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Practical Manual for Companies 2020.

Deduction for investment in cinematographic production

1. Spanish film productions (article 36.1 of the LIS )

Royal Decree-Law 17/2020, of May 5, which approves support measures for the cultural sector and of a tax nature to deal with the economic and social impact of COVID-2019 , modifies the definition of cinematographic productions and allows that until August 31, 2020 (this period is extended until January 31, 2021 , as established in the first section of Order CUD /807/2020, of August 27) they are also considered commercial release of a film , without it losing its status as a cinematographic film, resulting in the deduction for investments in Spanish cinematographic productions regulated in article 36.1 of the LIS, being applicable, which is carried out through the television and platforms offering streaming content (through television audiovisual communication services, as well as electronic communication services that broadcast television channels or programme catalogue services).

Furthermore, with effect for tax periods beginning on or after January 1, 2020, the first Final Provision of the aforementioned Royal Decree-Law 17/2020 introduces changes to the deduction for investments in Spanish productions of feature films and short films and audiovisual series of fiction, animation or documentary regulated in article 36.1 of the LIS , modifying its requirements and increasing the percentages and their maximum limits:

  • The scope of application of the deduction is extended and can also be applied from January 1, 2020 to investments in short films cinematographic films.

  • One of the requirements for deduction is modified, establishing that a new and perfect condition copy of the production must be delivered (until December 31, 2019, the deposit is required) to the Spanish Film Library or the film library officially recognized by the respective Autonomous Community.

  • The deduction percentages applicable to the producer of the work are increased as of January 1, 2020:

    • 30 percent of the first million of the deduction base.
    • 25 percent on the excess of said amount.

  • The maximum amount of the deduction is increased from 3 million to 10 million euros.

  • The amount of this deduction, together with the rest of the aid received, may not exceed 50 percent of the cost of production. However, this limit will be raised in certain cases (you can consult them in Chapter 6 of this Practical Manual).

You can consult all the details regarding the application of this deduction in Chapter 6 of this Practical Manual.

2. Foreign film productions (article 36.2 of the LIS)

With effect for tax periods beginning on or after January 1, 2020, the following changes are introduced to the for investments in foreign productions of feature films or audiovisual works regulated in article 36.2 of the LIS, modifying its requirements and increasing the percentages and their maximum limits:

  • Producers registered in the Administrative Registry of Film Companies of Institute of Cinematography and Audiovisual Arts who are in charge of the execution of a foreign production of feature films or audiovisual works that allow the creation of a physical medium prior to their serial industrial production be entitled to this for in Spanish territory.

  • deduction percentages applicable as of January 1, 2020 are increased:

    • 30 percent of the first million of the deduction base.
    • 25 percent on the excess of said amount.

  • The deduction will be applied provided that the expenses incurred in Spanish territory are at least 1 million euros . However, in the case of animation productions such expenses will be at least 200,000 euros.

  • The maximum amount of the deduction is increased from 3 million to 10 million euros.

  • A new percentage of 30 percent is established when the producer is in charge of the execution of visual effects services and the expenses incurred in Spanish territory are less than 1 million euros.

  • The amount of this deduction may not exceed the amount established by Commission Regulation ( EU ) 1407/2013 of December 18, 2013 , relating to the application of articles 107 and 108 of the Treaty on the Functioning of the European Union to minimis aid.

You can consult all the details regarding the application of this deduction in Chapter 6 of this Practical Manual.