Spotlight on film and TV tax incentives part 1

These days, producers rarely go anywhere unless there is some kind of financial inducement in addition to all the other elements outlined above. Here we look at some of the top tax incentives available around the world, with more territories to follow next week.

Canada

Canada continues to be one of the world’s most attractive production destinations thanks to the quality of its infrastructure, the depth of its talent base and its world-beating incentives. A big appeal (particularly to Hollywood producers) is that there are both federal and state incentives. At a federal level, there is a refundable tax credit that is equal to 16% of qualifying labour. This can then be topped up with attractive state programmes linked either to labour or expenditure.

The most significant incentives are British Colombia’s Production Services Tax Credit (PSTC, 33% of qualified BC labour expenditures) and Ontario’s PSTC, which is calculated as 25% of all qualifying production expenditures incurred in the state. These aren’t the highest tax credits in the country, but they are the most significant because they can be used while filming in and around the state-of-the-art production hubs of Vancouver (BC) and Toronto (Ontario).

Still in Canada, there are also very attractive tax incentives in Alberta, Manitoba, Nova Scotia and Quebec to name a few. BC, Ontario and Quebec also offer attractive tax incentives for VFX and animation while the country as a whole has a favourable regime for co-production.

Vancouver

US States

Like Canada, a number of US states have realised that producers can be induced to relocate from Hollywood if there is a strong enough financial incentive. New Mexico was a trailblazer in this respect. It offers a 25% or 30% Refundable Film Production Tax Credit that also covers post-production services rendered in New Mexico. Louisiana is also popular thanks to a 30% tax credit on qualified direct production expenditures made within Louisiana. There’s also an additional 5% tax credit for payroll expenditures to Louisiana residents.

There are so many incentives across the US that it is hard to be comprehensive in a short space, but New York’s 30% fully refundable tax credit has been a big draw while Texas has recently increased the size of its incentive fund threefold. California, anxious about runaway production, is also fighting back so it is worth staying across developments in that state.

New York City

UK and Ireland

The UK is the major production hub of Europe. A major reason for this is a strong tax relief system, which was recently improved again on April 1, 2014. From that date, the rate of tax relief for films with a qualifying budget of £20m or over has been increased from 20% to 25% of the first £20m of qualifying UK expenditure, with any excess qualifying UK expenditure still receiving a 20% tax credit. There has also been a reduction in the minimum UK spend threshold to 10% from 25%. Also important was the decision to relax the cultural test that calculates which productions are eligible for support. The decision provided a particular boost to the film VFX industry.

The UK isn’t big enough to have Canada-style regional incentives. But there is the attractive Screen Yorkshire, significant financial support from Northern Ireland and a new production fund backed by the government in Wales.

Ireland is a separate territory that also offers attractive incentives. Recently, it announced that its tax credit would rise in 2016 from 28% to 32%. Even at the current level Ireland has been attractive enough to pull in high-end drama productions such as The Tudors and Vikings.

Robin Hood's Bay

Germany

Strong incentives have helped Germany establish itself as the UK’s major rival within Europe for big budget production. Echoing the situation in Canada there is support for the film industry at both national and regional level. At national level, there is the German Federal Film Fund (DFFF), which was launched in 2007. In 2014, Germany cut the available fund from €70m per annum to €60m per annum but it still represents a big benefit to filmmakers. Regional support varies state by state but most parts of Germany offer some kind of incentive.

The most popular region with filmmakers is Berlin-Brandenburg, which boasts great locations and a world-class studio in the shape of Babelsberg (about 35km outside Berlin in Potsdam). Berlin-Brandenburg, which has an annual fund of around €25m, estimates that a film with a budget of €15m could get around €4m from a combination of DFFF and regional support. Films, TV drama, documentary and animation productions are all eligible. Bavaria Film Commission also has an attractive fund that can be added to DFFF spend.

Berlin

Australia

Australia offers a mix of federal and regional incentives. These incentives are tax-based and provide a cash rebate to the producer on qualifying Australian production expenditure. At a federal level, the three incentives are a 16.5% Location Offset, 30% Post, Digital and Visual Effects Offset and 40% Producer Offset. At a regional level, one of the best incentives comes from Screen NSW, which has around A$8m a year to allocate.

Critics says Australia is losing its appeal due to adverse movements in currency exchange and the fact that other countries are launching incentives. So far, the government has resisted calls to increase its 16.5% location offset to 30% in response. But it has just increased the size of its available fund by A$20m. It is also willing to do deals on a case by case basis. For example, Twentieth Century Fox secured a A$12m increase in the incentive for The Wolverine when it shot in Sydney.

Sydney

Next week: UAE/Abu Dhabi, Eastern Europe, Malaysia, Spain/Canary Islands, South Africa/Mauritius, Colombia. Click here to read part 2.