As coronavirus ravaged Spain in April, the country’s central government took one significant step toward building for a post-COVID future. The COVID-19 pandemic has sparked — paradoxically — a new bullishness in Spain’s international production industry.
On May 5, Spain’s government greenlit a critical hike to tax breaks for Spanish and international productions, suddenly and significantly increasing the country’s competitiveness as a film and TV location destination.
Tax rebates for international shoots — and also tax credits for Spanish nationality productions — were increased from 25% to 30% for the first €1 million ($1.1 million) spend in the country and from 20% to 25% thereafter, capping a shoot’s total tax deduction at €10 million ($10.8 million).
In the Canary Islands, the rebate has been set at an extraordinary 50% for the first $1.1 million, and 45% for the rest — the highest rate of deduction in the world.
The new measures, especially the muscular rise in the rebate ceiling, produced a large sigh of relief in Spain’s big shoots industry.
“It’s clear that Spain, and especially the Canary Islands, has become a highly attractive country from the financing point of view,” says Nostromo Pictures’ Adrián Guerra, president of Profilm, Spain’s international shoot sector trade association.
“The new tax incentives will triple the number of international shoots in Spain,” predicts Raúl Berdonés, president of Secuoya Group.
“This is a win for both Spain and the U.S., and other international players. Given the production logjam that existed in Hollywood before COVID-19, this will be welcome news as the sector looks to reopen,” says former HBO executive James Costos, president of Secuoya Studios, the production arm of Secuoya Group, who, with Spain Film Commission president Carlos Rosado, addressed a letter to Spanish prime minister Pedro Sánchez arguing in favor of raised tax breaks for international shoots.
The rebates also came after lobbying by other trade bodies such as Profilm.
Considerable rebates, a long-time demand of Spanish industry lobbying, join further essential requirements made by international productions seeking locales abroad: Cost-effective high-profile creative and tech talent; efficient transport infrastructure and hotels; top-echelon production services; and diverse and accessible locations.
“Honestly, there aren’t many more countries around us that tick all that list of options,” Guerra says.
The main impact that the tax incentives hike will have on international shoots will be in terms of time, producers say.
To date, big Hollywood players came to Spain to film some scenes from major productions or episodes of high-profile TV series, but never an entire feature film or a full season.
The reason was incentives’ formerly low ceiling: $3.3 million in mainland Spain, meaning the maximum spend eligible for deductions amounted was $16.5 million.
With the new incentive, international producers will be able to invest around $44 million shooting in Spain, triggering the maximum reimbursement $11 million.
In the Canary Islands, this ceiling looks to rise to $19.8 million, pending further legislative amendments.
“That margin will undoubtedly generate more work over longer time,” Guerra explains.
Also, the minimum expenditure for international productions performing post-production or animation work will be $220,000, allowing Spain to attract more modest projects that will help develop still further an already competitive local VFX industry.
With a solid track record of servicing international titles — think Anthony Mann’s “El Cid,” Steven Spielberg’s “Indiana Jones and the Last Crusade” and Ridley Scott’s “1492: Conquest of Paradise” — Spain won larger global visibility after “Game of Thrones” filmed there from 2014-18.
On March 14, when the coronavirus threat was hanging, Fresco Film, the “Game of Thrones” production services provider in Spain, had to halt three international productions: one of them from Netflix, another from Sony.
But the new incentives measures generated a positive, immediate impact.
“Beyond these three projects, we have rapidly inked new shoot deals with further international clients, attracted by the rebate hike,” says Peter Welter, Fresco Film CEO.
Once local film and TV shoots gradually restart — filming on Amazon-Fiction-Beta miniseries “3 Caminos” resumed on May 25, Season 2 on the Movistar Plus-Portocabo-Arte-Atlantique series “Hierro” and Arcadia-Kowalski’s feature “Todas las lunas” followed suit in early June — the next step should be to open Spain’s borders, allowing international shoots to return.
“The sector envisages a July 1 opening of Spanish airspace, having already implemented new sanitary, fiscal and legal measures,” says Carlos Rosado, president of the Spain Film Commission.
The rise in the costs of reinforcement of sanitary measures will increase shoot budgets some 6% to 8%, Rosado estimates.
A return to normality also depends on the authorities of each producer’s country of origin, but at least the Spanish sector is starting to recover a larger sense of visibility about the future.
The post COVID-19 age suggests new opportunities. Since production teams will probably need to reduce the number of countries they will film in, trying to limit fresh outbreaks, Spain marks other advantages.
“We can replicate in Spain up to 60%-70% of the world’s locations. Traveling by road, we can cover a wide variety of landscapes, architectures and cultures,” Welter says.
“International shoots will film longer in Spain, requiring other processes, such as post-production, be [completed] here,” says Denis Pedregosa at production services company Babieka.
Spain is already building as an international production hub in terms of both the reach of Spanish shoots and global audience for titles, especially TV dramas, led by Netflix global hit series “Money Heist” and “Elite.”
“The success of Spanish TV fiction is allowing international producers to better appreciate the high level of Spain’s creative and physical production,” Pedregosa says.
The streaming platform boom is sparking full soundstage occupancy in key international production hubs, so opportunities for new facilities are growing, reinforced in Spain by its cost-contained services.
Netflix has been operating its first European production hub at the Secuoya Studios near Madrid since 2018.
Built around Secuoya Studios, Madrid Content City, a 140,000 square-meter production-education-leisure complex, which will take in 10 soundstages, has just started the construction of phases II and III, to conclude by September 2021.
The Canary Islands, with a special fiscal regime, makes its 45%-50% rebate for shoots compatible with further advantages such as the so-called Zona Especial Canaria (ZEC), with just 4% in corporate tax.
According to Natacha Mora, Canary Islands Film coordinator, “this is a very attractive incentive [that] is mainly benefiting animation and VFX companies set up in the islands in recent years.”
Among the newcomers are Orca Studios, a Gran Canaria-based virtual production facility that uses the same LED volume technology employed by ILM on its Stagecraft system for “The Mandalorian,” allowing filmmakers to shoot exterior scenes in a controlled environment of a studio.
The recent incentives hike does not apply to regions such as Navarre and the Basque Country, which have their own taxation systems. Each of the three Basque territories offers tax breaks of up to 40% in the case of Araba and Gipuzkoa, when it comes to films shot in Basque.
Driving the growth of a local production ecosystem, Navarre is mainly attracting domestic shoots via a 35% corporate tax deduction for Navarre-based companies.
A further step in the growth of Spanish facilities’ growth is the launch in Navarre of Melitón Films, a joint-venture of the Lekaroz-based production services and training entity Estudios Melitón and Canary Islands’ Macaronesia Films, aimed at boosting Navarre’s audiovisual industry and facilitating access to regional tax incentives.