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Runaways Welcome: Countries Offer Incentives to Lure Productions Fleeing Hollywood

Nations eager to lure production with a variety of packages

One man’s loss is another’s gain. While Hollywood producers lament the lack of local production, territories around the world are benefitting from the exodus, as a raft of factors — tax incentives, a filmmaker-friendly infrastructure, co-funding and favorable exchange rates — are successfully luring production from the U.S. and elsewhere. According to Joseph Chianese, exec veep of financial solutions at Entertainment Partners, 32 foreign jurisdictions consistently attract production.

Europe’s soft money sources remain a gold standard for filmmakers. Many current films, such as the Ron Howard pic “Rush,” Wes Anderson’s “The Grand Budapest Hotel” and Fox’s “The Book Thief,” are German co-productions, as filmmakers tap into the country’s solid incentive package, which offers a rebate of up to 20% plus support from a number of regional film funds.

The U.K., too, has been buzzing with business, including Marvel’s “Guardians of the Galaxy” and WB-Village Roadshow’s “Edge of Tomorrow” (aka “All You Need Is Kill”), and its biggest coup — the next “Star Wars” installment, directed by J.J. Abrams.

SEE ALSO: L.A. Mayor Declares State of ‘Emergency’ As Movie, TV Production Flees Hollywood

Blighty offers a quite competitive tax credit: Films with a core expenditure of £20 million ($31 million) can claim a cash rebate of up to 25% of the qualifying film production expenditure, while films with a core expenditure of more than $31 million can claim 20%.

In fact, the U.K. is so heavily booked with productions that this year Pinewood is opening a studio in Malaysia.

SEE ALSO: Foreign Incentives Help Crush Once-Booming F/X Biz in U.S.

Countries like South Africa, Hungary, the Czech Republic and Ireland continue to be welcoming to the biz, as even more nations enter the competition.

Ireland’s government last year extended its tax incentive for the film, TV and animation industries until 2020. The tax relief scheme, Section 481, will be restructured as a tax credit in 2016, when it will include further enhancements, notably increasing the tax rebate to 32%, from 28%, of expenditure.

James Hickey, chief exec of the Irish Film Board, notes that while the incentive Ireland offers is high as far as tax rebates go, a key selling point is that the credit is paid immediately.

SEE ALSO: Where in the World Will the New ‘Star Wars’ Films Shoot?

“Twenty-eight percent of the qualifying spend of a film’s budget is actually what you get paid on day one,” Hickey says. “There is no discounting, and you’re paid upfront.”

The country has carved out its own niche by housing high-end TV such as “The Tudors” and “Vikings.” Hickey says the incentives have helped the Ireland biz ramp up in the face of the economic recession. “There was a reduction in local production, but we’re now picking up again,” he says.

Toronto has campaigned so successfully for film and TV work that it’s siphoning productions away from Hollywood’s once go-to place, Vancouver. Thanks to Ontario’s more favorable tax credits, pics such as “Man of Steel 2” are moving across the country to Toronto. (Parts of “Man of Steel” were filmed in Vancouver.)

Ontario now gives filmmakers a 35% rebate of qualifying costs (which include production costs) plus an enhanced credit rate of 40% for first time producers. An additional 10% bonus is given for productions that shoot at least 85% of the locations in Ontario. Meanwhile, British Columbia offers 33% of qualifying costs on labor, plus 17.5% for digital, animation and visual effects, plus 6% relief outside of Vancouver and 6% distant-location labor incentives.

Nationally, Canada promotes a 16% refundable tax credit. Chianese says the additional provincial incentives can stack up credits quite high.

Indeed, the competition among Canada’s regional governments is sharply affecting work in those areas.

For instance, British Columbia’s incentives were not enough to keep Fox’s “X-Men: Days of Future Past” from moving to Quebec, where the production could take advantage of the province’s 25% credit on total production costs plus 20% QCASE (Quebec Computer Aided Special Effects, and animation & shooting scenes in front of chroma-key screen).

Chianese says Canada continues to attract TV, VFX-heavy projects such as WB’s “Pacific Rim,” and animation such as Sony’s “Smurfs 2.” But, he adds, “It remains to be seen if Vancouver can recover features, especially with the loss of support from New Democratic Party leader Adrian Dix, whose plan was to increase the 33% to 40%.” (Dix is still the NDP leader, but his party didn’t win the provincial B.C. elections in May.)

Locations also can be affected by exchange rates. For example, the currency rate in Australia and New Zealand is still higher than the U.S., but had been even higher. This affected the volume of productions there. Peter Jackson’s Weta Digital continues to bring production jobs to New Zealand, but in Oz, the industry pushed unsuccessfully to increase the 16.5% refundable tax credit to 30% to match the post, digital and visual effects offset at 30%.

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