Comparison of Canadian Content, Production Services, Co-Ventures and Treaty Co-Productions

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Comparison of Canadian Content, Production Services, Co-Ventures and Treaty Co-Productions

Comparison of Canadian Content, Production Services, Co-Ventures and Treaty Co-Productions

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March 31, 2015

Deciding how to structure the production of an audio-visual production in Canada can be complicated. That’s why Dentons is pleased to provide this comparison chart which aims to simplify the process by identifying the primary structuring considerations and how they differ among the four primary options: “Canadian content,” “production services,” co-ventures and international treaty co-productions.

	Canadian content	Production services	Co-ventures	Treaty co-production
Incentives available	Federal Canadian Content Tax Credits and Provincial Canadian Content or Services Tax Credits	Federal Canadian Services Tax Credits and Provincial Services Tax Credits	Federal Canadian Services Tax Credits and Provincial Services Tax Credits	Federal Canadian Content Tax Credits and Provincial Canadian Content or Services Tax Credit
	Enhanced Canadian broadcast license fees		Enhanced Canadian broadcast license fees	Enhanced Canadian broadcast license fees
	Private and public discretionary funding			Private and public discretionary funding
Approving authorities	Canadian Audio Visual Certification Office (CAVCO)	Canadian Audio Visual Certification Office (CAVCO)	Canadian Radio-Television and Telecommunications Commission (CRTC)	CAVCO, upon the recommendation of Telefilm Canada (Telefilm)
Development of the production	The Canadian producer must develop the production.	No requirement for any Canadian involvement in the production.	No requirement that either of co-venturers has developed the production. However, one of them must own the underlying rights necessary to produce and exploit the production.	The co-producers must significantly develop the coproduction. The co-producers must also own the rights necessary to produce and exploit the co-production.
Copyright ownership	The Canadian producer must own 100% of the copyright.	There is no requirement that the Canadian producer own the copyright.	There is no requirement that the Canadian co-venturer own the copyright.	The copyright ownership in the production must be split among the co-producers in proportion to their relative financial contributions.
Financial control	The Canadian producer must produce the project and have financial control.	There is no requirement for any Canadian financial control in respect of the production.	Canadian co-venturer must have a financial participation of at least 50% in the co-venture. Canadian co-venturer must have sole or co-signing authority over the Canadian production bank account and the payment of the Canadian elements.	Each treaty sets out the minimum financial participation of the co-producers.
Creative control	The Canadian producer must produce the project and have creative control.	There is no requirement for any Canadian creative control in respect of the production.	Creative control must be shared equally between the Canadian co-venturer and the non-Canadian co-venturer.	Creative and technical participation must be in proportion to the financial contribution of each co-producer. For example, if the Canadian coproducer contributes 40% of the total budget, then 40% of the key creative and technical positions must be filled by Canadians.
Spend requirements	75% of all service costs (generally, below the line costs) must be paid to Canadians.	In order to qualify for the Canadian Federal Services tax credits, the production must meet the following cost thresholds: Films - the cost of the film must exceed CA$1,000,000 Television episodes of less than 30 minutes – a cost of CA$100,000 per episode Television episodes of greater than 30 minutes – a cost of CA$200,000 per episode	75% of all service costs (generally, below the line costs) must be paid to Canadians.	All financing received from Canadian individuals and companies must be used in priority for the Canadian expenditures.
Spend requirements	The following costs are excluded from the 75% calculation: costs determined by reference to the amount of income from the production; remuneration for producer(s) and coproducer(s) (except for producer-related positions); amounts paid to key creative personnel eligible for points; post-production costs; and amounts paid in respect of accounting fees, legal fees, insurance and financing costs.		The following costs are excluded from the 75% calculation: remuneration for producer(s) and coproducer(s) (except for producer-related positions); amounts paid to key creative personnel eligible for points; post-production costs; amounts paid in respect of accounting fees, legal fees, insurance and financing costs; indirect expenses; and contingency cost.	Generally, the expenditures in each co-producing country should match the financial contribution of the applicable coproducer and they cannot be less than the minimums in the treaty. Location shooting in a third country may be allowed if required for the script. Generally, no studio shooting will be allowed in a third country, unless an exemption is obtained.
	75% of all post production/lab costs must be paid for services provided in Canada by Canadians or Canadian companies.		75% of all post production/lab costs must be paid for services provided in Canada by Canadians or Canadian companies.
			If the co-venture is with a country which is part of the Commonwealth, French-speaking or has a co-production treaty with Canada, the expenditure requirements are reduced to 50% for both services and post production work.
Exploitation rights – Canada	The Canadian producer must retain all Canadian exploitation rights. Exception is the “shown in Canada” exception which allows productions shown exclusively on online platforms (e.g., Netflix) to qualify provided the rights flow from the production company to a Canadian distributor to an online service provider.	No requirement for Canadian ownership of any exploitation rights.	The Canadian producer is not required to retain all Canadian exploitation rights, however, in practice this is what happens in most cases.	The Canadian co-producer must retain all Canadian exploitation rights.
CAVCO Points Test	The production must achieve at least 6/10 points for Canadian personnel. Either the director or the screenwriter, and either one of the two lead performers, must be Canadian citizens or permanent residents, but can reside outside of Canada. No points will be allotted for a Canadian who shares the functions of a key creative position with a non-Canadian. For the lead performer, CAVCO looks at remuneration (including perks), credit and screen time in making this determination. To obtain the points for the position of screenwriter, each individual involved in the preparation of the screenplay for the production must be Canadian. This means that all the individuals engaged in developing the screenplay from outline or treatment, through drafts and polishes, to the final shooting script must be Canadian.	The CAVCO Points Test is not applicable to production services.	The production must achieve at least 6/10 points for Canadian personnel on the same basis as for a Canadian Content production, subject to the exception below. If the co-venture is with a country which is part of the Commonwealth, French-speaking or has a co-production treaty with Canada, the points test is reduced to 5 out of 10. Even in this case, the director or the screenwriter and at least one of the two lead performers must be Canadian.	There is no points test applicable to coproductions, however the general rule is that all personnel must either be from Canada or the co-producing country, subject to the following: if the co-production is with an EU member country, the citizens of any EU country may qualify; one lead performer and one cameo performer may be from a third country in the case of a feature film. This number increases for television series over seven episodes additional exceptions, on a case by case basis, approved by Telefilm and the other co-production authority where the participation of the personnel is indispensable to the financing or commercial success of the project, subject to treaty provisions. Telefilm also has an evaluation grid which measures creative and technical balance.
Producer credits	All positions related to the producer function must be held by Canadians, unless an exemption for a foreign courtesy credit has been granted by CAVCO. Note: no exemption will be granted for the functions of producer, co-producer, line producer or production manager, as these positions must be held by Canadians.	No restrictions on who may receive producer credits.	Producer credits are not limited to Canadian co-venturer. Producer credits should be balanced between Canadian and non-Canadian producers.	Only the Canadian and foreign coproducers may get producer credits.
Producer–related credits	Non-Canadians granted a producer related screen credit (other than producer or co-producer, which is not allowed under any circumstances) are limited to being on set for a maximum of 25% of principal photography (other than for a lead performer, or an individual working in the story department, or a showrunner, which may be on set for more than 25%).	No restrictions on who may receive producer-related credits (i.e. executive producer, associate producer, supervising producer, production executive, supervising executive).	A non-Canadian producer can receive producer-related credits (i.e. executive producer, associate producer, supervising producer, production executive, supervising executive).	See below.
Courtesy credits	An exemption for a foreign courtesy credit for non-Canadians not providing services may be granted by CAVCO only where the functions do not interfere with the financial and creative authority of the Canadian producer, and relate to broadcast, distribution or financing, or the provision of services under the strict supervision and control of the Canadian producer. An affidavit to this effect must be submitted. A non-Canadian showrunner must submit a non-Canadian Showrunner Affidavit declaring that any work performed is done under the direction and control and with the full knowledge of the Canadian producer.	No restrictions on who may receive courtesy credits.	No restriction on granting of courtesy credits.	Third country persons may receive producer-related courtesy credits provided: the total number of producer related credits granted to third country persons does not exceed the number of similar credits granted to persons from the co-producing countries; and third country individuals receiving producer-related credits sign an affidavit stating that they were not on set for more than 25% of principal photography, they exercised no authority in respect of the coproduction and they received no remuneration.
Profit participation	The Canadian producer must retain an acceptable share of revenues from the exploitation of the production outside of Canada (i.e. not less than 25% of net profits derived from the non- Canadian markets).	There is no requirement that the Canadian producer receive any profit participation.	The Canadian coventurer must receive at least 50% of the share of profits from the exploitation of the co-venture.	Profits will be allocated in proportion to the financial contribution of the applicable co-producer.