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Practical Handbook for Companies 2021

Deduction for investments in foreign cinematographic production

Regulation: Article 36.2 LIS

  • In order to apply the deduction for investments in foreign productions of feature films or audiovisual works that allow the creation of a physical support prior to their serialised industrial production in the Canary Islands, entities must comply with the general requirements established for these deductions in article 36.2 of the LIS.

  • The deduction percentages established in Article 36.2 of the LIS will be increased in accordance with the provisions of Article 94.1 a) of Law 20/1991, whereby the following percentages will be applied:

    • The 54 per cent in respect of the first million of the deduction base (the higher of:30% x 1.8 = 54% or 30% + 20% = 50%).This percentage of 54 per cent may be applied provided that the aid intensity does not exceed 50 per cent of the eligible costs, under the terms laid down by Article 54 of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty.

      The 45 per cent on the excess of this amount (the greater of 25% x 1.8 = 45% or 25% + 20% = 45%).

    • The 54 percent of the deduction base (the greater of:30% x 1.8 = 54% or 30% + 20% = 50%), when the producer is in charge of the execution of visual effects services and the expenses incurred on Spanish territory are less than 1 million euros.

      The amount of this deduction may not exceed the amount laid down in Commission Regulation (EU) 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid .

  • In accordance with the provisions of Article 36.2 of the LIS, which establishes that the deduction for investments in foreign film productions is excluded from the limit referred to in the last paragraph of Article 39.1 of the LIS, the limits applicable to this deduction will not be increased in accordance with the provisions of Article 94.1.b) of Law 20/1991, so this deduction will not be subject to the joint limit of 60/90 or 70/100 (La Palma, La Gomera and El Hierro) per cent.

  • The fourteenth additional provision of Law 19/1994 establishes, with effect for tax periods beginning on or after 1 January 2021, a specific limit for this deduction, indicating that its amount may not exceed the result of increasing by 80 per cent the maximum amount set out in Article 36.2 of the LIS, in the case of expenses incurred in the Canary Islands.Therefore, the maximum amount of this deduction will be 18 million euros (10 million euros x 1.8).

    Likewise, this provision establishes with regard to the minimum amount of expenditure established by letter a) of article 36.2 of the LIS, that the expenses incurred in the Canary Islands for the animation of a foreign production must be greater than 200,000 euros.In relation to the execution of visual effects services, the provisions of letra b) of Article 36.2 of the LIS shall apply.