Manitoba Interactive Digital Media Tax Credit: Eligibility for the 40% Rate

If your studio builds games, apps, or other interactive digital media in Manitoba, the difference between a 35% and 40% refundable tax credit is significant. The higher rate could mean hundreds of thousands of dollars in extra support. The Manitoba Interactive Digital Media Tax Credit (MIDMTC) offers a 40% rate, but only if your business meets specific labour and spending thresholds set by the province.

Below is a clear breakdown of who qualifies for the 40% rate, what costs count, and how to avoid common mistakes that delay approval.

How the Manitoba Interactive Digital Media Tax Credit Works

The MIDMTC is a refundable corporate income tax credit created to support Manitoba’s interactive digital media sector and create local jobs. It helps fund the development of eligible products meant for commercial release. Internal tools or one-off marketing websites are not eligible.

Key program facts:

Maximum credit rate: up to 40%
Base credit rate: 35%
Eligible costs: mainly Manitoba labour, plus some marketing and distribution expenses
Refundable: you can receive the credit even if your corporation owes no corporate income tax
Jurisdiction: Manitoba only

The 40% rate is not automatic. You must meet extra Manitoba labour requirements beyond the basic eligibility rules.

Eligibility for the 40% MIDMTC Rate

To access the 40% Manitoba Interactive Digital Media Tax Credit rate, your corporation must first qualify for the MIDMTC in general. Then, you must meet one of two labour-based tests.

Base eligibility (required for all applicants)

Your business must:

Be a taxable Canadian corporation
Have a permanent establishment in Manitoba
Develop an eligible interactive digital media product for commercial market
Apply for and receive a Certificate of Eligibility before or during development
Incur qualified Manitoba labour expenditures

Additional requirements for the 40% rate

You qualify for the 40% rate if either of the following is true for the project:

Option 1: Manitoba wage threshold

At least 25% of total wages paid during the year go to Manitoba residents

Option 2: Labour spending threshold

You spend at least $1 million in eligible Manitoba labour expenditures in the tax year

If you meet base eligibility but do not meet one of these tests, your project may still qualify for the 35% rate.

Tools such as GrantHub’s eligibility matcher can help you check if your labour structure meets the 40% threshold before you apply.

What Labour Costs Count Toward the 40% Rate?

Only qualified Manitoba labour expenditures count toward the 40% calculation.

Typically eligible:

Salaries and wages paid to Manitoba resident employees
Certain taxable benefits directly tied to eligible work
Labour directly related to the development of the interactive product

Not typically eligible:

Contractor costs paid to non-Manitoba residents
Administrative or overhead labour not linked to product development
Labour incurred before receiving a Certificate of Eligibility

Marketing and distribution costs may be eligible for the credit, but they do not help you meet the 40% labour threshold.

Common Mistakes to Avoid

Assuming all projects get 40%
The 40% rate is conditional. Many studios qualify only for the 35% rate because they miss the wage or labour spending tests.

Hiring contractors instead of Manitoba employees
Non-resident contractors usually do not count toward Manitoba labour thresholds, even if the work supports the project.

Applying too late for the Certificate of Eligibility
Work done before approval may not be eligible, which can reduce your qualifying labour below the 40% threshold.

Counting non-development staff
Only labour directly tied to building the interactive digital media product qualifies.

Frequently Asked Questions

Q: How do I know if my company qualifies for the 40% MIDMTC rate?
You must first meet the base MIDMTC rules, then confirm either that 25% of wages go to Manitoba residents or that you spend at least $1 million on eligible Manitoba labour in the year.

Q: Is the Manitoba Interactive Digital Media Tax Credit refundable?
Yes. The MIDMTC is refundable, meaning your corporation can receive the credit even if it does not owe corporate income tax.

Q: Can startups qualify for the 40% rate?
Yes, if they are taxable Canadian corporations with a Manitoba permanent establishment and meet the labour thresholds. Early-stage studios often qualify at 35% first, then scale into the 40% rate.

Q: Do marketing and distribution costs help me reach the 40% threshold?
No. While some marketing and distribution costs may be eligible for the credit, only Manitoba labour counts toward the 40% eligibility tests.

Q: Can one company have some projects at 35% and others at 40%?
Yes. Eligibility is assessed at the project and tax-year level, depending on labour allocation and spending.

Next Steps

If your studio is close to the 40% threshold, small staffing or payroll changes can make a big difference. GrantHub tracks digital media tax credits and grants across Canada and helps you see which programs match your business profile before you invest time in an application.

See also:

What expenses do arts, culture, and media grants cover?
How Canadian film and media companies use tax credits and coproduction treaties
How to know if your film, media, or arts project qualifies for federal or provincial funding

Understanding the Manitoba Interactive Digital Media Tax Credit eligibility for the 40% rate early can help you plan hiring, budgets, and timelines with confidence.

Manitoba Interactive Digital Media Tax Credit: Eligibility for the 40% Rate