With state film subsidies being scaled back in Spain, tax breaks look like a keystone of a future, more market-driven, film financing system.

Uncertainty about the long-term future of local film subsidies has increased from early April when, as part of Spain’s general austerity measures, the new conservative government slashed the 2012 budget of country’s main Film Protection Fund by 36% to €49 million ($63.7 million).

If approved by Spain’s tax authorities and European Commission, the government will hike film tax breaks from a current 18% to around 20%-25%, while easing their use, says Susana de la Sierra, director general of Spain’s ICAA Film Institute.

“Some producers argue the most important aspect of Spain’s film tax break system are legal guarantees that film investors can access tax breaks, regardless of the percentage of their breaks.

The Canary Islands’ singular fiscal plan offers a 38% tax breaks, the most advantageous in Spain.

“Clash of the Titans” and “Wrath of the Titans,” from Warner Bros. and Legendary Pictures, both shot partially there. The sequel was co-produced by Tenerife-based tax vehicle Furia de Titanes II, whose partners included Spanish bank Banesto.

Other fiscal deductions at the Islands include a 18% RIC Reservation of Canaries Investment tax break and reduced local sales tax of 4%.

Studios & facilities

Launched in 2005, Alicante’s Ciudad de la Luz, by far Spain’s biggest studio complex, now faces a May 8 European Commission ruling that it must return $354 million in funding to the regional Valencia government. With the Valencia governmen, which puts up rebates for a production’s spend at the Ciudad, itself battling to avoid bankruptcy, the future of the Ciudad is uncertain.

Post & vfx

Spain’s post and vfx scene is peppered with dynamic young shops, such as Barcelona-based Apuntolapospo, the post-production arm of conglom Vertice 360. A Spanish 3D pioneer, Apuntolapospo provided services to “Chico & Rita,” and digital vfx on the Sony-distribbed “XP 3D,” Spain’s first 3D horror movie. Also maving waves is DTT Efectos Especiales, founded by makeup artists David Marti and Montse Ribe (“Pan’s Labyrinth”). DTT services include animatronics, dummies and props.

Return to Location: Europe 2012 >>