San Sebastian: Basque Country Kicks in 30% Tax Shelter

Bizkaia's EC approval open door to Gipuzkoa and Alava winning Commission thumbs-up for like systems

SAN SEBASTIAN – As Txintxua Films prepares for the world premiere Monday of Asier Altuna’s family drama “Grandma” (“Amama”), a chronicle of modernization in a Basque rural world, the Basque film industry took a rain-check Saturday at the San Sebastian Festival on its own advances in introducing two key mechanisms fundamental for a modern industry: Tax breaks; and bank guarantee mechanisms.

Both have seen progress, as has the Basque industry at large, as it positions itself as a film hub with one eye on strengthening contacts with Europa, and the other on Latin America. In one move, on July 15, the European Commission green-lit a 30% tax shelter for film investment in Bizkaia, the Basque country province centered around its capital city of Bilbao.

The incentive rates, after the Canary Islands, as the highest deduction in Spain. Usable by Bizcaia-based tax-payers on any Spanish film – whether it shoots in Bizcaia or not, the 30% tax break can be applied on up to 50% the costs of production and, importantly, 40% of P & A. Channeled via an Agrupacion de Interes Economico (AIE), it is limited at 45% of investors tax payment.

In a second initiative, Elkargi, a Basque bank loan guarantee scheme – used by Txintua Films to allow it to discount a pre-buy from Basque pubcaster ETB, producer Marian Fernandez said Saturday – has joined forces with the Basque Government to launch a pilot project for Basque companies seeking consultancy on access to private-sector investment. That will occur, without detriment to Basque Government aid to film/TV investment,” said Joxean Munoz Otaegi, its deputy councilor for Culture, Youth and Sports.

Currently, Gipuzkoa and Alava still have to adapt the 30% incentive to their own tax laws. That opens the door to some tweaks, such as possibly demanding territoriality – films which benefit from tax investment should partly shoot in the provinces, or even tax rebates on spend by international shoots, said Miren Itziar Agirre Berriotxoa, director of the Basque Tax Administration.

They shouldn’t hang around.

To date only two films – Luis Marias’ “Fuego,” produced by Eduardo Carneros (“Timecrimes”) and Koldo Serra’s “Gernika” – have used the 30% incentive. Now EC approved, the shelter has made “an absolutely positive impact, the Basque Country has become a highly competitive production hub, and can generate a large, solvent and, above all, continuous industry.”

The biggest challenge, he added, will now be to generate sufficient volume of production to meet the demand for tax driven investment.

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