BC IDMTC
The BC IDMTC works in conjunction with the federal SR&ED program. Claimants must renounce BC SR&ED however it almost invariably works better for gaming companies and others that qualify for the BC IDMTC. There are a few reasons for this:
- the qualifying expenditures typically represent a broader base of expenditures, since they include artistic work, content and other expenditures in addition to programming effort
- the definition of eligible programming / software development is also broader since there is no need to demonstrate technological uncertainty. Software development must only be necessary for the product.
- the rate at which the incentive is earned is higher → i.e. 17.5% vs 15.5% (if you include the proxy)
- the incentive is not considered “government assistance” so the federal SR&ED expenditures are not reduced
ELIGIBLE BUSINESS CORPORATIONS
(Part 2 of the Small Business Venture Capital Act)
Originally companies registered under the SMALL BUSINESS VENTURE CAPITAL ACT as either VCCs or EBCs could not claim BC SR&ED as they were not considered QUALIFYING CORPORATIONS under Part 6 of the BC INCOME TAX ACT:
Eligibility Requirements (Bulletin CIT 007)
You are eligible to claim the British Columbia SR&ED tax credit for a taxation year if:
you are a corporation with a permanent establishment in British Columbia
during the taxation year,
you carried on qualifying SR&ED in British Columbia on, or after,
September 1, 1999, and
your corporation is not:
exempt from British Columbia income tax under section 27 of the Act,
controlled directly, or indirectly, by persons whose taxable income:
° is exempt from British Columbia income tax under section 27 of the
Act, or
° is exempt from income tax under Part I of the federal Income Tax
Act (federal Act),
an employee venture capital corporation, or
a small business venture capital corporation.
However in recent years the BC INCOME TAX ACT was changed to allow ELIGIBLE BUSINESS CORPORATIONS to claim BC SR&ED
“qualifying corporation”, for a taxation year, means a corporation that has a permanent establishment in British Columbia at any time during that taxation year, but does not include a corporation that
(a)is exempt from tax under section 27,
(b)is controlled directly or indirectly in any manner whatever by one or more persons all or part of whose taxable income is exempt from tax under section 27 of this Act or under Part 1 of the federal Act,
(c)is an employee venture capital corporation registered under section 8 of the Employee Investment Act,
(d)is a small business venture capital corporation registered under section 3 of the Small Business Venture Capital Act, or
(e)is of a type or class of corporation prescribed by regulation;
Paragraph (d) of the new definition only excludes “venture capital corporation registered under section 3 of the Small Business Venture Capital Act“
There is now no mention of ELIGIBLE BUSINESS CORPORATIONS under Part 2 of that act.