The German Federal Film Fund (DFFF) film subsidy has given visual effects a seat at the incentives table for the next three-year cycle beginning 2013. Effects work done in Germany will qualify for the 20% production subsidy as a virtual film shoot, without actually requiring a location shoot in the country, as has been part of the current guidelines.

Stefanie Stalf, founding partner of Teuton vfx house Scanline, says the new guidelines could have qualified films such as “Warhorse,” “The Dark Knight Rises,” “Sherlock Holmes: Game of Shadows” and “Skyfall” for DFFF subsidies as virtual shoots, if they included some additional local post-production work.

A key condition of the virtual shoot, however, is that a minimum outlay of €5 million ($6.6 million) and at least 25% of the pic’s vfx budget must be spent in Germany. Right now, it’s unlikely that any one company could handle a job that big on its own. But, as evidenced by the recent collaboration from Teuton shops on “Cloud Atlas,” Stalf says, “the German companies are used to cooperating, and it wouldn’t be a problem to share projects.”

Indeed, for more than two years, a consortium of vfx companies including Scanline, Trixter, Pixomondo and Rise, as well as production and post-production service providers ARRI and CineMedia, has been lobbying the DFFF to strengthen its subsidy support for vfx, as well as to recognize new digital production and post-production technology to fulfill eligibility criteria.

The otherwise growing German vfx industry has been feeling the weight of competition from other national tax incentive subsidies, particularly those in Canada and the U.K. Nonetheless, German companies have contributed to international productions such as “Harry Potter and the Deathly Hallows: Part 1,” “Captain America: The First Avenger,” “Hugo,” “X-Men: First Class,” “Underworld: Awakening,” “The Avengers,” “The Amazing Spider-Man,” “Looper,” the “Iron Man” films and HBO series “Game of Thrones.” “Cloud Atlas” features work by Rise, Scanline, Trixter and Exozet.

Pixomondo’s Oscar for “Hugo” as well as Scanline’s technical Oscar for development of the Flowline software, have helped raise the national profile.

While all production companies that are part of a German location shoot benefit from subsidy money, most of the big international jobs were shot elsewhere, and therefore not eligible for subsidies, with “Cloud Atlas” a notable exception.

“We saw that we had the infrastructure and the means to deliver high-quality work in Germany, but in the end, we couldn’t get a better market share as long as the subsidy structure couldn’t compete with England and Canada,” Stalf says.

Stalf adds that Germany was losing vfx talent as creatives followed the work to other countries.

While the allure the 20% cash subsidy looks good, the DFFF is limited by it’s yearly $78 million budget, which has to cover all projects. Plus the U.K. and Canada still present far fewer conditions, and support there is limited only by what a filmmaker can, or wants to, spend.

Cornelia Hammelmann, project director of the DFFF, sees the new guidelines as a compromise. “It’s not everything that the vfx industry would have wanted, but it’s a real step forward,” she says.

So even if the new designation doesn’t quite open the floodgates for virtual shoots, the new guidelines do crack a door.