Industry Report: Financing
The Belgian tax shelter
by Cartoon, the European Association of Animation Film
05/03/2009 - Serge De Poucques co-founded Nexus Factory production &
He is the Belgian executive producer of Max & Co, the animated feature film in volume, and the 3D feature film La véritable histoire du Chat Botté (The true story of Puss ‘n Boots) for post-production images, 2D, 3D, aftereffects, etc. He is also President and founder of «anim.be», the professional association of Belgian producers and animation studios.
What are the main features
of the Belgian tax shelter?
This is a system in operation since 2005. The Belgian system differs from the classic structure of a tax shelter, where a producer can obtain government support if works are undertaken within the territory. Here, the system is designed to encourage investors who are not traditional investors in the audiovisual, to bring money into audiovisual production. The aim is to encourage companies that make profits in Belgium, but are not audiovisual investors, to invest in this sector. The principle is the following:
The company investing in the project can deduct
150% of the investment from its taxable base. The
primary condition is, of course, that the investor
pays tax. If the investor, for instance, invests
100.000 euros he can deduce 51.000 euros from
his taxation base.
The calculation is as follows: 150.000 euros (corresponding to 150% of the investment of 100.000 euros) x 34% (the tax on companies) = 51.000 euros.
Obviously, there are constraints:
1) the 150% cannot exceed 50% of the taxable benefits;
2) the 150% cannot rise beyond an absolute value of 750.000 euros; to maximise this system, the taxable base must be 1.500.000 euros. The investor can deduct 750.000 euros from his taxation base and pay tax only on the remaining 750.000 euros;
3) the investment cannot represent more than 50% of the budget for the project;
4) the investment can be in the form of a loan to a maximum of 40% of the total, and 60% as a share in the coproduction, which represents the true risk investment. Given that the producer is financially sound, the investor will be able to recover 40% of his investment;
5) the Belgian producer who is recipient of this investment is obliged to spend 150% of the share of coproduction in Belgium (corresponding to 90% of the total sum brought to the project by the investor);
6) the investing society must be a Belgian investment company, or an investment company taxed in Belgium. The company cannot be the producer, nor a TV channel. The producer must be a Belgian entity. All works for cinema are eligible. In the case of television, only animation series, documentaries, and films for TV are eligible;
7) it is possible to seek out several investors in Belgium, to reach the 50% limit of the project budget. The investment can also be arranged to cover several works;
8) the system is cumulative with all other national or E uropean aids.
The «investment risk» is as follows:
* against share of receipts generated by the work.
For a project costing 200, the investor’s input represents 100, of which 60% is in the form of coproduction and 40% is loan. The Belgian expenditure must attain a minimum of 90%.The investing company saves 51 in taxes, is reimbursed 42, and the portion of risk investment is 12. Moreover, the investor has his share of 60% in the returns for the coproduction. There were many intermediaries, in recent years, who positioned themselves between the producer and the investor.
What is the producer’s position?
The producer has received 100, and must repay 43. Some producers buy back the revenue share, which is 60, from the investor.
What example of coproduction has
benefited from the Belgian tax shelter?
We recently coproduced the film La véritable histoire du Chat Botté (The real story of Puss ‘n Boots) between France (Herold & Family, who provided 70% of the budget), Belgium (Nexus Factory, with 20%) and Switzerland (Saga Production, with 10%).The total budget for the film was € 11M.The Belgian contribution to the budget is broken down as shown:
Belgium Financing Plan
Notice that the tax shelter represents 50% of the Belgian share of the overall budget.
How may the Belgian tax shelter evolve?
We intend to ask the Government to raise the ceiling to €1.5M. Additionally, in the case of animation, we are asking for an increase in the time limit set for the producer’s expenditure of the budget. At present, the producer must make use of the invested sum within 18 months following the date of signature of the agreement, which is hardly realistic in the animation sector.
Cartoon Master Donostia – San Sebastian, Spain, November 2008