A. Deduction for investments in Spanish film productions and audiovisual series (art. 36.1 LIS)

Beneficiaries of the deduction

Regulations: see also art. 39.7 LIS

Producers: taxpayers who produce Spanish feature films, short films, and audiovisual fiction, animation, or documentary series.
Funders: Since January 1, 2021, entrepreneurs or professionals who participate in the financing of Spanish productions of feature films, short films, audiovisual fiction series, animation or documentaries are allowed to apply this deduction, under the same conditions as the producers who generate the right to it, when the following circumstances occur:
- That they provide amounts in the form of financing, to cover all or part of the production costs as well as the costs of obtaining copies, advertising and promotion at the expense of the producer up to the limit of 30% of the production costs.
  Time when financing must be provided:
  - The amounts intended to finance production costs may be contributed at any stage of production, prior to or after the moment in which the producer incurs the aforementioned production costs until obtaining the certificates referred to in letter a') of section 1 of article 36 of the LIS .
  - The amounts intended to finance expenses for obtaining copies, advertising and promotion by the producer may be contributed before or after the moment in which the producer incurs the aforementioned expenses, but never after the tax period in which the producer incurs them.
- That they do not acquire intellectual property rights or any other rights regarding the results of production , the ownership of which must in all cases belong to the producer.
- That they are not linked , in the sense of article 18 of the LIS , with the taxpayer who generates the right to the deduction (the producer).

Important : the producer and the taxpayers who participate in the financing ( financiers ) of the production must sign one or more financing contracts, which may also be signed at any stage of production being necessary that both communicate to the Tax Authority prior to the end of the tax period in which the latter (producer) has the right to apply the deduction this circumstance, providing both the signed financing contract and the certifications of compliance with the requirements demanded in article 36.1 for the application of the deduction.

To carry out this communication regulated in art. 39.7 LIS the management " Presentation of communication regulated in art. 39.7 LIS ” has been created in the Electronic Headquarters of the State Agency of Tax Administration.

Deduction base

The basis for the deduction will be the total cost of production, as well as the costs of obtaining copies and the costs of advertising and promotion borne by producer up to a limit for both of 40% of the cost of production .

At least 50 percent of the deduction base must correspond to expenses incurred in Spanish territory .

In the case of a co-production, the amounts will be determined, for each co-producer, based on their respective percentage of participation in the production.

The deduction base will be reduced by the amount of the subsidies received to finance the investments that generate the right to deduction.

Deduction percentage and maximum deduction amount

a. Percentage

Investments in Spanish productions of feature films and short films and audiovisual series of fiction, animation or documentary , which allow the creation of a physical support prior to their serial industrial production will entitle the producer or taxpayers who participate in the financing (financier) to a deduction that will be:

From 30 percent with respect to the first million of the deduction base.
From 25 percent on the excess of said amount.

b. Maximum deduction amount

For the producer: The amount of this deduction may not exceed 10 million euros .
For the funder: although the amount of the deduction may be determined under the same conditions as those applied to the producer, provided that they have been generated by the latter, the maximum amount of the same will be the result of multiplying by 1.20 the amount of the sums that has contributed to finance the aforementioned production costs and the expenses for obtaining copies, advertising and promotion at the expense of the product.

The excess deduction may be applied by the producer who has generated the right to it.

Remember: In the case of the financier, he may apply the deduction provided for in section 1 of article 36 of the LIS when he contributes amounts intended to finance all or part of the production costs, as well as the expenses for obtaining copies, advertising and promotion at the producer's expense up to the limit of 30% of the production costs.

Requirements

To apply the deduction established in this section, the following requirements must be met:

That the production obtains the corresponding certificate of nationality and the certificate that accredits the cultural character in relation to its content, its connection with the Spanish cultural reality or its contribution to the enrichment of the cultural diversity of the cinematographic works that are exhibited in Spain, issued by the Institute of Cinematography and Audiovisual Arts, or by the corresponding body of the Autonomous Community with competence in the matter.

Regarding the certificate of nationality, see article 5 of Royal Decree 1084/2015, of December 4, in development of the provisions of article 5 of Law 55/2007, on Cinema.

These certificates will be binding on the competent tax authority in matters of accreditation and application of the above tax incentives and identification of the beneficiary producer, regardless of the time of issue thereof.
That a new and perfect copy of the production be delivered to the Spanish Film Library or the film library officially recognized by the respective Autonomous Community.

In short:

Deduction percentage	Maximum amount	Deduction base
30%	Up to €1 million	€10 million In addition, in the case of the financier, the result of multiplying by 1.20 the amount of the sums that it has contributed to finance the production costs or the expenses for obtaining copies, advertising and promotion at the expense of the product. Without exceeding the limits indicated below	(+) Total cost of production together with costs of obtaining copies, advertising and promotion costs to be borne by the producer up to a limit of 40% of the cost of production. In the case of the financier, production costs and expenses for obtaining copies, advertising and promotion are borne by the producer up to a limit of 30% of production costs. (-) Amount of subsidies received to finance investments that generate the right to deduction.
25%	On the excess of 1 million €

Deduction percentage

Maximum amount

Deduction base

30%

Up to €1 million

€10 million

In addition, in the case of the financier, the result of multiplying by 1.20 the amount of the sums that it has contributed to finance the production costs or the expenses for obtaining copies, advertising and promotion at the expense of the product.

Without exceeding the limits indicated below

(+) Total cost of production together with costs of obtaining copies, advertising and promotion costs to be borne by the producer up to a limit of 40% of the cost of production.

In the case of the financier, production costs and expenses for obtaining copies, advertising and promotion are borne by the producer up to a limit of 30% of production costs.

(-) Amount of subsidies received to finance investments that generate the right to deduction.

25%

On the excess of 1 million €

Limits

The amount of this deduction, together with the rest of the aid received by the taxpayer, may not exceed 50% of the cost of production . However, this limit is raised to:

The 85 percent for short films.
80 percent for productions directed by a person who has not directed or co-directed more than two feature films qualified for commercial exploitation in cinema exhibition halls, whose production budget does not exceed 1,500,000 euros.
80 percent in the case of productions shot entirely in one of the co-official languages other than Spanish that are screened in Spain in said co-official language or with subtitles.
80% in the case of productions directed exclusively by persons with a degree of disability equal to or greater than 33% recognized by the competent body.
75 percent in the case of productions made exclusively by female directors.
75% in the case of productions with special cultural and artistic value that require exceptional financing support according to the criteria established by Ministerial Order or in the corresponding calls for aid.
The 75 percent in the case of documentaries.
75% in the case of animated works with a production budget not exceeding 2,500,000 euros.
60% in the case of cross-border productions financed by more than one Member State of the European Union and involving producers from more than one Member State.
60 percent in the case of international co-productions with Latin American countries.

Tax period in which the deduction is applied

The deduction will be generated in each tax period for the production cost incurred in that period, although it will be applied from the tax period in which the production of the work ends.

However, in the case of animation productions, the deduction will be applied from the tax period in which the nationality certificate indicated in letter a') of article 36.1 of the LIS is obtained.

Note: l the application of the deduction by the taxpayer who participates in the financing will be incompatible , totally or partially, with the deduction to which the producer would be entitled .