Canada raises game developer incentives

Tax credit for large firms increases to 40%

TORONTO -- Even as Canada's biggest province runs a record deficit during the economic downturn, Ontario shows no sign of letting up on entertainment industry handouts.

Aiming to keep Ontario at the forefront of crossplatform media production, the province has sweetened its interactive digital media tax credit for large game developers from 25% to 40% for companies that develop original content, and to 35% for producers working on a fee-for-service basis for international clients.

Additionally, Ontario will allow game developers that spend at least $1 million annually to develop interactive digital media games to tap a new 35% Ontario interactive digital media tax credit to offset ongoing labor costs.

Tracey Jennings, head of the Canadian entertainment and media practice at PricewaterhouseCoopers, said the new measure will help video game developers by enabling them to tap subsidies throughout a multiyear development cycle. Existing incentives enable producers to tap tax offsets only after a video game is completed.

Goosing the interactive digital media tax credit comes after Ontario hiked its 25% tax credit for foreign film and TV producers to offset all local production costs, and made its tax incentive permanent.

The province earlier this year poured $20.5 million into the Starz Animation Toronto 3D cartoon studio, and another $226 million in a new Toronto development studio planned by French interactive games maker Ubisoft.

The investments in local media production come despite the Ontario government on Thursday projecting a $24.7 billion deficit in the current fiscal year on lower tax revenues and higher public sector costs during the recession.