Question For FilmTVLaw.com:
We have a production company here in the US, but our director is German and we want to shoot some locations in Germany. Can we qualify as a co-production in Germany in order to get grants and tax breaks? Any help would be super.
Answer by Brandon Blake, Entertainment Lawyer:
Foreign film and television financing is more important than ever, so this is a great question. Please also see my Entertainment Lawyer Question and Answer Forum at www.filmtvlaw.com, for more in depth and money saving advice that I publish twice a month.
In order to answer this question we first need to break down the different types of incentives and financing that can be available for a project shot in Europe. In fact, there are two types of financing that can be available in many E.U. countries. The following is a brief analysis. Clients who retain our firm for development and finance services will receive an in-depth analysis of finance opportunities, including available European co-production eligibility.
First, there are the tax incentives of which most knowledgeable producers are already aware. Just as in the United States, where various states will offer tax incentives to shoot or complete post-production in that state, such as New Mexico’s 25% incentive or Georgia’s 30% rebate, most European countries offer tax incentives for shooting in that country. These are not E.U. wide, but must be dealt with country-by-country. Germany offers a 20% federal tax incentive for qualifying co-productions. In addition, most German states also offer tax incentives, which will be in addition to the Federal incentives.
Second, Germany offers a number of other grants, loans and investor tax incentives, which have parallels in other European countries including France and England. These additional incentives can be substantial, and include loans and grants for certain budget level projects. The German investor incentive allows investments in a film or television production to be written off against German taxes. This is not the same as the tax rebates discussed above.
However, all of this requires one key element, a German co-production. Co-production agreements are entered between countries, and provide for arrangements where projects can take advantage of local tax incentives and grants. For Example, Canada has co-production agreements with over 50 nations around the world, including Germany.
But here is the thing, the United States does not have a single co-production agreement with any country in the world, not one. So, to qualify, American film and television producers need to be creative. “The Bourne Supremacy”, “Inglourious Basterds” and “The Grand Budapest Hotel” all received German co-production money, so it is just a matter of dealing with the paperwork and working with the right partners.
What percentage of a film budget can come from State, Federal and European funding? The cap on direct grants and incentives throughout Europe is supposed to be 50%, however, there are exceptions, and this cap does not limit the investor incentives listed above, or third-party companies that can receive various incentives based off being involved in aspects of the production and distribution of the same film.
Here are some case studies, showing how much European money is available:
1) “The Lobster” with Colin Farrell and Rachel Weisz received 56.7% of the budget from tax credits and subsidies, and 43.3% from territorial pre-sales. It should be mentioned that these presales are related to the co-production status as well.
2) “A Royal Affair” with Alicia Vikander and Mads Mikkelsen received 40% tax credits and subsities, 23% private equity (tax advantaged), and 37% from pre-sales.
3) “The Railway Man” with Colin Firth and Nicole Kidman received 50% tax subsidies and 47% presales, with 3% from other sources.
The takeaway from all this is that European co-production money can be very generous, and that the entire European system of finance and distribution revolves around co-productions. For example, nearly all French co-productions end up screening at the prestigious Cannes Film Festival, demonstrating that it is an interdependent system throughout the European distribution market.
With the right project, it is possible to get 100% of the financing through arrangements that in one way or another arise out of European film and television incentives. Unlike in the US, where private loans, private capital or studio financing must always play a part, filmmakers in Europe can cobble together funding entirely based on European government funds. Our firm can help advise as part of our development services for producers.
As with any entertainment matter, please do not make a decision about complex issues without consulting an experienced entertainment lawyer first. Feel free to contact my office at www.filmtvlaw.com about a quote.
- By Brandon Blake, Entertainment Lawyer