The Canadian Audio-Visual Certification Office (CAVCO)
The Canadian Audio-Visual Certification Office (CAVCO) co-administers two tax credit programs with the Canada Revenue Agency: The Canadian Film or Video Tax Credit Program (CPTC) for Canadian content; and The Production Services Tax Credit (PSTC) for non-Canadian content.
The key objectives of CAVCO are to encourage Canadian programming and to stimulate the development of an active domestic independent production sector, as well as to stimulate job growth by encouraging Canadians and foreign-based film producers to employ the services of Canadians. CAVCO provides certification for an eligible production, confirming that it meets the requirements of the two programs described above and can receive a tax credit from the Canada Revenue Agency.
To be recognized as a Canadian film or video production, a live action production must be allotted a total of at least six points according to the creative points scale below. Points will only be awarded if the person(s) who rendered the services is/are Canadian.
Director - 2 points; Screenwriter - 2 points; Lead performer for whose services the highest remuneration was payable - 1 point; Lead performer for whose services the second highest remuneration was payable - 1 point; Director of photography - 1 point; Art director - 1 point; Music composer - 1 point; Picture editor - 1 point.
When a production meets the CPTC program requirements, CAVCO makes a recommendation to the Minister of Canadian Heritage to issue a Canadian film or video production certificate. The certificate also provides an estimate of the production's qualified labour expenditures, needed for calculating the tax credit. The certificate is based on an analysis of detailed cost estimates, financing plans including amounts deemed assistance, and the Canadian content requirements of the CPTC program.
The Canadian Audio-Visual Certification Office (CAVCO), along with the Canada Revenue Agency, administers the following refundable tax credit programs to support the film and television production industry in Canada:
1) The Canadian Film or Video Production Tax Credit (CPTC) encourages the creation of Canadian programming and the development of an active domestic independent production sector. It is available to Canadian production companies for productions qualified as Canadian content; qualified productions must meet specific criteria for key creative personnel and production costs. The CPTC is available at a rate of 25 percent of the qualified labour expenditure.
2) The Film or Video Production Services Tax Credit (PSTC) encourages the employment of Canadians by taxable Canadian or foreign-owned corporations with a permanent establishment in Canada. The PSTC is equal to 16 percent of salary and wages paid to Canadian residents or taxable Canadian corporations for services provided to the production in Canada.
The first program is cultural. It credits Canadian labour expenses on Canadian content productions that are owned and controlled by Canadians. The second program is purely industrial. It invites the world to film their productions in Canada. Companies that service non-content productions can get a credit on the Canadian labor they employ. The PSTC builds up the Canadian production infrastructure when foreign companies come to Canada to film their productions.
The Canadian tax credit model has been replicated around the world because it is seen as a stable and effective way to offer government support. Together, both programs cost the federal government some $380 million annually depending on the level of production activity. The total volume of film and television production in Canada reached an all-time high of $7.1 billion in production activity in 2014-15.
The results expected from the Canadian Audio-Visual Certification Office (CAVCO) are as follows:
1) Canadian content film and television productions receive certification from the Department of Canadian Heritage.
2) Non-Canadian content film and television productions using Canadian production services receive accreditation from the Department of Canadian Heritage.
In turn, this will contribute to Canadian artistic expressions and cultural content being created and accessible at home and abroad. Reaching Canadian audiences with more Canadian content remains the key underlying goal of the Canadian Film or Video Production Tax Credit (CPTC). Through this program, the Government of Canada can invest in this cultural vehicle and make possible the production of thousands of hours of Canadian content. As all Canadian content productions must be shown in Canada, Canadians have the opportunity to see them. This helps meet the overall departmental objective of reaching Canadian audiences.
Another key expected result is related to the economic growth generated by such foreign productions and the expertise acquired by workers and technicians employed in the film and video industry sector.
Actual spending in 2013-14 was $ - 409,992 CAD. This negative number represents a surplus or, as for CAVCO, revenues. CAVCO collects user fees from clients. As its planned and actual revenues were higher than its expenditures, CAVCO generated revenues in 2013-14.
For more information, please see: http://www.pch.gc.ca/DAMAssetPub/DAM-verEval-audEval/STAGING/texte-text/dpr-rmr-2013-14_1415218344790_eng.pdf
Tax credit programs are seen as a very stable and predictable form of government support that act to leverage other public and private contributions and against which banks are willing to lend.