Deduction for investments in foreign cinematographic production

Regulation: Article 36.2 LIS and 94 Law 20/1991 and DA 14 Law 19/1994

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 serial industrial production carried out in the Canary Islands, entities must comply with the general requirements established for these deductions in article 36.2 of the LIS .

a. Percentages

The deduction percentages established in article 36.2 of the LIS will be increased according to the provisions of article 94.1 a) of Law 20/1991, so the following percentages will apply:

• 54 percent of the first million of the deduction base (the greater of: 30% x 1.8 = 54% or 30% + 20% = 50%). This 54 per cent may be applied provided that the aid intensity does not exceed 50 per cent of the eligible costs , as laid down in 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.

  45 percent on the excess of said amount (the greater of 25% x 1.8 = 45% or 25% + 20% = 45%).

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

b. Limits

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) percent.

c. Maximum deduction amount

The Fourteenth Additional Provision of Law 19/1994 establishes the following maximum deduction amounts:

• The amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works may not exceed the result of increasing by 80 percent the maximum amount referred to in article 36.2 of the LIS, when it concerns expenses incurred in the Canary Islands. Therefore, with effect for tax periods beginning on or after 1 January 2023, the maximum amount of the deduction will be million (€20 million x 1.8).

  In the case of audiovisual series , the deduction will be determined per episode and the maximum deduction amount will be 18 million euros (10 million x 1.8) for each episode produced.

• In relation to the deduction generated by the execution of visual effects services by producer , the provisions of letter b) of article 36.2 of the LIS will apply, that is, the amount of this deduction may not exceed the amount established by 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 .

  Finally, it is established regarding the minimum expenditure amount set 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 .

d. Filling in form 200

• Completion of the table “Deductions for foreign film productions in the Canary Islands (art. 36.2 LIS and DA 14 Law 19/1994)” (page 18 bis of form 200)

Taxpayers who apply this deduction must enter in box [02314] "Deductions for foreign film productions in the Canary Islands (art. 36.2 LIS and DA 14 Law 19/1994)" on page 14 bis of form 200, the amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works, when the expenses are incurred in the Canary Islands. The amount entered in this box will be the result of completing the breakdown table on page 18 bis of form 200 in the manner 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 2022) 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 made in the Canary Islands, which are applied in the settlement corresponding to the period subject to settlement, will be recorded.

  Keep in mind:

  In box [02314] the total amounts entered in the column "Applied in this settlement" will be recorded, which must be transferred to box [02314] 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 Authority 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 in the Canary Islands (art. 39.3 LIS and DA 14 Law 19/1994)" of this Chapter 6 .

  Keep in mind:

  In box [01319] the total amounts entered in the column "Amount paid due to insufficient quota" will be recorded, which must be transferred to box [01319] 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.

• Completion of 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 made in the Canary Islands must complete the "Canary Islands tax regime" section of this table. as 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.