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San Sebastian: Spain’s Navarre Launches 35% Tax Incentives

Tax credits benefit international and Spanish movies, TV

SAN SEBASTIAN — Famed for its Pamplona bulls-runs, Spain’s Navarre is now offering another lure to visitors, at least if they are film and TV producers: 35% tax rebates, one of the highest fiscal deduction levels in Europe.

Setting out its stall at a San Sebastian press and industry presentation on Tuesday, Navarre is joining the fastest growing form of film finance in Europe. 12 in 2008, the number of fiscal incentive schemes more than doubled through 2014 to 26. More have been added since.

Greenlit late August summer by the European Commission, the rebates, which are open to both foreign and Spanish productions, aim to turn Navarre, one of the richest regions on Spain, into a new film, TV, animation and vidgame hub.

That drive has already seen results. In a first sign of industry build, L.A.-based LA Panda, a producer on SXSW winner “10.000 KM,” has established a Pamplona production office, run by LA Panda director-producer Elia Urquiza, who directed Malaga Spanish Cinema Festival winner “Next.”

La Panda, as the Pamplona production house is called, will produce out of Navarre and lure foreign shoots, particularly from the U.S., to the region. It is also aiming to establish a Pamplona post-production facility. Among first projects which La Panda looks set to shoot in Navarre are “The Chain,” a psychological thriller from Spain’s David Martin Porras, and Urquiza’s own Navarre-set drama “El secreto,” which she will direct. LA Panda also aims to carry our post-production in Navarre on experimental movie “Grimsey,” which it is producing.

La Panda will collaborate with Pamplona and Madrid-based Bestax to analyse projects’ best tax options, Urquiza said in San Sebastian.

Navarre’s tax breaks cut two ways. On international shoots, the 35% tax credit must be channelled through a Navarre-based service company. That it way above the 15% being offered to international shoots on the Spanish peninsula (rising to 35% in the Canary Islands). Actors salaries are included in eligible items, capped at €50,000 ($56,000).

For Spanish shoots, Navarre tax payers – high-net individual or companies – can benefit from 35% tax deductions, invested in  Spanish shoots which spend at least 25% of their budgets in Navarre. Investment will be channelled via Asociación de Interes Economico (AIE), a vehicle used widely by the Spanish industry since 2007.

“We want to ensure that the shoots generate significant economic activity in the territory,” said Javier Lacunza, general manager of Navarre Culture, Sports and Leisure Infrastructures (NICDO).  Spanish animation companies can draw down deductions over several years, which is highly attractive, he added.

Three high-profile Spanish productions have recently shot in Navarre: “Rumbos” and Pablo Berger’s “Abracadabra,” starring Maribel Verdu and Jose Mota, both produced by Arcadia Motion Pictures, used tax breaks. A third,“El Guardian Invisible,” a serial killer thriller set in the wooded Valley of Baztan. produced by Nostromo Pictures and directed by Fernando Gonzalez Molina (“Palm Trees in the Snow”), is currently negotiating with investors to use the tax deductions.

Steeped in landscapes, and local lore, kept alive down the centuries, “The Invisible Guardian” was produced out of Navarre and all exteriors shot there, maximising the spend, so tax benefits. Navarre’s Symphonic Orchestra recorded the soundtrack. “Rumbos” and “Abracadabra” did not make specific use of Navarre landscapes.

Navarre’s tax breaks twin two factors: The region’s resilient history of independence; the need to create new growth economic drivers in Western Europe. Once one of Europe’s most powerful kingdoms, Navarre helped power its Renaissance under the remarkable Marguerite of Navarre (1492-1549). It was celebrated for its scientific prowess in Shakespeare’s “Love’s Labour’s Lost.” Though assimilated into Spain from 1512, it has retained its ability to collect most of its own taxes.

Though Spain has clawed its way out of recession, there are large questions about its longterm economic growth. Navarre is Spain’s third-richest region, with a per capita GDP of €28,682 ($27,562) in 2015.

Its four economic pillars are the agri-food sector, automotive and machinery-equipment production, health and renewable energy, said Lacunza. In the new Navarre 2030 economic strategy report, which was recently approved, has added integral tourism and creative industries, he added.

Cultural industries in turn “are regarded as delivering broad-based advantages, for example in terms of employment, heritage awareness, consumer interest, economic growth, exports, tourism and so-called national ‘soft power,’ the report reads.

In a 2014 analysis, Olsberg SPI, a consultancy firm, observed that film production spend in countries with fiscal incentives comprises 0.06% of their GDP, vs, 0.01% for countries with no incentives in place.

Navarre’s unemployment is the lowest in Spain but still at 13%.

LA Panda setting up shop in Pamplona “has many symbolic aspects,” said Lacunza. “Thanks to a structured approach towards laws and normative, we are able to bring back some of our young exiled talent. And bringing back that talent is crucial to fighting a crisis that made them leave and stay away.

Navarre established an audiovisual cluster this summer, incorporating producers, freelancers and companies with a stake in the sector.

The best promotion of its tax scheme, however, will be companies like LA Panda setting up in Navarre, Lacunza argued.

He added: “We have had a long crisis in Spain Governmental budgets for culture are tight and will continue being. So let’s not fight for the €1 coin coming directly from the public budget. Let’s fight for the €10 note coming from somewhere else in the world thanks to a structured approach to tax regulations.”

WHY SHOOT IN NAVARRE?

1.YES, ‘GAMES OF THRONES’ HAS BEEN THERE

Shooting in the Bardenas Reales – think Monument Valley reimagined by Salvador Dali – which stood in for the Dothraki desert homeland in early Season 6. Said to be the biggest cold desert in Europe, the Bardenas attracts 60 shoot requests a year, Lacunza said.

2.THE TAX INCENTIVE

The deduction on investment is high in percentage terms, and there us no cap, said producer Adrian Guerra, at Nostromo. Latter is a ‘large advantage.”

3. A SMALL ASK

To qualify, international shoots are required to film a minimum of one week in Navarre, a fairly small ask.

4. RINGING THEIR OPTIONS

Companies who set up in Navarre, like La Panda, can ring their options, offering services or co-production to foreign producers, qualifying a movie as European, or post production or animation services in Navarre, or the possibility of bringing in more Spanish or European partners, tapping into further rebates and pan-European funds such as Eurimages. A large flexibility.

5.A WIDE GEOGRAPHIC GAMUT

“One of our claims, in terms of the film world, is the diversity of landscapes,” said Lacunza. He added: “In just a 100 kilometer radius, we have rain-forests, snow capped mountains, urban landscapes, wonderful Romanesque and Medieval villages, a desert, the sea close-by and motorways reaching to all the cardinal points from Pamplona.” Among other major lures: Navarre’s Pyrenean woods and valleys, Ana Herera Isasi, Navarre’s councillor of culture, sports and youth, said at the San Sebastian presentation.

6.ACCESS TO DECISION-MAKERS

“We are a country within a country and small, with just a 640,000 population. That means if you have to open very special places, even the palace of government, you do. Being small can be a competitive advantage. The people who decide are available!” Lacunza commented. “You have easy access to decision makers,” Urquiza added.

7.AMAZING HISTORICAL BUILDINGS

Navarre’s Olite Castle looks like where Prince Charming would set up residence, if he got first choice. Urquiza also recommends, of historical locations: Artajona, a fortified village; El Castillo de Javier, an imposing castle-church complex; and the Monastery of Leyre, not a hotel.

8.NOVELTY

Few Navarre locations have been used in big movies. Urquiza: “These are places that have never been seen. People is LA.. are tired of certain locations that now have been used a lot. But Navarre is new.”

9.EASY ACCESS FROM MADRID AND BARCELONA

For sending heavy equipment, the high velocity train takes around three hours from Madrid and Barcelona, a plane 35 minutes. Bilbao is an hour away.

10.EXCITEMENT

Because it’s a virgin territory, “people came from all over the region to be extras in ‘Game of Thrones.’ People were so excited, eager to help or to be in the movie,” Urquiza said.

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