TAX INCENTIVES FOR AUDIOVISUAL WORKS IN BIZKAIA: "TAX CREDIT"

TAX INCENTIVES FOR AUDIOVISUAL WORKS IN BILBAO: "TAX CREDIT".

AMENDMENTS TO PROVINCIAL REGULATION 11/2013 ON CORPORATE TAX.

which investments and expenses in audiovisual productions provide tax incentives in Bizkaia (Tax Credit)?

Provincial Law 9/2022, of 23 November, which updates and extends the tax incentives for the promotion of culture in Bizkaia, establishes that investments and expenses in the production of feature films and short films and other audiovisual works of fiction, animation or documentary that allow the production of films and short films and other audiovisual works of fiction, animation or documentary that allow the production of films and short films and other audiovisual works of fiction, animation or documentary that allow the production of films and short films and other audiovisual works of fiction, animation or documentary that allow the production of films and short films, animation or documentary films which allow the production of physical support prior to serial audiovisual production entitle the producer to a deduction in the net quota of the percentage to be stated on the deduction base, which is made up of the cost of production and the expenses for obtaining copies and for advertising and promotion to be borne by the producer.

The requirement of permanence of the assets and liabilities provided for in Provincial Regulation 11/2013, of 5 December, on Corporate Income Tax is understood to be met if the producer maintains the same percentage of ownership of the work for 3 years, without prejudice to its power to market all or part of the exploitation rights deriving from it to one or more third parties.

The deduction may be applied by the executive producer only in cases where the producer of the audiovisual work is non-resident in Spanish territory and does not operate in that territory through a permanent establishment.

When the deduction is applied by the executive producer, the basis for the deduction is constituted exclusively by the cost of the production borne by the taxpayer and the provisions of Article 67(5) of Provincial Law 11/2013 do not apply.

In the case of co-production, the amounts are determined for each co-producer in their respective percentage of participation in the work.

The deduction is understood to be generated and is applied in the periods in which the payments are made and for the amount thereof.

what is the deduction percentage for audiovisual works in Bizkaia (Tax Credit)?

a) 60% for productions in which the amount of the investments and expenses included in the basis for the deduction made in the Historical Territory of Biscay where the taxpayer's tax domicile is located exceeds 50% of the total amount of the investments and expenses.

b) 50% for productions in which the amount of the investments and expenses included in the basis for the deduction made in the Historical Territory of Biscay where the taxpayer is resident for tax purposes is between 35% and 50% of the total amount of the investments and expenses.

c) 40 per cent for productions in which the amount of the investments and expenses included in the deduction base that are made in the Historical Territory of Biscay where the taxpayer is resident for tax purposes exceeds 20 per cent of the total amount of the investments and expenses and does not reach 35 per cent.

d) 35% in all other cases.

When the audiovisual works are filmed entirely in Basque, the applicable deduction percentage would be increased by 10 percentage points.

The determination of the percentage of the investments and expenses that make up the deduction base made in the Historical Territory of Biscay where the taxpayer's tax domicile is located is carried out globally for the set of tax periods during which the deduction is applied. In order for this to occur, the taxpayer in the first tax period in which the deduction is applied must make an estimate of the percentage of the investments and expenses included in the deduction base in .

When it is found that the percentage represented by the investments and expenses included in the deduction base made in the Historical Territory of Biscay where the taxpayer is resident for tax purposes out of the total of the aforementioned investments and expenses is lower or higher than that declared in the tax year in which the deduction was first applied, the deduction must be regularised in the last tax year in which it is applied by applying the corresponding definitive deduction percentage.

what is the deduction limit (Tax Credit) of the audiovisual work?

The amount of the deduction together with the rest of the aid obtained by the taxpayer for each audiovisual work may not exceed 50% of the total production budget, except in the case of a production financed by more than one Member State of the European Union and in which producers from more than one Member State of the European Union participate. In this case it may not exceed 60 per cent of the total production budget.

Where the deduction is made by the executive producer, the above percentages apply only to the costs incurred by the taxpayer.

The above limit does not apply in the case of audiovisual works that are considered difficult as set out below, and does not apply to co-productions involving countries on the Organisation for Economic Co-operation and Development's Development Assistance Committee List.

what are the requirements for applying the tax credit in Bizkaia?

In order to apply the deduction, the following requirements must be met:

• 1.- That the production obtains a certificate accrediting the cultural nature of the work in relation to its content, that it is linked to cultural reality or that it contributes to the enrichment of diversity, issued by the Instituto de la Cinematografía y de las Artes Audiovisuales, the corresponding body of the Autonomous Community with competence in the material, or by an equivalent body of another Member State of the European Union or of the European Economic Area.

• 2.- That a new copy in perfect condition is deposited at the Basque Film Library or at institutions or bodies with competence for collecting, cataloguing, conserving, restoring or making audiovisual works available to the public. The delivery shall be made on the same support used for the exhibition.

This requirement does not apply when the deduction is assigned by the executive producer or when it is not a work of Spanish nationality.

how do I obtain the certificate accrediting the cultural nature of an audiovisual work, an essential requirement for obtaining the deduction (Tax Credit)?

According to Article 22 of R.D. 1084/2015, in order for an audiovisual production to obtain the tax credit (Tax Credit) it must accredit its cultural nature as a necessary requirement.

The certificate of cultural character is granted by the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) upon application by the production company/s, which will decide on the basis of at least two of the following requirements:

1.- The original version of the work must be in any of the co-official languages of Spain. In the case of co-productions with foreign companies, the original version of the feature film may be one of the official languages of the European Union.

2.- The content is mainly set in Spain.

3.- The content is related to literature, music, dance, architecture, painting, sculpture or artistic expression.

4.- The script is an adaptation of an existing literary work.

5- The content of the audiovisual work is biographical in nature or reflects historical facts or characters, without prejudice to free adaptations of the script, typical of a film production.

6.- The content must include mythological or legendary stories, events or characters that can be considered to be part of any cultural heritage or tradition in the world.

7.- It should allow a better understanding of cultural, social, religious, ethnic, philosophical or anthropological diversity.

8.- That the content is related to issues or topics that are related to the Spanish social, cultural or political reality, or that have an impact on them.

9.- One of the main characters or several of the secondary characters in the film story must be directly linked to the Spanish social, cultural or political reality.

10.- That the work is specifically aimed at a children's or young people's audience, and contains values in accordance with the principles and aims set out in the Education Act and the Law for the Improvement of Educational Quality.

when is an audiovisual work considered "difficult" for the purposes of obtaining a tax credit in Bizkaia?

An audiovisual work is considered "difficult" for the purposes of the tax credit in Bizkaia (Tax Credit) if it falls into one of the following categories:

a) Short films

b) Films that are the first or second work by a director.

c) Works whose only original version is in Basque.

d) Low-budget works: those whose production costs do not exceed 1.000.000 of euros.

e) Works which, due to their subject matter or other production-related issues, have difficulties in entering the market. In this case, the taxpayer must demonstrate that the work has difficulties to be introduced in the market, and the classification as a difficult work must be requested from the tax authorities prior to the end of the first tax period in which the taxpayer accredits the right to the deduction.

As a general rule, the definitions referred to in the previous paragraphs are provided for in Law 55/2007, of 28 December, on Cinema.

Taxpayers accrediting their right to the tax credit in Bizkaia (Tax Credit) give their consent to the dissemination of their data corresponding to the tax credit in accordance with the regulations in force. The Provincial Council of Bizkaia will publish the information in accordance with these regulations.

what other common regulations affect the tax credit for audiovisual works?

1. The basis for the deduction is reduced by the amount of subsidies received to finance the investments and expenses that generate the right to deduction.

2. The taxpayer must submit a list of other public aid or subsidies received together with the self-assessment tax return in which he or she avails himself or herself of the related deductions so that it can be checked whether the maximum deduction possibilities mentioned above have been complied with.

3. Failure to comply with the requirements for each deduction that must be met in subsequent years to the one in which the deduction is applied means that the tax payments not made in due course for the tax deductions made must be paid, together with the corresponding interest on late payment, which must be added to the amount resulting from the self-assessment for the year in which the non-compliance occurs.

4. Additional requirements may be established by regulation for the application of deductions, in particular those related to the information that must be included in the work's credits and to the transfer of graphic and audiovisual material that must be made for non-commercial and exclusive use in the promotion of the territory.

how is participation in the financing of audiovisual works regulated?

Taxpayers of Corporation Tax or Personal Income Tax who operate through a permanent establishment and participate in the financing of the production of feature films and short films and other audiovisual works, and of fiction, animation or documentary series that allow the production of a physical medium prior to serialised industrial production that meet the requirements to generate their right to the aforementioned tax deductions are entitled to make a deduction from the net tax payable as established in this regulation. This deduction is incompatible, in whole or in part, with the deductions to which those other taxpayers would be entitled under this provision.

This deduction is not applicable when the taxpayer who participates in the financing of the production is related to the taxpayer who carries it out in the manner established in the Norma Foral.

It is understood that the taxpayer participates in the financing of the production of an audiovisual work of another taxpayer when he/she contributes non-refundable amounts to cover all or part of the investments and expenses that make up the basis for the deductions. Subrogation to the position of the contributor participating in the financing is not allowed except in cases of universal succession.

In order to apply the participation in the financing of an audiovisual production work, it is necessary to sign a contract with the requirements established in the Norma Foral 11/2023.

Taxpayers participating in the financing cannot acquire intellectual property or other rights over the results of the production.

If the taxpayers opt to apply the aforementioned participation regime, the producer and/or executive producer are not entitled to apply the corresponding total or partial amount of the deduction, and instead the taxpayer participating in the deduction is entitled to credit the deduction in their self-assessment of the tax, the amount being determined under the same conditions as would have been applied to the taxpayers who would have generated the right to apply the deductions. However, the taxpayer who participates in the financing cannot apply a deduction greater than that resulting from multiplying by 1.20 the amount of the sums paid out for the financing. The excess can be applied to non-participating taxpayers.

The taxpayer participating in the financing will apply annually the deduction corresponding to him according to the contributions disbursed in each tax period, as well as the deduction provided for in general that in each tax period is credited. If the taxpayer participating in the financing contributes in the tax period amounts that could have been deducted a higher amount, the excess can be applied in the following tax periods with the aforementioned limitations.

The application of the deduction corresponding to the taxpayer who participates in the financing of an audiovisual work must be taken into account in accordance with the provisions of the Norma Foral, and the amount must be taken into account for the purposes of applying the 35 percent limit established in the Norma Foral.

Taxpayers wishing to avail themselves of this deduction must present the aforementioned financing contract in a communication to the Tax Administration signed by all parties prior to the end of the tax period in which the deduction is generated, in accordance with the provisions of the regulations. They must also present the certificate accrediting the cultural nature of the work, or a document accrediting their application.

Check out our production services in Bizkaia and the Basque Country.

Camaleón Offer Film & TV Equipment Hire in Bilbao: Camera & Lighting Equipment

Other Related Blog Post with Bilbao:

• Tax Deductions for Film in Spain

• General and selective aid for Film in Spain - Feature films and short films

• ∑Tax Incentives for Audiovisual Works in Bizkaia - Tax Credit