Tax deduction for investments in cinematographic films and other audiovisual works in navarre

Tax deduction for investments in Navarra Cinema

The deduction is deemed to be generated in the tax period in which the production of the work is completed. If the production takes longer than twelve months or affects more than one tax period, the producer may choose to apply the deduction as and when the payments are made and for the amount of the deduction with application of the deduction regime in force on the date on which it starts. In such a case the deduction is deemed to have arisen in the periods in which the payments are made.

Taxpayers wishing to take advantage of this deduction must submit an explanatory report of the project to the Directorate-General of the Government of Navarre responsible for culture, which will issue a report on whether the project complies with the requirements and conditions of the deduction. Once this report has been requested, the taxpayer can enter the deduction that has been generated in his return/settlement.

In order for this deduction to be applied, the production must obtain the corresponding certificate of nationality y the certificate attesting to the cultural character in relation to their content, their link with cultural reality or their contribution to the enrichment of the cultural diversity of the cinematographic works shown in Spain, both certificates issued by the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA).

Within 6 months of applying for the certificate of nationality, the taxpayer must present to the Directorate General of the Government of Navarre responsible for culture the justification of the production company's investment and compliance with the rest of the requirements established to accredit the deduction, according to the conditions established by the head of the department responsible for taxation. Failure to comply with the aforementioned deadline entails the loss of the deduction and its regularisation in accordance with the legal provision. The Directorate General shall issue and notify a decision within 6 months of the submission of the documentation, determining the basis for the deduction according to the investment made by the production company and the expenses incurred in Navarre. If the basis of the deduction recognised in the decision is lower than the basis declared, the taxpayer must pay, together with the tax liability for the tax period in which the decision is notified, the full amount corresponding to the deduction unduly applied, plus interest on late payment.

What are the requirements to obtain the Spanish nationality certificate for a film production?

The certificate of Spanish nationality of a film production is granted by the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA), and according to the Ley del Cine and associated regulations, the following requirements must be fulfilled in order to be granted:

1. The production company must be domiciled in Spain, or in a Member State of the European Economic Area and have a branch in Spain.

2. A significant percentage of the actors, , technicians y creative must be of Spanish nationality or from European Economic Area countries, including positions such as director, scriptwriter(s), composer(s), lead actor(s)/actress(es), etc.

3. The work must be carried out in any of the official languages of Spain, the project must be written in Spanish, in one of the co-official languages or in one of the languages of a country of the European Economic Area. If it is in another language, its artistic or cultural relevance must be justified.

4. The script and the play must have a meaningful cultural connection with Spain or with the countries of the European Economic Area. This connection is assessed on the basis of a scale of points defined in the regulations.

5. Of the film's budget one percentage to be spent on Spanish territoryl including contracting of services, equipment rental, hiring of personnel, etc.

6. Production must comply with legislation the company also complies with Spanish labour, tax and social security regulations, as well as with environmental regulations and established ethical standards.

7. Submit a application to the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) (Institute of Cinematography and Audiovisual Arts) including the script of the work, production contracts, detailed budget, certificates of nationality or residence of the technical and artistic team, a report justifying the cultural connection of the work and documentation accrediting the expenses in Spain.

The film production must obtain a minimum score in a rating system designed by the ICAA, which takes into account the script, language, crew, location and cultural theme.

In the case of international co-productions, the specific regulations on proportional participation of each country must be complied with, depending on whether it is a majority or minority Spanish co-production.

The documentation is submitted by application to the ICAA, which will assess whether the film meets the requirements. In the event that the the certificate accrediting the Spanish nationality of the work is issued.

What are the requirements to obtain the certificate attesting the cultural character of a film production?

The certificate accrediting the cultural character of a film production in Spain is granted by the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) or by the competent authorities of the Autonomous Communities that have been granted competence, as appropriate. The main requirements and criteria for obtaining the certificate are as follows:

1. Cultural or educational nature of the content: The audiovisual work must be related to the culture, history, art, traditions or values of Spain or the States of the European Economic Area. Relevant social issues, promoting cultural diversity or encouraging the preservation of heritage may be included.

2. Language of production: Must be in Spanish, , in any of the co-official languages of Spain or in languages of other European Economic Area countries.

3. Connection with the Spanish or European cultural sphere: The audiovisual work must reflect or promote cultural values that are related to Spain or Europe, either through the subject matter, the characters, the setting, or the treatment of historical, artistic or social elements.

4. Participation of Spanish or European talent: It is necessary that a significant part of the technical and artistic team be of Spanish nationality or from a Member State of the European Economic Area, including positions such as as director, screenwriter(s), director of photography, lead actors/actresses, and composers and other key positions in the production.

5. Contribution to the cultural and creative sector: The production must prove that it contributes to the development of the cultural industry in Spain or in the European Economic Area in terms of employment, training of talent or impact on the audiovisual industry.

6. Compliance with applicable regulations: The audiovisual work must comply with Spanish labour, tax, intellectual property and environmental laws.

When applying for the certificate, the production company must submit to the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) or the corresponding regional body a dossier including a complete copy of the script of the work or, failing this, a detailed synopsis justifying its cultural nature, a detailed list of the technical and artistic team, indicating the nationalities of each of its members, a document explaining the connection of the work with the Spanish or European cultural, educational, social or historical sphere, detailed information on where the filming will take place and whether Spanish cultural heritage is included, an indication of the percentage of expenditure to be made in Spain and its economic and cultural impact, and accreditation that the production company complies with the legal requirements and has sufficient financial resources.

The productions must pass a rating system in which elements such as language, equipment, subject matter, and location are weighted.

The Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) or corresponding body will assess the application submitted on the basis of the innovative content and its contribution to the cultural landscape, whether the work promotes cultural or social values or has a clear educational objective, the use of local resources and the hiring of Spanish or European professionals are valued, and productions that promote inclusion are also particularly valued.

The audiovisual production company must send all the required documentation to the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) or the corresponding regional body, which will review the documentation and issue a report on compliance with the requirements. If all the criteria are met, the certificate of cultural character is awarded.

Who are the recipients of the tax rebate for investments in cinematographic films and other audiovisual works in Navarre ("Tax Rebate" - "Tax Deduction")?

• The production or co-production companies of Spanish productions of cinematographic films and other audiovisual works of fiction, animation or documentaries that allow the production of a support prior to their dissemination.

• The registered producers in the Administrative Register of Cinematographic and Audiovisual Companies of the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA) to be responsible for the implementation of a Spanish or foreign production of cinematographic films and other audiovisual works of fiction, animation or documentaries which have the certificate attesting to the cultural nature of the work.

• Taxpayers liable to corporate income tax or non-resident income tax

PRODUCERS OR CO-PRODUCERS OF SPANISH PRODUCTIONS OF CINEMATOGRAPHIC FILMS AND OTHER AUDIOVISUAL WORKS OF FICTION, ANIMATION OR DOCUMENTARIES

Applies to investments in spanish productions of cinematographic films and other audiovisual works of fiction, animation or documentary.

What is the tax deduction percentage for producers or co-producers of Spanish productions of cinematographic films and other audiovisual works of fiction, animation or documentary in Navarra ("Tax Rebate" - "Tax Deduction")?

• The general tax deduction is 45 per cent of deductible expenses.

• The special tax deduction is 50 per cent of deductible expenses on the first three million of the deduction base in the following cases:

-Productions whose only original version is in Basque.

-Short films

-Documentaries

-Animation productions

-Productions made exclusively by women directors

-Productions directed by a person who has not directed or co-directed any feature film or audiovisual series of fiction, animation or documentary (first-time directors)

The amount of this deduction may not exceed EUR 5 million.

In the case of a co-production, the amounts are determined for each co-producer according to their respective percentage of participation.

What is the basis of the tax deduction for investments in cinematographic films and other audiovisual works in Navarra ("Tax Rebate" - "Tax Deduction")

1. The basis of deduction is made up of:

a) The cost of production of the audiovisual work until the standard or digital master copy is obtained, with the following specialities and limits:

1. The remuneration of the executive producer may not exceed more of these two limits: 10 per cent of the cost of production, or 100,000 euros.

Only executive production is recognised as a cost if it is carried out by natural persons, or legal persons whose corporate purpose includes expressly the executive production.

In the case of a commercial relationship between the production company and the executive producer must be accompanied by a contract with the invoice and if the relationship is an employment relationship, it must be accompanied to the contract the payroll with application of the General Security Regime Social. When the subject matter of the executive producer's contract or other workers is generic for various film productions or series produced by the production company shall be apportioned on a pro-rata basis to the cost according to the effective participation in each project.

When the production company's regular staff performs the functions of executive producer without a specific contract his remuneration is charged to to overheads, subject to the same conditions of apportionment as above.

2. The amount of overheads until 10 per cent limit of the cost of production.

The following can be imputed the cost of staff employed by the production company without a specific employment contract for the work to be deducted shall be deducted from overheads.

Expenditure on regular staff with a specific employment contract for their participation in several of the production company's audiovisual works pro rata according to the actual participation in each of them, and shall be charged as expenditure on technical staff.

3. The expenditure relating to supplies such as water, gas or electricity that are produced during shooting time on premises or in the facilities with a direct link to the filming and is justified with the appropriate documentation. If the expenses are incurred in the registered office of the production company and is not directly linked to the the costs of supplies are charged as overheads.

4. The tax-deductible depreciation cost of the time of use of the technical equipment and material property of the production company while production is taking place.

5. Expenditure on services catering, hospitality, travel and travel, telephone and internet costs incurred during filming. The expenditure on these items incurred outside of the period between the start and end date of filming are charged to expenses general.

b) Advertising and promotion expenses of the audiovisual work until 40 per cent limit of the total cost of production.

c) Adaptation costs to media or systems as necessary for theatrical release or exploitation once the film has been production is completed; in the case of series in order to be able to be broadcast on television or on platforms that offer services in streaming.

d) Costs for the realisation of tangible supports that are needed for ensuring conservation of the audiovisual work, and expenses for obtaining copies or other media for exhibition in cinemas exploitation; in the case of series, in order to be able to be broadcast on television or on platforms that offer services in streaming.

e) Costs of the special audit report which prove the cost of the audiovisual work.

2. The expenditure considered as amount of investment must be made between 24 months prior to the start of filming and 24 months after the end of filming.

The start and end date of filming is determined according to the criteria established by the Instituto de la Cinematografía y de las Artes Audiovisuales (ICAA).

3. The following are not counted as the amount of the investment the financial costs and indirect taxes.

4. When the investment comes from acquisitions of purchases of goods or services from a related person or entity the amount of the investment is determined by the cost of such goods or services of the related entity if sufficiently justified.

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