Italy revises international tax credit, maintaining headline 40% rate

Italy has published details of its revised tax credit for international productions, maintaining its headline 40% relief and introducing groundbreaking rules around the use of AI.

The 40% rate for international shoots applies to production spend in Italy of at least €250,000.  However, the rate reduces to 30% for specific above-the-line costs relating to non-European entities.

Some of the key changes are around the use of AI. Costs incurred in Italy relating to the use of AI will be ineligible.

However, the use of AI attributable to special effects is permitted. 

Productions will be obliged to reveal if AI has been used on work carried out in Italy. There will also be an obligation to provide specific clauses in the contracts between Italian executive production or post-production companies and authors and performers allowing them not to consent to the exploitation of their work/image/performance by artificial intelligence systems.

One executive told Screen they represented one of the first times a national authority has ruled out relief being claimed in certain circumstances if AI is used.

Details of the revised international credit were announced at the Venice Film Festival today (August 30) by Lucia Borgonzoni, undersecretary of state to the ministry of culture, and Nicola Borelli, who heads the directorate general for Cinema and Audiovisual at the Italian Ministry of Culture.

They will announce revisions to Italy’s tax credit for local productions tomorrow.

Both Borgonzoni and Borelli emphasised very little had changed about the international tax credit. They also stressed its importance to Itay; Borelli said it had helped to attract €2bn in international investment since 2017.

International producers have been waiting since the start of the year for the government to issue forms and guidelines for obtaining Italy’s tax credit for 2024. The delay and uncertainty have caused a number of international productions to postpone or abandon plans to shoot in Italy this year.

Borgonzoni and Borelli also criticised ‘rumours’ and ‘fake and false information’ about the international tax credit that circulated during the reform process which they said had been disseminated by competitor countries, the press and also by the Italian industry.

Reforms in detail

In details sent to Screen, the international tax credit remains available up to a maximum annual limit of €20m for each company or group of companies. But there is no maximum limit per work. Italy’s local production tax credit, if claimed by a company also applying for the international tax credit, does not count for the purposes of reaching the annual limit of €20m per company.

Other regulations concerning eligible costs incurred on Italian territory have not been changed.

The obligation to carry out at least one day of filming/work on Italian territory has been eliminated, a move for which Italian post-production companies have lobbied.

Other details of the revised international tax credit include:

- The costs of professional and personnel figures governed by national collective labour agreements are eligible, for each employee, up to the amount provided for in the collective agreements entered into by the most representative employers’ and trade union associations, increased up to a maximum of 20%;

- The transferability of the tax credit is confirmed;

- The deadline of 180 days from the conclusion of the activities within which the final application must be submitted remains unchanged;

- The benefit is granted on condition that the eligible cost is at least €250,000;

- Applicants must operate in compliance with the protocol on rules against harassment and violence in the workplace, in the film and audiovisual sector, signed by the most representative employers’ and trade union organisations.