Deductions for foreign film productions (art. 36.2 LIS)

a. Scope

Those producers in the Administrative Registry of Companies of the Institute of Cinematography and Audiovisual Arts who are in charge of the of a foreign production of feature films or audiovisual works that allow the creation of a physical support prior to their serial industrial production are entitled to apply this deduction for the ##1## expenses ##1## incurred in ##2## Spanish territory.

b. Requirements

With effect for tax periods beginning on or after January 1, 2021, in order to apply this deduction, the following requirements must be met:

1. That the production obtains the corresponding certificate that accredits the cultural character in relation to its content or its connection with the Spanish or European cultural reality, issued by the Institute of Cinematography and Audiovisual Arts , or by the corresponding body of the Autonomous Community with competence in the matter. This requirement will not be applicable to apply the deduction to the producer who is in charge of the execution of visual effects services.

2. That a specific reference to having benefited from the tax incentive be incorporated into the end credits of the production; the collaboration, where appropriate, of the Government of Spain, the Autonomous Communities, the Film Commissions or the Film Offices that have been directly involved in the filming or other production processes carried out in Spain, as well as, where appropriate, the specific filming locations in Spain and, in the case of animated audiovisual works, the location of the studio that has been commissioned to provide the production service.

3. That the rights holders authorize the use of the title of the work and of graphic and audiovisual press material that expressly includes the specific locations of the filming or any other production process carried out in Spain, for the realization of activities and the preparation of promotional materials in Spain and abroad for cultural or tourist purposes, which may be carried out by state, autonomous or local entities with powers in matters of culture, tourism and economy, as well as by the Film Commissions or Film Offices that have intervened in the realization of the filming or production.

c. Deduction base

The basis for the deduction is the following expenses incurred in Spanish territory directly related to production:

1. The creative staff expenses , provided that they have tax residence in Spain or in a member state of the European Economic Area.

2. The expenses arising from the use of technical industries and other suppliers .

d. Amount of deduction

The amount of the deduction will be the result of applying the following percentages to the deduction base:

1. As a general rule, percent of the first million of the deduction base and 25 percent of the excess of said amount.

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

   For tax periods beginning on after 1 January 2023, the maximum amount of this deduction is € million for each production carried out (previously, the maximum amount was €10 million).

   In the case of audiovisual series , the maximum deduction amount will be 10 million for each episode produced.

   The amount of this deduction, together with the rest of the aid received by the contributing company, may not exceed 50 percent of the cost of production.

2. In cases where the producer is responsible for the execution of visual effects services and the expenses incurred in Spanish territory are less than 1 million euros, the 30 percent of the deduction base will be applied.

   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.

This deduction is excluded from the joint limits of 25 and 50 percent referred to in the last paragraph of article 39.1 of the LIS , so said deduction will not be computed for the purposes of calculating said limit.

e. Filling in form 200

In application of the provisions of article 36.2 of the LIS , taxpayers must enter in box [01039] "Deductions for foreign cinematographic productions (art. 36.2 LIS)" on page 14 bis of form 200, the amount of the deduction for foreign cinematographic productions that they apply in the tax period subject to declaration. The amount entered in this box will be the result of completing the breakdown table on page 18 bis of form 200 explained below.

Completing the table “Deductions for foreign film productions (art. 36.2 LIS)” (page 18 bis of form 200)

Taxpayers who apply the deduction for foreign film productions regulated in article 36.2 of the LIS must complete this breakdown table as detailed below:

• In column "Pending/generated deduction" the amounts of the deduction generated both in the current tax period (2023) and in a period prior to the current one (2015 to 2023) will be entered in the corresponding boxes, and which are pending application at the beginning of the tax period that is the subject of the declaration.

• In column "Applied in this settlement" the part (or the totality, if applicable) of the amounts recorded in the previous column "Deduction generated" relating to the deduction for foreign film productions, which are applied in the settlement corresponding to the period subject to settlement, will be recorded.

  Keep in mind:

  In box [01039] the total amounts entered in the column "Applied in this settlement" will be recorded, which must be transferred to box [01039] on page 14 bis of form 200 regarding the settlement of the Tax.

• In column "Amount paid due to insufficient quota" the part of the amounts recorded in the previous column "Applied in this settlement" will be recorded for which, due to insufficient quota, the taxpayer requests payment from the Tax Administration in the terms established in article 39.3 of the LIS.

  In the event that due to insufficient quota in the application of this deduction its payment is requested from the Tax Administration in the terms provided for in article 39.3 of the LIS, said request must be made following the procedure detailed in the section "Payment of deductions for foreign film productions (art. 39.3 LIS)" of this Chapter 6 .

  Keep in mind:

  In box [01892] the total amounts entered in the column "Amount paid due to insufficient quota" will be recorded, which must be transferred to box [01892] on page 14 bis of form 200.

• In column "Pending application in future periods" the positive difference between the amount of deductions pending at the beginning of the tax period or generated in said period in the column "Pending/generated deduction" and the amounts recorded in the columns "Applied in this settlement" and "Amount paid due to insufficient quota" will be recorded. This amount will remain pending application in future tax periods, unless the tax period being declared is the last one in which the corresponding deduction can be applied, in which case the outstanding deduction balance would be lost.

Completing the “Investments in film productions or audiovisual series” table (page 21 of form 200)

In addition to the breakdown table on page 18 bis of Form 200, producers who are entitled to apply the deduction for foreign film productions regulated in Article 36.2 of the LIS must complete the "General regime" section of this table in the manner detailed below:

• Film productions (except audiovisual series)

  Producers must enter in this box the number of productions that have generated the right to practice the deduction for foreign film productions in the tax period subject to the declaration.

• Audiovisual series

  In the case of audiovisual series, the deduction is determined per episode, so producers must enter in the boxes created for this purpose the number of series and episodes that generate the right to apply this deduction in the tax period covered by the declaration.

  When completing box "number of episodes" it must be taken into account that the maximum deduction limit per episode provided for in article 36.2 of the LIS must be examined and complied with in each episode, to the extent that the deduction limit must be determined by episode, without the aforementioned limit being able to be offset between episodes.