Questions and answers about Producer fees

Table of contents

• To which claims do the Producer Fee guidelines (FAS 2009-01) apply?
• Why were these guidelines developed?
• When do the revised guidelines dated March 31, 2009 take effect?
• Is there a dispute and/or recourse mechanism for disagreements that occur at the review stage prior to an assessment?
• The CRA recently audited and adjusted my producer fees. I disagree with the assessment and would like the CRA to re-examine my claim(s) by applying the Producer Fee guidelines (FAS 2009-01). How do I make such a request?
• In establishing the reasonableness of producer fees paid to a person in a non arm's length transaction, can the CRA provide a list of what it considers reasonable in the circumstances when the particular amount exceeds the 10% threshold?
• For treaty and inter-provincial co-productions, will the CRA give consideration to the fact a co-producer may command higher fees because of his/her stronger and more active role in producing a film?
• Will the CRA provide a written explanation for decisions that result in a denial or reduction of tax credits?
• Will the CRA monitor the application of the guidelines to ensure they are being applied uniformly and consistently?
• Why do the guidelines apply to all "above the line" producer fees and not exclusively to the individual(s) who function as "producer" as defined in Section 1106 of the Income Tax Regulations?
• Are all payments to financiers, broadcasters and distributors subject to the reference threshold?

To which claims do the Producer Fee guidelines (FAS 2009-01) apply?

They apply to the Canadian Film or Video Production Tax Credit (CPTC), the Film or Video Production Services Tax Credit and similar provincial tax credits that are co administered by the Canada Revenue Agency (CRA).

Why were these guidelines developed?

The CRA has had internal guidelines on the reasonableness of producer fees for several years. However, the Agency was informed that the guidelines were not being applied consistently across all of its offices. The March 31, 2009 version of the Producer Fee guidelines (FAS 2009-01) includes additional clarifications, some of which resulted from its stakeholder consultation process in 2008, and is now available on the CRA website.

When do the revised guidelines dated March 31, 2009 take effect?

In order to ensure that all claims are treated uniformly across the country and that the law is applied consistently, these guidelines are effective immediately. The CRA will not return to the previous established practices that varied across the country as this would imply returning to an inconsistent application of the law.

Is there a dispute and/or recourse mechanism for disagreements that occur at the review stage prior to an assessment?

Yes. In the event that you disagree with your CRA audit proposal(s), you can discuss the issue(s) with the auditor during the review stage. If you are not satisfied with the outcome, we recommend that you discuss the issue(s) with the auditor's Team Leader. You will find a list of telephone numbers on the Film Services Units page.

The CRA recently audited and adjusted my producer fees. I disagree with the assessment and would like the CRA to re-examine my claim(s) by applying the Producer Fee guidelines (FAS 2009-01). How do I make such a request?

If you disagree with your assessment or re-assessment, you may file a Notice of Objection with the CRA. For more information on the objection process, please visit the Complaints and disputes.

In establishing the reasonableness of producer fees paid to a person in a non arm's length transaction, can the CRA provide a list of what it considers reasonable in the circumstances when the particular amount exceeds the 10% threshold?

Since what is considered reasonable in the circumstances is a question of fact, it is not possible or practical to provide a list that would deal with every possible situation. However, the CRA does recognize that a comparable arm's length producer fee associated with the same level of producer services provided in the same production context (i.e., similar size of cast/budget, logistical demands and complexity of production financing and funding) may be useful in establishing the reasonableness of "non arm's length" producer fees that exceed the 10% reference threshold. There might be other justifiable reasons to support higher producer fees. The CRA will therefore consider such additional information and documents from the claimants to support higher producer fees paid in non arms-length transactions.

For treaty and inter-provincial co-productions, will the CRA give consideration to the fact a co-producer may command higher fees because of his/her stronger and more active role in producing a film?

Yes. The CRA recognizes the fact that it may be reasonable for one of the co-producers to command a fee that is higher than the other co-producer because of his/her stronger and more active role in producing a film. As a result, the producer fee may appear high when compared to 10% of the co-producer's portion of the total part B and C costs, but nonetheless reasonable in the circumstances.

Will the CRA provide a written explanation for decisions that result in a denial or reduction of tax credits?

Yes. For any tax credit denials or reductions, including adjustments to producer fees, the auditor will provide a written rationale and explanation supporting his/her conclusion.

Will the CRA monitor the application of the guidelines to ensure they are being applied uniformly and consistently?

Yes. The CRA continually monitors the application of all of its policies. In the case of the Producer Fee guidelines, the Agency has held meetings with its Film Services Units to review the application of the guidelines to ensure uniformity and consistent application.

Why do the guidelines apply to all "above the line" producer fees and not exclusively to the individual(s) who function as "producer" as defined in Section 1106 of the Income Tax Regulations?

The definition of "producer" in Section 1106 of the Income Tax Regulations is used to identify the individual who must meet the requirement of being "Canadian" in order to qualify the particular film or video production as a "Canadian film or video production" for purposes of the CPTC and Class 10(x) accelerated capital cost allowance. The objective of the guidelines is to establish the reasonableness of all producer fees, including those paid to the producer(s), co-producer(s), executive producers, line producers and associate producers.

Are all payments to financiers, broadcasters and distributors subject to the reference threshold?

No. The fees must have been paid specifically for the provision of producer services.