Ontario Cuts Foreign Film Tax Credit, Hollywood to Take Hit

Pacific Rim Robot Fight Scene in Rain - H 2013
Warner Bros. Pictures

Pacific Rim Robot Fight Scene in Rain - H 2013

The provincial subsidy has backed movies like 'Pacific Rim' and 'Pixels' and an expanding slate of U.S. network TV series that shoot in Toronto.

Ontario on Thursday said it will give its film tax credit for foreign — mostly Los Angeles — producers a haircut.

The province, while releasing its 2015 fiscal budget, proposed reducing the foreign film tax credit rate from a 25 percent all-spend to 21.5 percent for qualifying production expenditures incurred after April 23, 2015. Betting the cut in the film tax credit will be offset by recent savings to Los Angeles producers from a lower Canadian dollar, the province is also rejiggering the Ontario Production Services Tax Credit to target salaries and wages paid to local talent and crews.

The measure aims to ensure services provided in the province for foreign film and TV shoots "represent more than a nominal amount of a corporation’s total eligible expenditures." That would compel Ontario labor expenditures, including labor under a service contract, to amount to at least 25 percent of total expenditures.

"It also proposed that the OPSTC be clarified to ensure that only expenditures incurred after the final script stage to the end of the postproduction stage would be eligible for the credit," the provincial government stated in its budget document.

Elsewhere, the Ontario Computer Animation and Special Effects Tax Credit, which is used by foreign and local producers to offset the cost of producing animation and visual effects locally, often for big-budget tentpole movies, is being reduced in value from a 20 percent to an 18 percent refundable tax credit for expenditures incurred after April 23, 2015. 

The province said the lower Canadian dollar "is making Ontario an increasingly attractive location for productions and is increasing foreign investment in the film and television sector." The 2015 budget document noted Los Angeles producers, who are flocking to shoot in and around Toronto in 2015, "have benefited significantly from the drop in the Canadian dollar relative to the U.S. dollar because their Ontario production costs are paid in Canadian dollars."

"As a result, there is a reduced need for government support of foreign productions," the provincial government said, defending its cut to the foreign film tax credit.

April 23, 5:45 p.m. New information added to explain Ontario's strategy to cut its foreign film tax credit for cost savings.