tax Credits, OMDC, 175 Bloor St. East, South Tower, Suite 501, Toronto ON, M4W 3R8, Signature of Declarant Date Page 16

19 Ontario Sound Recording Tax Credit APPENDIX 4 LEGISLATION (TAXATION ACT, 2007, c. 11, Sched. A, Section 94) (Current to January 1, 2017) 94. (1) A corporation that is an eligible sound recording company for a taxation year and that complies with the requirements of this section may claim an amount for the year in respect of and not exceeding the corporation s Ontario sound recording tax credit for the year. Amount of tax credit (2) The amount of a corporation s Ontario sound recording tax credit for a taxation year is the sum of all amounts, each of which is in respect of an eligible Canadian sound recording in relation to which the corporation is an eligible sound recording company and each of which is equal to 20 per cent of the qualifying expenditures incurred by the corporation before the end of the year in respect of the recording, to the extent that the expenditures were not included in determining the amount of the corporation s available tax credit under this section or section of the Corporations Tax Act for a previous taxation year. Limit on tax credit (2.1) A corporation may only claim the Ontario sound recording tax credit in respect of a qualifying expenditure incurred on or after April 24, 2015 if the following requirements are met: 1. The expenditure was incurred in respect of an eligible Canadian sound recording that commenced before April 23, The expenditure was incurred before May 1, The corporation did not receive an amount from the Ontario Music Fund in respect of the expenditure. Corporate partner (3) The following rules apply if a corporation is a member of a partnership at the end of a fiscal period of the partnership in which the partnership would qualify for an Ontario sound recording tax credit in respect of one or more eligible Canadian sound recordings if the partnership were a corporation whose fiscal period was its taxation year, and if the corporation would be an eligible sound recording company for the taxation year in relation to the eligible Canadian sound recordings: 1. Subject to paragraph 2, the portion of the Ontario sound recording tax credit to which the partnership would be entitled if it were a corporation that may reasonably be considered to be the corporation s share may be included in determining the amount of the corporation s Ontario sound recording tax credit for the corporation s taxation year. 2. If the corporation or another member of the partnership bases a claim in respect of the partnership for the fiscal period under subsection (4), no amount in respect of the partnership may be included in determining the amount of the corporation s Ontario sound recording tax credit for the corporation s taxation year otherwise than under subsection (4). Page 17

20 Same (4) If it is acceptable to the Ontario Minister, a partner s share of a partnership s Ontario sound recording tax credit determined under subsection (3) for a fiscal period shall be equal to such amount as the partner claims not exceeding the amount, if any, by which the amount of that credit exceeds the total of all amounts each of which is claimed under this section or section of the Corporations Tax Act in respect of the tax credit by another partner. Limited partner (5) Despite subsections (3) and (4), a limited partner s share of an Ontario sound recording tax credit to which a partnership would be entitled if it were a corporation is deemed to be nil. Application for certificate (6) In order to be eligible to claim an amount in respect of an Ontario sound recording tax credit under this section in respect of a sound recording, a corporation shall apply to the Ontario Media Development Corporation or a person designated by the Minister of Culture for certification that the sound recording is an eligible Canadian sound recording and that the corporation is an eligible sound recording company for the taxation year in relation to the eligible Canadian sound recording. Same (7) A corporation that applies for certification under this section shall provide to the designated person the information the designated person specifies for the purposes of making the determinations required under subsection (6). Certificate (8) If the particular sound recording is an eligible Canadian sound recording for the purposes of this section and the corporation is an eligible sound recording company for the taxation year in relation to the recording, the designated person shall issue to the corporation a certificate so certifying. No claim unless certificate delivered (9) No amount may be claimed under this section for a taxation year in respect of a sound recording unless the corporation delivers to the Ontario Minister, with its return for the year, the certificate issued under this section in respect of the sound recording, or a certified copy of the certificate. Revocation of certificate (10) A certificate issued under this section may be revoked if, (a) an omission or incorrect statement was made and it is reasonable to believe that, if the omitted information had been disclosed or if the person designated had known that the statement was incorrect, the designated person would have found that the corporation was not an eligible sound recording company for the purposes of this section or that the recording was not an eligible Canadian sound recording for the purposes of this section; (b) the corporation is not an eligible sound recording company for the year in relation to the eligible Canadian sound recording; or (c) the sound recording is not an eligible Canadian sound recording for the purposes of this section. Same (11) A certificate that is revoked is deemed never to have been issued. Page 18

21 Definitions (12) In this section, eligible Canadian sound recording means a sound recording that satisfies the prescribed rules and is by an emerging Canadian artist or group; ( enregistrement sonore canadien admissible ) eligible sound recording company has the prescribed meaning; ( société d enregistrement sonore admissible ) emerging Canadian artist or group means an artist or group that satisfies the prescribed rules; ( nouvel artiste ou ensemble canadien ) qualifying expenditure means an amount determined in the prescribed manner in respect of an expenditure that satisfies the prescribed rules. ( dépense admissible ) Page 19

22 APPENDIX 5 REGULATIONS (Ontario Regulations 37/09) (Current to July 20, 2012) Ontario sound recording tax credit 36. (1) This section applies for the purposes of section 94 of the Act. (2) In this section, amalgamated corporation means a corporation formed on the amalgamation or merger of two or more corporations; Canadian-controlled corporation means a corporation that would be a Canadian-controlled entity for the purposes of the Investment Canada Act (Canada) if references to the Minister in sections 26 to 28 of that Act were read as references to the Ontario Minister; Canadian group means a group of musicians, vocalists or both, at least 75 per cent of whom are qualified Canadians; government assistance means, in respect of a corporation, assistance that the corporation has received, is entitled to receive or may reasonably be expected to receive from a government, municipality or other public authority in any form, including a grant, subsidy, forgivable loan, deduction from tax and investment allowance, but not including an Ontario sound recording tax credit under section 94 of the Act or section of the Corporations Tax Act; master recording means, in respect of a sound recording, the initial fully completed sound recording from which all copies of the sound recording are made; parent corporation means, in respect of a subsidiary corporation, the corporation that controls the subsidiary corporation; predecessor corporation means a corporation that amalgamates or merges with one or more other corporations to form an amalgamated corporation; qualified Canadian means an individual ordinarily resident in Canada who is described in paragraph (a) of the definition of Canadian in subsection 1106 (1) of the Federal regulations; small eligible sound recording company means, in respect of a taxation year of the company, an eligible sound recording company that has never claimed a tax credit for a previous taxation year and whose gross revenue for the 12-month period immediately before the beginning of the taxation year does not exceed $500,000; sound recording business means a business in which the principal activities are managing musicians or vocalists or both, publishing music, producing sound recordings, marketing and distributing sound recordings or a combination of those activities, carried out under contract with musicians, vocalists or copyright holders; subsidiary corporation means a corporation that is controlled by another corporation. Page 20

23 (3) In section 94 of the Act, emerging Canadian artist means a qualified Canadian, (a) who is a musician, vocalist or both, (b) who has never had a gold sound recording (as determined by the Canadian Recording Industry Association, the Recording Industry Association of America, the International Federation of the Phonographic Industry or a successor of any of them) both in the United States of America and in Canada, the United Kingdom, France, Germany, Asia or Latin America, and (c) who has never been a member of a musical group that has had a gold sound recording described in clause (b); emerging Canadian group means a Canadian group that has never had a gold sound recording described in clause (b) of the definition of emerging Canadian artist and of which at least 75 per cent of the members are emerging Canadian artists; sound recording means a recording of music, with or without lyrics, (a) that is produced by analog, digital or similar technology, and (b) that is, (i) on a vinyl record, compact disc, digital versatile disc or audiotape, if the recording is made before May 12, 2005, or (ii) on a vinyl record, compact disc, digital versatile disc, audiotape or any other fixed medium from what a recording is capable of being played, if the recording is made after May 11, (4) For the purposes of section 94 of the Act, a corporation is an eligible sound recording company for a taxation year in respect of an eligible Canadian sound recording if the following conditions are satisfied: 1. The corporation is a Canadian-controlled corporation that carries on a sound recording business during the year as its primary activity. 2. The corporation carried on a sound recording business throughout the 12-month period ending immediately before the taxation year. 3. The corporation carries on its sound recording business primarily at a permanent establishment in Ontario. 4. The corporation s Ontario allocation factor for its previous taxation year is at least one-half. 5. The corporation bears the financial risks associated with its sound recording business or is related to a Canadian-controlled corporation that bears the financial risks. 6. Within the 12-month period ending immediately before the first taxation year for which the corporation claimed a tax credit in respect of the sound recording, i. the corporation implemented a plan for the distribution of at least one sound recording, and ii. a person designated by the Minister of Culture considered the plan to be appropriate for the commercial exploitation of the sound recording. Page 21

24 (5) An amalgamated corporation is deemed to satisfy, (a) (b) (c) the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the taxation year, the amalgamated corporation and any of its predecessor corporations carried on a sound recording business; the condition described in paragraph 4 of subsection (4) for its first taxation year after amalgamation or merger if the Ontario allocation factor of its predecessor corporations would be at least one-half for their last taxation years ending before the amalgamation or merger if that Ontario allocation factor were determined as if the predecessor corporations were a single corporation; and the condition described in paragraph 6 of subsection (4) for its first taxation year after amalgamation or merger if the plan for distribution described in that paragraph is implemented by at least one of its predecessor corporations. (6) If a subsidiary corporation is wound up into its parent corporation, the parent corporation, (a) (b) (c) is deemed to satisfy the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the year, either or both of the subsidiary corporation and the parent corporation carried on a sound recording business; is deemed, if the winding-up occurred in the taxation year, to satisfy the condition described in paragraph 4 of subsection (4) for the year if the Ontario allocation factor of the parent corporation and the subsidiary corporation would be at least one-half for their last taxation years ending before the windingup if that Ontario allocation factor were determined as if both corporations were a single corporation; and is deemed to satisfy the condition described in paragraph 6 of subsection (4) if the plan for distribution described in that paragraph is implemented within the period specified in that paragraph by the subsidiary corporation. (7) The following rules apply for the purposes of paragraphs 2, 4 and 6 of subsection (4): 1. If a sound recording business carried on by a corporation was previously carried on by a sole proprietor or by a partnership, the sole proprietor or partnership is deemed to be a corporation for the period of time that he, she or it carried on the business before the corporation was incorporated, and that corporation is deemed to be the same corporation as, and a continuation of, the corporation that is deemed to have existed. 2. If all or substantially all of the assets used in a sound recording business are transferred by one corporation to another corporation and section 85 of the Federal Act applies to the transfer, the transferee corporation is deemed to be the same corporation as, and a continuation of, the transferor corporation with respect to the operation of the business. (8) Subject to subsection (9), a sound recording is an eligible Canadian sound recording for the purposes of section 94 of the Act if the following conditions are satisfied: 1. The recording is produced by an eligible sound recording company. Page 22

25 2. The music or the lyrics to the music, if there are lyrics, are performed on the recording by an individual or group that was an emerging Canadian artist or emerging Canadian group both when the contract was entered into with the eligible sound recording company for the production of the recording and when the master recording was made. 3. At least one of the following conditions is satisfied: i. The music was composed primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they composed the music. ii. If there are lyrics, the lyrics were written primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they wrote the lyrics. iii. Substantially all of the activities carried out to produce the recording were performed in Ontario. 4. The eligible sound recording company retains the right to exclusive control of the master recording for at least five years after the master recording is completed. 5. The eligible sound recording company that claims a tax credit in respect of the sound recording has a plan for the distribution of the recording that a person designated by the Minister of Culture considers to be appropriate for the commercial exploitation of the recording. (9) A sound recording is not an eligible Canadian sound recording if any of the following applies: 1. The sound recording is primarily of the spoken word or of wildlife or nature sounds. 2. The total playing time of the sound recording is less than 15 minutes. 3. The sound recording is produced for use as an instructional tool or for advertising or promotional purposes. 4. The sound recording can be reasonably considered to be capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin. 5. The dominant characteristic of any lyrics on the recording is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence. 6. Public financial support for the recording is contrary to public policy. (10) The amount of an eligible sound recording company s qualifying expenditures in respect of an eligible Canadian sound recording for a taxation year for the purposes of section 94 of the Act is the sum of any of the following expenditures that are incurred by the corporation during the year and not excluded under subsection (11), less the sum of all government assistance in respect of the expenditures: 1. Expenditures incurred for the production of the sound recording that are on account of property used primarily in Ontario or services provided primarily in Ontario, including artists royalties, musicians session fees, graphics, artwork, photography, layout and colour separations, software, digital scanning, programming and beta testing. Page 23