Canadian Film Tax Credits Explained: PSTC vs Provincial Credits (BC, NL) — Eligibility and How to Claim

Canadian Film Tax Credits Explained: PSTC vs Provincial Credits (BC, NL) — Eligibility and How to Claim

Film and TV productions in Canada rely on tax credits to help cover costs. Two main options are the federal Production Services Tax Credit (PSTC) and provincial production services credits, such as those in British Columbia and Newfoundland and Labrador. These programs are different. Knowing how they work together helps you get back more of your labour costs.

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PSTC vs Provincial Film Tax Credits: What’s the Difference?

The Film or Video Production Services Tax Credit (PSTC) is a federal, refundable tax credit. It was created to attract both Canadian and foreign productions to Canada. Provincial credits are separate. They reward production activity within a specific province.

Here’s a quick breakdown:

• PSTC (Federal): Based on eligible Canadian labour costs for production services done anywhere in Canada.
• Provincial credits (BC, NL): Also based on labour, but only for work performed in that province and subject to its rules.

Most service productions try to get both federal and provincial credits, as long as the same costs are allowed by each program.

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Federal Production Services Tax Credit (PSTC): Eligibility and Coverage

The PSTC is managed by the Canadian Audio-Visual Certification Office (CAVCO). You claim it through your federal corporate tax return.

Who can apply?

• Taxable Canadian corporations
• Foreign-owned corporations with a permanent place of business in Canada

Business requirements:

• Your main business must be film or video production or production services.
• You must either own the copyright during Canadian production or have a direct contract with the copyright owner.
• You cannot be tax-exempt under Part I of the Income Tax Act.

What expenses qualify?

• Only Canadian labour costs count.
• Wages and salaries paid to Canadian residents for production services done in Canada.

How much is the PSTC?

• The PSTC gives a refundable tax credit equal to 16% of eligible Canadian labour costs.

Important restriction:

• You cannot combine the PSTC with the Canadian Film or Video Production Tax Credit (CPTC) for the same project.

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British Columbia Production Services Tax Credits (BC)

British Columbia is one of Canada’s busiest provinces for film and TV production. It offers several refundable provincial credits.

Core BC Production Services Tax Credit:

• Available to accredited production companies with a permanent office in BC.
• The company must mainly do film or video production or production services.
• No Canadian content requirement. Foreign productions can apply.

Other BC credits:

• Base production services credit
• Extra credits for:
  • Regional production
  • Distant locations
  • Digital animation, visual effects, and post-production (DAVE) services

You must qualify for the base BC credit to get the regional or DAVE credits.

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Newfoundland and Labrador Film and Video Industry Tax Credit (NL)

Newfoundland and Labrador also offers a refundable provincial tax credit to support local film and video production.

Key points:

• The credit covers eligible labour and production spending in Newfoundland and Labrador.
• The production company must meet all provincial requirements and file the right paperwork.
• Rates and eligible costs depend on the type of production and certification.

Provincial rules can change. Always check the latest percentages and caps with the province or a tax expert before finalizing your budget.

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How to Claim Film Tax Credits in Canada

Claiming film tax credits takes planning and careful timing.

Typical steps:

1. Production planning
   • Check which federal and provincial credits you can apply for.
   • Set up contracts and payroll to meet each program’s requirements.
2. Certification
   • Apply to CAVCO for PSTC accreditation.
   • Apply separately for provincial certification (like in BC).
3. Tax filing
   • Claim the credits in your corporate income tax return.
   • Attach all required certificates and forms.

A tool like GrantHub’s eligibility matcher can help you compare film and media funding programs by province and production type. This is useful if you are considering more than one location.

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Common Mistakes to Avoid

1. Thinking PSTC covers non-labour costs
   Only eligible Canadian labour expenses count. Equipment, travel, and locations are not covered federally.

2. Mixing up PSTC and CPTC eligibility
   Service productions usually qualify for PSTC, not CPTC. Claiming the wrong credit can slow your refund.

3. Missing provincial certification deadlines
   Provincial credits often have strict deadlines that may not match federal dates.

4. Not confirming permanent establishment status
   Foreign producers must have a Canadian permanent office to get PSTC.

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Frequently Asked Questions

Q: Is the PSTC refundable?
Yes. The PSTC is fully refundable. If the credit is more than your taxes owed, you get the rest as a payment.

Q: Can foreign-owned film companies claim Canadian tax credits?
Yes. Foreign-owned companies can claim the PSTC if they have a permanent office in Canada and meet all rules.

Q: Can I combine PSTC with BC production services credits?
Yes, usually. Federal and provincial production services credits are meant to work together, if you follow each program’s rules.

Q: Are tax credits taxable income?
Refundable tax credits usually lower your production costs but may be counted as income for tax. Ask your accountant.

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GrantHub tracks hundreds of active grant and tax credit programs across Canada, including federal and provincial film incentives. This helps you see which ones fit your production.

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Next Steps

Film tax credits can cover a big part of your labour budget, but only if your production is set up the right way from the start. Before you pick your shooting location or payroll system, check which federal and provincial credits your business can use. GrantHub helps Canadian and international producers compare funding options across provinces so you can plan with confidence.

See also:

• How to stack grants and loans without violating funding rules
• What business expenses are eligible across Canadian grants and loans?
• How long do Canadian grant programs take to pay out funds?