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Basque Country Preps International Production Tax Credits

30% breaks part of a Basque push into private sector financing and the creation of a more international industry

Basque Country Preps International Production Tax

SAN SEBASTIAN – Basque Government is advancing on plans to open up its advantageous tax regime to international productions, its culture authorities confirmed Saturday at the San Sebastian Festival.

Coming as, for the first time ever, a Basque-language movie, “Loreak” (Flowers) plays in the main competition at the San Sebastian Festival, the highest-profile event in the Spanish-speaking world, the confirmation forms part of a larger push to encourage private sector finance to enter the Basque film industry and to internationalize its structures, without abandoning direct subsidies, Joxean Muñoz Otaegi, the Basque deputy councillor for Culture, Youth and Sports, told Variety.

Currently, the Basque Government offers 30% tax breaks to its local industry. Spanish mainland tax breaks for the film industry run at 18%.

Channelled through a Agrupacion de Interés Económico (AIE) tax scheme, these have just been used for the first time ever via an AIE on Luis Marias’ “Fuego,” said Basque Treasury official Itziar Agirre produced by one of the Basque countries most prominent producers, Eduardo Carneros (“Timecrimes,” “Aballay,” “Las Acacias”), and starring Jose Coronado, Aida Folch and Leire Berrocal.

AIEs facilitate film investment by not only offering deductions, but by allowing investors to offset a film’s losses, if there are any, against future tax payments, and partake of profits, said lawyer Francisco Menendez Nadal.

Directed by Helena Taberna (“Yoyes”, “La Buena Nueva”), produced by Iker Ganuza and scheduled to roll late 2014/early 2015, drama thriller “The Contents of Silence” also aims to tap “a substantial part” of financing via an AIE Vehicle, Ganuza said at San Sebastian. “Silence” will be co-produced with Germany, he added.

The new tax rebates for international productions are unlikely to kick in before 2015, said Clara Montero, director, Basque Culture Promotion.

A first draft of rules of engagement -whether the rebates would be channeled via a service company or would require formal co-production status – has been drawn up by the Basque Government’s culture and treasury departments and has now to be discussed this fall with tax authorities in the Basque Country’s three provinces of Gipuzkoa, Vizcaya and Alava, she added.

In a best-case scenario, tax breaks for international productions would be ready in 2015.

At Saturday’s presentation of the Basque Country as a shoot locale, “Filming in the Basque Country ,” which was attended by the three provinces film commissioners, Basquetour director Arantxa Madariaga also underscored one of the singularities of the Basque Country: “We’re a small country, but we have three capitals, and an amazing diversity of landscapes.”