How the Film or Video Production Services Tax Credit Works for Foreign Producers in Canada

How the Film or Video Production Services Tax Credit Works for Foreign Producers in Canada

If you are a foreign film or TV producer planning to shoot in Canada, you may be looking for ways to save money. The Film or Video Production Services Tax Credit (PSTC) is a Canadian federal tax credit that helps foreign-owned productions lower their costs when they hire Canadian crews and use Canadian services. This advice is for productions in Canada and follows PSTC rules.

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What Is the Film or Video Production Services Tax Credit?

The Film or Video Production Services Tax Credit is managed by the Canadian Audio-Visual Certification Office (CAVCO) under the Department of Canadian Heritage. This program is different from “Canadian content” credits. The PSTC is designed for service productions, including those from U.S. studios and other foreign producers filming in Canada.

Who Can Apply?

To be eligible for the PSTC, you must meet all of these conditions:

• Be a taxable Canadian corporation
• Be mainly focused on film or video production services
• Be hired by a foreign producer to provide production services in Canada
• Own the copyright in the production, or have a contract with the copyright owner

Because of these rules, foreign producers usually set up a Canadian service production company or work with a Canadian production services provider.

What Productions Qualify?

The PSTC covers many types of productions, such as:

• Feature films
• Television series
• Mini-series
• Documentaries
• Animated productions (with special labour rules)

Some productions do not qualify, including news, talk shows, reality TV, and shows that are mainly promotional or instructional.

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Eligibility Requirements

Before you apply, make sure your production and company structure meet the PSTC rules. The applicant must be a Canadian company that pays tax in Canada. The production itself must be one of the eligible types listed above. Only Canadian labour costs count toward the credit, so hiring Canadian crew is important.

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How Much Is the Production Services Tax Credit Worth?

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

• The credit is only for Canadian labour, not your total production budget
• There is no maximum limit on the credit you can receive
• Labour must be for work done in Canada

Since the credit is refundable, the Canada Revenue Agency will pay the credit even if your Canadian company does not owe taxes that year.

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Eligible Labour Costs: What Counts?

You can claim:

• Wages and salaries paid to Canadian residents
• Fees to Canadian individuals or taxable Canadian companies for production work
• Employer-paid benefits related to eligible labour

You cannot claim:

• Payments to people who are not Canadian residents
• Producer fees based on profit sharing
• Deferments and payments that depend on future profits

Productions often hire as many Canadian crew members as possible to maximize the credit. If you want to check which federal or provincial credits fit your project, GrantHub’s eligibility matcher can help.

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How to Apply

Applying for the PSTC is a two-step process—first with CAVCO, then with the Canada Revenue Agency (CRA).

Step-by-Step Application Process

1. Apply for a PSTC Certificate through CAVCO
   • Send in your production details, budget, and company documents
2. Get CAVCO Certification
   • CAVCO checks if your production meets the rules
3. File Your T2 Corporate Tax Return
   • Use the certified labour amounts to claim the credit
4. Receive the Refundable Credit
   • CRA pays the credit after reviewing your claim

Apply for CAVCO certification during or soon after production to avoid delays.

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Combining with Provincial Credits

One big advantage of filming in Canada is that you can combine the PSTC with provincial film tax credits. This can make your project much more affordable.

You can often use the PSTC with:

• Ontario Production Services Tax Credit (OPSTC)
• British Columbia Production Services Tax Credit
• Quebec Production Services Tax Credit (QPSTC)
• Other regional film incentives

Each province has its own rules and rates. For more details, see:

• How Transferable and Production Tax Credits Work in Canada
• How Canadian Film and Media Companies Use Tax Credits and Coproduction Treaties

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Common Mistakes to Avoid

• Wrong company structure: Only a Canadian corporation can apply. The foreign parent company cannot apply directly.
• Not all labour counts: Only Canadian labour costs are eligible. Payments to non-resident cast or crew do not qualify.
• Waiting too long to apply: Late applications to CAVCO can delay or even stop your tax credit.
• Mixing up credit types: The PSTC is not a Canadian content credit. Make sure you apply for the right program.

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Frequently Asked Questions

Q: Is the Film or Video Production Services Tax Credit refundable?
Yes. The PSTC is refundable, so you can get a cash payment even if your company does not owe taxes.

Q: Can I include foreign actors or directors in eligible labour?
No. Only Canadian residents or Canadian corporations count for eligible labour.

Q: Is there a maximum amount I can claim?
No. There is no cap. The credit is 16% of your eligible Canadian labour costs.

Q: Can I use the PSTC with provincial incentives?
Yes. Most productions use the PSTC along with provincial tax credits, but each program has its own rules.

Q: Who gets the tax credit payment?
The Canadian service production company receives the refund from the CRA—not the foreign parent.

If you want to compare film tax credits by province, GrantHub tracks active programs across Canada.

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Next Steps

If you are planning a foreign production in Canada, learn about the PSTC early. This will help you make smart choices about hiring, budgeting, and setting up your company. Using both federal and provincial credits can greatly lower your final production costs. You can use GrantHub to check which film tax credits you qualify for before you start filming.

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