At last count, Canada's video game industry supported 821 studios and 34,010 jobs while contributing $5.1 billion to the national economy every year, making this sector an engine of the country's digital media ecosystem.
Despite these impressive figures, the Canadian gaming industry has had its fair share of challenges of late. In both Canada and abroad, the gaming sector faced significant contraction post-Covid, which set off a wave of mergers and acquisitions that swallowed up many independent studios.
There's also been a fundamental shift in consumer tastes that has both benefitted and challenged Canadian video game businesses. With many gamers becoming more price-conscious, a large contingent simply opt to buy fewer new titles at full price, favoring legacy or blockbuster drops over products from emerging studios. Similarly, as Games-as-a-Service (GaaS) and streaming titles like Fortnite have grown in popularity, these 'finite gaming' experiences tend to monopolize the attention span of potential customers when new titles come online.
Despite these challenges, gaming industry revenues have never been higher, peeking at $522.5 billion USD in 2025. Even more exciting for Canadian studios is the country's hunger to maintain a growing share of this revenue within its borders.
Enter R&D tax credits, which at both the federal and provincial level offer significant opportunities for studios to offset costs and extend their innovation runway without overburdening their budgets. If you're a CFO, CTO, or founder at a Canadian gaming studio, two programs deserve a spot at the top of your funding stack: The federal SR&ED Tax Incentive Program and provincial Interactive Digital Media Tax Credits (IDMTC).
Used together, these programs can return a significant share of your development payroll in cash, without giving up equity or control. Here's how they work, and where in Canada they're most generous.
Why Game Development Qualifies for SR&ED
SR&ED is Canada's federal R&D tax incentive, and it's easy to assume it only applies to labs and hardware companies. In practice, a large share of everyday game development work qualifies.
Eligible SR&ED activities for studios often include:
- Frame rate and performance optimization
- Physics and simulation systems (smoke, fluid, cloth, lighting)
- Multiplayer state synchronization and netcode
- Cross-platform and mobile porting challenges
- Memory management and engine-level constraints
A few common misconceptions keep studios from claiming what they're entitled to. Quality assurance testing tied to an eligible project can qualify. Supervision time and project documentation can qualify. Projects that failed or were shelved can still qualify, since the technological uncertainty resolved along the way is often the clearest evidence of eligible work.
Essentially, you don't need a dedicated R&D department; any work addressing a technological obstacle that isn't solvable with publicly available knowledge is fair game, whether or not your team calls it "R&D" internally.
Under the 2026 SR&ED Enhancements (Bill C-15, Royal Assent March 26, 2026), eligible Canadian-controlled private corporations can now claim up to $2.1 million in refundable credits annually against a doubled $6 million expenditure limit, with capital expenditure eligibility restored and expanded access for eligible public corporations.
Where SR&ED Falls Short, and Why IDMTC Fills the Gap
SR&ED reimburses eligible technical work after the fact, but it doesn't fund a studio's first prototype, and it generally excludes UI/UX design, marketing, and other non-technical production costs. That's where provincial Interactive Digital Media Tax Credits come in. IDMTC programs are built specifically for interactive products like video games and can be claimed alongside federal SR&ED on different portions of the same project, giving studios a second, complementary funding layer.
Three provinces account for 83% of Canada's video game studios and 95% of industry employment: Ontario, Quebec, and British Columbia. Each runs its own program, with different rates and rules.
British Columbia: 25%, Now Permanent
B.C.'s IDMTC now offers a 25% refundable credit on eligible B.C. salary and wages, up from 17.5%, for wages incurred after August 31, 2025. The province also made the program permanent, removing its prior 2028 expiry date. Studios need at least $100,000 in eligible B.C. wages to qualify, and there's no upper cap on the labour portion. One note for B.C. studios: you can't claim the provincial BC SR&ED credit and the IDMTC in the same tax year, but federal SR&ED remains fully stackable with IDMTC.
Ontario: 40% for Owned IP, 35% for Fee-for-Service
Ontario's OIDMTC is one of the most generous digital media credits in the country. Studios developing and marketing their own IP can claim 40% of eligible Ontario labour, plus up to $100,000 toward marketing and distribution. Studios doing fee-for-service or work-for-hire development claim 35% on labour only.
Most applicants need to satisfy Ontario's "80/25 rule": at least 80% of development labour must go to Ontario residents, and at least 25% must go to the corporation's own employees rather than contractors. Specialized digital game corporations that meet minimum Ontario labour and payroll thresholds are exempt from this rule and can file annual claims more easily.
Quebec: Up to 37.5% Through the Multimedia Titles Credit
Quebec gaming studios typically claim through the Tax Credit for the Production of Multimedia Titles, administered by Investissement Québec, rather than the province's e-business credit for IT services. This credit can reach up to 37.5% of eligible labour expenditures (a combination of refundable and non-refundable components), and it applies to video games, interactive educational software, and related digital titles. Studios need an initial qualification certificate plus an annual eligibility certificate to claim it.
Quebec is also home to the largest share of Canada's video game workforce, at 45% of industry FTEs, concentrated around Montreal's major studios and a deep supplier ecosystem.
Stacking the Programs: A Simple Example
A mid-sized Ontario studio with $1.5 million in eligible Ontario labour developing its own IP could see:
- OIDMTC: $1.5M × 40% = $600,000
- Federal SR&ED on the technical portion of that same labour (net of the OIDMTC amount claimed): a further six-figure credit, depending on the CCPC's expenditure pool and eligible proportion of technical work
The exact math depends on how labour is split between technical (SR&ED-eligible) and non-technical (UI/UX, marketing, content) work, which is why claim strategy matters as much as eligibility.
What This Means for Your Studio
Canada's video game industry is maturing, not shrinking: average salaries are up 21% since 2021 even as the total number of studios has consolidated slightly. Government funding is one of the few levers studios of any size can pull without diluting ownership, and for a sector where 88% of revenue comes from exports, every non-dilutive dollar extends runway against global competition.
The studios getting the most value from these programs treat SR&ED and IDMTC as a combined, ongoing strategy rather than a once-a-year filing exercise: tracking eligible technical work throughout the development cycle, documenting it contemporaneously, and coordinating claims across both federal and provincial programs so nothing is double-counted or missed.
How Boast Helps
Since 2011, Boast has helped 2,000+ companies across North America secure more than $900 million in R&D tax credits, according to Boast's 2026 R&D Tax Credit Benchmark Report. Boast pairs in-house SR&ED and IDMTC expertise with a technology solution that tracks qualifying activity year-round, backed by a 100% audit defense commitment.
If your studio is developing in B.C., Ontario, or Quebec, our team can help you map your technical work to SR&ED and layer in the right provincial IDMTC or multimedia credit on top.
Ready to see what your studio could claim? Talk to a Boast R&D tax credit specialist today.
