Visual Effects and Animation Studios Rally for Better Tax Incentives in Quebec

What’s Going On with Quebec’s Tax Changes?
How Do These Changes Affect Animation Studios?
Industry Reactions and Concerns
Proposals for Fixing the Tax Credit Issue
What’s at Stake for the Animation Industry?
The Road Ahead for Animation in Quebec
Frequently Asked Questions

What’s Going On with Quebec’s Tax Changes?

Big news for anyone in animation or visual effects (VFX) working out of Quebec: recent changes in the provincial government’s tax policies have turned the industry upside down. Until recently, animation studios in Quebec had some sweet deals on tax credits. International film studios outsourcing work to VFX and animation companies could claim unlimited tax credits. That’s been a huge draw for projects, keeping artists and studios in Quebec busy.

But now, the government slapped on a 65% cap on those tax credits, and it’s causing a lot of stress. Basically, what this means is that studios can only claim up to 65% of the tax credits they were previously able to, making it way less attractive for international studios to hire Quebec-based companies.

Imagine this: a big studio like Disney wants to outsource some animation work to your studio. Before, they’d be like, “Yeah, let’s do it! The tax credits make this a no-brainer.” Now, they might think twice and look at options in places like France or Australia instead, where the tax policies are more generous. This sudden change is making it tough for Quebec’s VFX and animation studios to keep projects—and artists—here.

How Do These Changes Affect Animation Studios?

In short: it’s not good. Studios are losing contracts, employees are getting laid off, and some companies are even shutting down. The Quebec Film and Television Council surveyed 28 different VFX and animation studios in the province and found they’re predicting a huge drop in revenue. Last year, the industry made $1.3 billion. By 2025, that number could drop to $393 million if nothing changes.

For artists, this means fewer projects, lower job security, and possibly needing to move to other provinces or even countries just to find steady work. Cinesite, one of the biggest players in the province, lost three major contracts right after the tax change was announced. This accounted for nearly a third of their annual revenue! As a result, they went from 600 employees in Quebec in 2022 down to 400, and there could be more layoffs coming.

And it’s not just the big names feeling the heat. Smaller studios, like Montreal’s Digital Dimension, have already shut their doors. Two more are expected to follow suit within the next year.

Industry Reactions and Concerns

People in the industry are worried, and they’re speaking up. Véronique Tassart, the director of mergers and acquisitions at Cinesite, described the tax change as “too much, too fast.” Studios were just starting to recover from the Hollywood writers’ and actors’ strikes in 2023, and then this tax bomb dropped out of nowhere.

Chloé Grysole, managing director at Framestore Canada (the studio that worked on all the visual effects for “Barbie” right here in Quebec), said that with the new tax credits, it’s now about 10% more expensive to produce visual effects in Quebec compared to other places. And in the animation world, that’s a huge deal because studios are always looking for ways to save money.

Quebec-born filmmaker Denis Villeneuve, who’s directed big hits like “Dune” and “Blade Runner 2049,” didn’t hold back either. He called Quebec’s decision a “massive mistake” and warned that without the old tax incentives, thousands of jobs and a lot of money would leave the province.

Proposals for Fixing the Tax Credit Issue

The animation and VFX industry isn’t taking this lying down. They’ve been brainstorming ideas to present to the government, trying to find a middle ground that won’t destroy the industry but will still help the government save some money.

One suggestion: Set a rule that requires contracts between international film studios and Quebec-based companies to use a minimum of 40-45% local workers. That way, Quebec artists are still getting work, and the province gets a good return on its investment.

Another idea is to increase the tax credit cap so that Quebec can compete with other countries like Australia and France, where the tax environment is more favorable for animation and VFX projects. Raising the cap would make it more likely for big studios to keep coming back to Quebec for their projects.

What’s at Stake for the Animation Industry?

There’s a lot more at stake here than just losing a few contracts. The animation and VFX industry in Quebec has been a major player on the world stage, drawing in international projects and creating thousands of jobs for local artists. Now, there’s a real risk of the industry shrinking drastically, with some of the talent pool heading elsewhere in search of work.

Here’s a quick breakdown of what’s at stake:

Fewer Jobs: Quebec went from 8,000 animation and VFX jobs in 2022 to just 3,100. More job losses are expected if things don’t change.
Studio Closures: Small and mid-sized studios are most at risk. Montreal’s Digital Dimension already closed, and two more are expected to follow.
Lost Revenue: Quebec’s animation industry could see its revenue drop from $1.3 billion last year to just $393 million by 2025. That’s a massive blow not just for the studios, but for everyone working in animation.
Loss of Global Standing: Quebec has been one of the top spots for animation and VFX globally. But with these tax changes, other regions might start attracting the work that used to come here.

The Road Ahead for Animation in Quebec

Despite all the challenges, there’s still hope. Quebec’s animation and VFX industry leaders are coming together to push for a better solution. If the government listens and makes some adjustments, the province could see a revival. It’s all about finding that sweet spot where the tax policies make sense for everyone—the government, the studios, and, most importantly, the artists.

There’s already a strong community here, and that’s something to build on. The fact that these studios are uniting shows how passionate people are about keeping Quebec’s animation scene alive and thriving.

Frequently Asked Questions

What exactly changed in Quebec’s tax policy for animation?

The government introduced a 65% cap on the tax credits that international film studios can claim when subcontracting work to Quebec’s VFX and animation companies. Before, there was no cap, making Quebec a very attractive place for these companies to outsource work.

How does this impact animation jobs in Quebec?

The change makes it less financially appealing for international studios to hire Quebec companies, which has already resulted in layoffs and studio closures. The number of jobs in the animation and VFX industry is expected to keep dropping if the tax policy isn’t revised.

Why are animation studios losing money?

The tax credits helped studios attract big international contracts. With the new cap, it’s becoming more expensive for these contracts to be completed in Quebec, leading studios to either lose contracts or take on fewer projects.

What solutions are being proposed?

Animation studios are suggesting that contracts require a minimum percentage of Quebec-based workers or that the government increases the tax credit cap so that Quebec can remain competitive with other regions like Australia and France.

Could the animation industry in Quebec recover?

Yes, if the government revises the tax policies to make them more favorable for studios, Quebec could see a resurgence in projects and jobs. The industry leaders are working hard to propose solutions that benefit both the studios and the province.