Ontario ups the tax breaks ante

Canadian province Ontario has announced that it is to boost its interactive media business support even further with an increased budget for 2009.

That means that the local government will pass on even higher tax breaks to companies in the videogames business in a bid to sharpen its "competitive edge".

The budget, effective after March 26 this year, will increase the annual Ontario Interactive Digital Media Tax Credit brackets as follows:

• 40 per cent (up from 30 per cent) for qualifying corporations, regardless of size, that develop and market their own eligible products.
• 35 per cent (up from 25 per cent) for qualifying corporations that develop eligible products under a fee-for-service arrangement.
• To expand the OIDMTC, to allow corporations to claim 100 per cent of the amount paid to eligible arm's-length contractors that is attributable to the salaries and wages of the contractor’s employees.
• To extend the OIDMTC to digital media game developers that incur a minimum CAD 1 million (USD 799,000) of eligible labour expenditures over a 36-month period for fee-for-service work done in Ontario in respect of an eligible product. Corporations that meet the minimum expenditure test would not be required to be at arm's-length with the purchaser corporation, or to develop all, or substantially all, of the eligible product.

In total the budget increase will amount to around CAD 130 million (USD 104 million) in a bid to attract even more business to the area - a move which is likely to prove attractive in tight economic conditions.

Canada has been associated with tax breaks in the videogames industry for some years now, a move which has helped to propel it up the chart of the world's biggest games producers into third.