British Columbia SR&ED vs. Interactive Digital Media Tax Credit
The SR&ED tax credit exists at both the federal and provincial level in British columbia. This tax credit is aimed at helping those companies who have conducted research and development, including the gaming industry.
The provincial SR&ED tax credit in BC offers a maximum of 10% of the qualifying expenditures. This 10% does max out at an expenditure limit of $3 million but anything in excess may be claimed in a non-refundable tax credit. Qualified expenditures include:
- Staff wages (for those who worked directly on the SR&ED)
- Contractors (for those who worked directly on the SR&ED
BC also offers the Interactive Digital media Tax Credit (IDMTC). Their definition includes video games, educational software, edutainment products, simulators, augmented and virtual reality products within interactive digital media. This tax credit is worth 17.5% of a company’s eligible wages and salary incurred in a tax year. However, it is limited to employees that reside or resided in BC during product development. The credit also excludes employees who fit any of the following:
- Not directly involved in development (e.g. admin or HR)
- Those who own 10% or more of the issues shared of capital stock of the corporation
Both the provincial SR&ED tax credit and the IDMTC work in conjunction with the federal tax credit but not with each other. So you can file for the federal tax credit and one of the two provincial tax credits. So which one should you choose?
You need to consider the overall qualifying expenditures. While the IDMTC offers a higher remuneration for staff, if you have large expenditures in contractors or software, the BC SR&ED might work out better overall. Similarly, if your staff salaries are the largest component, you might do better to apply with the IDMTC. It’s always best to evaluate your options to maximize your tax credits. If you’re still unsure, reaching out to experts for your specific questions is always a good idea.