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Practical Handbook for Companies 2021

Deduction for investment in cinematographic production

In relation to the deduction for investments in Spanish film productions of feature and short films and fiction, animation or documentary audiovisual series, Law 11/2020, of 30 December, on the General State Budget for 2021, with effect for tax periods beginning on or after 1 January 2021, amends letter a') of article 36.1 of the LIS, adding that the certificates required in said letter will be binding for the Tax Administration, regardless of the date on which they were issued.

On the other hand, the last paragraph of article 39.1 of the LIS is amended, adding that the increased limit of the 50 per cent deduction will be applied to the deduction for investments in film productions, audiovisual series and live performances of performing arts and music regulated in article 36 of the LIS, when the amount of these deductions exceeds 10 per cent of the reduced gross tax bill in the deductions to avoid international double taxation and allowances.

Paragraph 5 of Article 39 of the LIS is also amended to establish, in relation to the requirement of permanence of the assets subject to the deductions to encourage certain activities regulated in Articles 35 to 38 of the LIS, that in the case of the deduction for investments in film productions, audiovisual series and live shows of performing arts and music regulated in Article 36 of the LIS, this requirement will be understood to be met to the extent that the production company maintains the same percentage of ownership of the work for a period of 3 years, without prejudice to its right to market all or part of the exploitation rights derived from the work to one or more third parties.

Finally, section 7 is added to article 39 of the LIS, extending the application of the deductions regulated in sections 1 and 3 of article 36 of the LIS to taxpayer who participates in the financing of Spanish productions of feature films and short films and audiovisual series of fiction, animation, documentaries or production and exhibition of live shows of performing arts and music made by another taxpayer.A taxpayer who participates in the financing of such productions shall contribute amounts by way of financing to cover all or part of the costs of the production without acquiring any intellectual property or other rights in respect of the results thereof, which shall in any event remain the property of the production company.Such contributions may be made at any stage of production until the certificate of nationality is obtained.

In relation to the deduction for investments in foreign productions of feature films or audiovisual works, Law 11/2021, of 9 July, on measures to prevent and combat tax fraud, with effect for tax periods beginning on or after 1 January 2021, incorporates in Article 36.2 of the LIS, some of the requirements to be met by producers who are responsible for the execution of foreign productions of feature films, in order to be able to apply this deduction.

To this end, requires the certificate issued by the Instituto de la Cinematografía y de las Artes Audiovisuales, or by the corresponding body of the Autonomous Community, accrediting the cultural nature of the production in order to comply with the provisions of the Commission Communication on State aid to cinematographic works and other audiovisual productions of 15 November 2013.In addition, requests the inclusion in the credits of the work of the specific filming locations in Spain and authorisation to use the title of the work and graphic and audiovisual press material that expressly includes the specific filming locations or any other production process carried out in Spain, for activities and promotional materials in Spain and abroad for cultural or tourism purposes, which may be carried out by state, autonomous or local entities with powers in the areas of culture, tourism and economy.

Finally, the forty-second transitory provision of the LIS establishes that the requirements regulated in letters b') and c') of article 36.2 of the LIS referred to in the previous paragraph shall not be applicable in the case of foreign productions of feature films and audiovisual works for which the contract for the execution of the production has been signed prior to the date of entry into force (11-07-2021) of the Law on measures to prevent and combat tax fraud.