07/05/2012 - Unlike other European countries, France has two different producer’s tax relief schemes (Credit d’Impôt and Credit d’Impôt International), which means that the money for national and foreign productions comes from different pots, securing a constant financing source for the domestic cinema production

The French Credit d’Impôt and the Soficas

Unlike other European countries, France has two different producer’s tax relief schemes for national and international productions (Credit d’Impôt and Credit d’Impôt International), which means that the money for national and foreign productions comes from different pots, securing a constant financing source for the domestic cinema production.

The Credit d’Impôt is a tax relief for French production companies of up to 20% of the eligible production costs, which can not be over 80% of the production’s budget for a national production or over 80% of the French share in an international coproduction. The eligible costs include authors’ rights, crew salaries, actors’ fees (up to the minimum established by their bargain agreement), rental and purchase of technical equipment, location fees, transport, post-production, special effects, catering and social charges. There is a ceiling of 1 million euros for each single project. The applicant must be a French production company with a project eligible for the CNC’s automatic support scheme to be mainly produced in France and in French or any of the regional languages of the country.

Any form of non-refundable public funds brought to the film by the producer will be proportionally deducted from the eligible costs prior to calculating the tax relief as follows:

Deduction of the eligible costs = (Eligible costs/Budget of the film) x Non-refundable public funds

Example:
Budget of the film: 4 million euros
Eligible costs: 2.7 million euros
National support: 250k euros
Local support: 50k euros

Therefore:
Deduction = (2,7/4) x (250,000 + 50,000) = 202,500 euros
Tax relief = 0,2 x (2,700,000 – 202,500) = 499,500 euros

The Credit d’Impôt International (C2I) can represent up to 4 million euro tax reduction to foreign production companies investing at least 1 million euro in the country. The granted amount will be 20% of the eligible costs spent in the country. A minimum of 5 shooting days in France applies. Since its launch in 2009, 42 productions from ten different countries have benefited from C2I with 170 million euros.

Neither scheme is automatic, which means that before incurring any expense, the producer has to apply for approval of the tax discount to the CNC, which will issue a certificate for the French Treasury. The write-off of taxes will happen at the end of the fiscal year; should the tax liability of the production company be less than the approved credit d’impôt, the Treasury will refund the producers the difference.

In addition to these two measures, a tax shelter for investors in film and television projects is also available. In this case the money is managed by the so called Soficas (Société pour le financement de l'industrie cinématographique et audiovisuelle), societies for the financing of the cinema and audiovisual industries, created in 1985. These entities are private equity funds financed with tax-related monies to support the audiovisual and cinema industry into which companies and individuals seeking to reduce their tax liabilities can put their money.

Under the condition of keeping their money in the fund for at least five years, investors are entitled to an income tax deduction equal to 36% of their investment (43% if the Sofica invests at least 10% of the money raised over the year in independent production companies). In either case, the taxable income can be reduced by no more than 25% or 18k euros, whichever is lower, which makes possible a tax deduction of up to 6,480 euros and 7,740 euros a year respectively.

As Soficas are market-oriented companies seeking profit, they usually provide expensive money in the form of gap financing (usually below 10% of the total budget), standing only behind the distributor within the recoupment schedule in most of the cases. Even if they are allowed to invest in both movie and TV productions, most of them are only devoted to feature films. Each of them can invest 20% of its money in foreign-speaking co-productions, as long as the language of the film matches the foreign co-producer’s country language. Only a small part of the Soficas’ money is invested in independent productions.

Every year CNC gives approval to several of these societies to operate under the conditions explained above. Click here to check the list for 2012.

Read also: the Belgian tax shelter.