Spain Readies Big Foreign Shoot Tax Credits

New measures offer 15%-35% rebates

MADRID – In a historic step-forward for Spain’s film industry, on Tuesday Miguel Ferre Navarrete, the Spanish Treasury Secretary of State took the stage at a Spanish Film Commission Conference to talk up the positive effect of Spain’s new 15% federal tax credits for international film shoots, which rise to a mouthwatering 35% in the Canary Islands.

Ever since the fall of the Republic in 1939, when a disastrous Spanish Civil War put back Spain’s clock, ending a vibrant Republican cinema when local diva Imperio Argentina was more popular than Greta Garbo, with only a few exceptions, Spanish governments of any political persuasion have tended to treat its filmmaking in Spain as a very secondary matter.

Finally, the prospect of attracting big Hollywood shoots to Spain has put some fire in the government’s belly.

“These fiscal incentives are a success. They create the potential for the shoots in Spain to be a strategic or very powerful sector,” Ferre Navarrete said. The Government is pushing to broaden Spain’s tax base, while aiming to lower contributions. But one area that is receiving “special treatment” is cinema and film or TV shoots, as well as animation and gaming, he added.

Enshrined in Spain’s Nov. 27 Corporate Tax Law, Spain’s new fiscal regs offer a tax credit of 15% of Spanish spend to international shoots – film and TV – in Spain, capped at €2.5 million ($2.8 million). This rises to 35% and a €4.5 million ($5.3 million) ceiling for foreign shoots which roll in the Canary Islands.

Crucially, the rebates, as in France, will be put through the Spanish line-producer or service company, not via the unwieldy structure of an Agrupación de Interés Económico (AIE), as used to date for Spanish movies. Rebates are now calculated on foreign shoots’ cash spend, not attracting local investors, again simplifying tax breaks.

Rebate payment will be made six-to-twelve months after the tax year in which the spend is made. As in the U.K. or Canada, banks look set to cash-flow the rebate discounting 80% of an accredited accountant’s estimation of receivable tax credits, commented producer Adrian Guerra, who oversaw the Spanish shoot (and in this case co-produced) Pierre Morel’s upcoming Studiocanal financed, distributed and sold “The Gunman,” with Sean Penn, Idris Elba and Javier Bardem.

Some corners still have to be turned. Line-producers at the Conference were surprised that the government has yet to define exactly what categories of spend – beyond creative elements, cast and key crew, as the Nov. 27 law makes clear – count towards tax credits. Industry reps look set to meet with Treasury experts in the next couple of weeks to close definitions of eligibility.

The European Union is revising Spain’s new tax credits and may well demand over the next few weeks the introduction of cultural criteria tests, as already exist, for instance, in France and the U.K. These have not proved an insurmountable problem for foreign shoots in France or the U.K.

The rock and roll days when Hollywood studios could qualify a big shoot as Spanish nationality – as happened with WB’s “Wrath of the Titans,” Universal’s “Fast and Furious 6” – then tap into double-digit million dollar tax credits, those days are over.

But Spain’s new international shoot tax credits open up enticing perspectives. One, pushed by the Spanish Film Commission, is Spain’s huge and still largely extent historic patrimony, including 2,500 castles. Another, suggested by Elijah Wood in a SFC video, is its undoubted talent, including a key tech level: Think Juan Antonio Bayona’s “The Impossible,” whose tsunami was shot at the Ciudad de la Luz studios in Alicante.

Then there’s the level of return. At one panel, in a survey, “Fiscal Incentives in Europe,” Olsberg-SPI consultant Andrew Barnes made reference to a European Audiovisual Observatory-Olsberg SPI study, “Impact analysis of fiscal incentive schemes supporting film and audiovisual production in Europe,” which details rebate and tax credit levels and caps across Europe. Major countries have far higher caps than the Canary Islands: The ceiling to France’s Tax Rebate on International Production (TRIP) stands at €20 million ($22.4 million), for instance. But few have as high a return -35% of spend – as the Canary Islands.

Spain’s tax credits also look set to apply to both animation and post-production. It was the lure of TRIP that persuaded Chris Meledandri’s Illumination Ent. and Universal to set up permanent shop in France, creating Illumination Mac Guff in 2011 and assigning animation to it on “Despicable Me 2.”

Spain has highly talented animators; production costs have fallen with crisis. On live action, “We may not get all of an ‘Exodus’-style movie shoot as in the past, but we can certainly be highly competitive about attracting part of the shoot,” said Guerra.

Spain has already hosted “Exodus” (pictured) in Almeria and Fuerteventura, in the Canary Islands; “Game of Thrones” shot part of season five in Andalusia’s Osuna – a reportedly spectacular scene in its bull ring – as well as Seville.

Spain is like “a sleeping lion,” said Spanish Film Commission prexy Carlos Rosado. When it awakes, and has favorable conditions to attract foreign shoots, it will be able to compete with other large industries for them, he argued.

Now the industry, Spanish Treasury and E.U. have to sign off on the final details of Spain’s international shoot tax credits, and then Spain and its Canary Islands market the hell out of the credits’ attractions and those of Spain and its industry.

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