HOLLYWOOD — U.S. producers have long been disappointed that nearby Mexico offers no production incentives. Savvy producers, however, have discovered they can save up to 15% of production budgets by taking advantage of the Value Added Tax (VAT) rebate.
Speaking at the Mexican-California Film Review confab in Los Angeles Nov. 10, Mexican film commissioner Sergio Molina proudly introduced “living proof” of Mexico’s little-known rebate.
Onto the stage came Luz Maria Rojas, the Mexican producer of “Curandero,” a $3 million Spanish-language pic financed by Miramax. Helmed by 31-year-old Venezuelan newcomer Eduardo Rodriguez from a screenplay written by hyphenate Robert Rodriguez (no relation), the production has recovered nearly all of the 15% VAT on all costs incurred while shooting in Mexico City last summer, Rojas explained.
“I was pleasantly surprised to see how quickly we started receiving our rebate, just six weeks after we started the process in July,” says Rojas, who has worked on several pics with the “Spy Kids” creator.
Introduced in August 2003, the rebate gives foreign producers a 15% VAT exemption on local services, provided they contract with a Mexican production service or a local producer. The international producer is required to make use of at least six local services, such as catering, carpentry or equipment rentals.
Molina emphasizes that it’s important the local producer or production service companies present the paperwork to the local tax office before the project starts production.
Seven to eight foreign pics are shooting in Mexico this year, an uptick from last year’s five.
“Bandidas,” starring Salma Hayek and Penelope Cruz, and the sequel “Legend of Zorro,” with Antonio Banderas and Catherine Zeta-Jones, are in production in Mexico but neither pic has made use of the tax benefit. “It’s probably more complicated for big-budgeted studio films, but it is doable,” Rojas says.
International producers have long been trying to convince Mexico to offer filmmaking incentives. They argue that Mexico, despite its proximity to the U.S., has lagged behind Canada and even New Zealand because it offered nothing, fiscally, to producers.
Indeed, since President Vicente Fox took office at the start of 2001, he’s been barraged by Hollywood lobbyists looking for tax handouts.
The MPAA, along with the likes of 20th Century Fox, has held numerous meetings with the Fox administration’s tax and tourism agencies on the subject.
Foreign producers hope incentives such as the VAT rebate are just the start of more support for foreign productions, which can take advantage of Mexico’s low labor costs and wealth of locations.
(Ken Bensinger in Mexico City contributed to this report.)