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On June 23, 2023, the Digital Games Tax Offset (DGTO) became law in Australia.
This new measure aims to support eligible video game developers by providing a 30% refundable tax offset for qualifying Australian development expenditure.
But what does this mean in practical terms?
A tax offset typically reduces the amount of tax a company owes.
In the case of the DGTO, it’s a refundable offset, meaning if your tax payable is less than the offset amount, the Australian Taxation Office (ATO) will refund the difference.
For example, if you owe $500 in tax but have a $1000 offset, you’ll receive a $500 tax refund.
This mechanism effectively allows the government to contribute to and boost the development budget of a video game, provided the company has already spent the money.
To claim the DGTO, the following criteria must be met:
The development expenditure must be Australian, meaning the goods or services are acquired in Australia. This excludes expenses incurred overseas.
A company can claim up to 30% of all qualifying expenditure, with a maximum claimable amount of $20 million per year.
This cap applies across multiple games. For instance, if three games are developed with a total budget of $90 million, the maximum offset remains $20 million.
The approximate limit of a game’s budget that can be claimed is around $66.7 million.
The ATO will group related companies for the purpose of applying the cap, so developing two games from separate companies will have their expenditures added together.
Before filing an offset claim with the ATO, developers need a certificate (completion, porting, or ongoing) from the Arts Minister. This certificate verifies that all the requirements are met.
The definition of a video game under the act is broad, encompassing games in electronic form that can generate a display on:
The DGTO is likely to benefit larger developers more than indie developers.
The minimum threshold of $500,000 in development expenditure will rule out many independent studios, particularly considering the expenditures that do not qualify.
Therefore, even a game with a budget over $500,000 may not meet the criteria.
If you have any queries about this article on the Digital Games Tax Offset, or Australian tax matters in general, then please get in touch.
If you have any queries about this article on New Zero Tax Rate on Photovoltaic Systems in Germany, or German tax matters in general,than please get in touch.
In a bold move to bolster its standing as a global high-tech hub, Israel recently introduced the revamped Angels Law, packed with enticing tax incentives to attract investors into its burgeoning tech sector.
The legislation, effective until the end of 2026, is a strategic successor to the original Angels Law that concluded its run in 2019.
This reinvigorated legal framework seeks to accelerate investment in Israeli high-tech startups while offering an array of tax benefits that promise to reshape the landscape of tech investments.
In order to ignite investment in high-tech startups under specific criteria, the new Angels Law delivers a tax credit as a carrot to investors who put their money into Israeli high-tech startups.
This credit is calculated by multiplying the investment amount by Israel’s applicable capital gains tax rate – a tax credit that mirrors what would have been levied had the investor sold their allocated shares within the same tax year of investment.
This is a game-changer that empowers investors to recoup a portion of their investment costs swiftly, thus paving the way for lower entry barriers to high-tech startups.
However, there’s a cap of ILS 4 million for this tax credit, and unused credit can be carried forward to future tax years.
The Angels Law introduces the concept of deducting investments in Israeli high-tech startups from capital gains realized through the sale of shares in other high-tech companies.
For this benefit to kick in, the investment must be made within 12 months before or 4 months after the shares’ sale.
By allowing investors to trim their capital gains with the investment amount, this provision optimizes the tax landscape for experienced investors, fostering a nurturing environment for their invaluable business acumen.
In an innovative twist, the Angels Law permits an Israeli high-tech company that acquires control over another local or foreign high-tech entity with a “beneficial intangible asset” to deduct the purchase cost from its “preferred technological income.”
This deduction can be claimed over five years, post-acquisition.
This shift empowers companies to manage their profitability during the early stages post-acquisition, giving time for strategic investments to mature.
Large Israeli high-tech firms often look to foreign financial institutions for funding due to restricted domestic financing options.
The new Angels Law aims to ease this burden by granting foreign financial institutions tax exemption on interest income generated from loans extended to Israeli high-tech firms.
This exemption aims to reduce the financial strain on tech firms, facilitating smoother access to essential funding from global sources.
With the clock ticking until the Angels Law’s expiration at the close of 2026, the window of opportunity for both local and foreign investors to capitalize on these lucrative tax benefits is a limited one.
Israel’s high-tech sector is now primed for an influx of investments, as startups and established tech giants alike stand to gain from these enticing incentives.
As the world watches, Israel is poised to maintain its reputation as a tech powerhouse with innovation-friendly policies that will reverberate throughout the global investment landscape.
If you would like more information about Israel’s new Angels Law or Israeli tax matters in general then please get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article..