A new lease of life for the cinema tax credit
by Fabien Lemercier
- The ceiling has jumped to €30 million, there is a rate of 30% for all French-language films, and it is now open to certain national works in a foreign language
The European film industry exists in an extremely competitive environment, in which every country is trying to highlight how attractive its tax incentives are in order to entice shoots to that territory. In addition, there has been some intense media lobbying carried out by Luc Besson in favour of French foreign-language productions (one such example being his upcoming movie, Valerian), which until now had not been able to benefit either from the national cinema tax credit, or from the one available to international feature films. In light of this, the French government has assessed the situation (the relocation rate for French films with a budget of over €10 million skyrocketed to 57% during the first half of 2015) and has decided to dramatically improve the competitiveness of France’s tax incentives in favour of the seventh art.
The draft finance bill for 2016 presented by the Minister of Culture, Fleur Pellerin, therefore sets out that all cinematic works shot in the French language, in addition to animated films and fiction films judged to use strong visual effects, will be able to benefit from a tax-credit rate of 30% (of qualifying expenditure), as against the current rate of 20% (apart from for works with a budget of less than €4 million, which were already at the 30% rate). Furthermore, the tax credit ceiling for a single cinematic work will undergo a dramatic transformation, as it will jump to €30 million (as against €4 million currently) in 2016. Lastly, a huge novelty in the French system is that the national cinema tax credit "will be open to certain foreign-language works": those films "with a strong cultural dimension involving the use of a foreign language for artistic, screenplay-related reasons" and "ambitious animated film productions or those using strong visual effects, which are orientated towards the international market". Interestingly, the Ministry of Culture’s 2016 budget sets out that this tax credit will have an overall budget of €98 million (or €45 million more than in 2015), a very big step forward that certainly has some rational economic causes behind it, as locating shoots in France allows the film sector to become more structured, enables it to shine culturally speaking and facilitates the creation of a high number of jobs. Indeed, it is estimated that for every euro of tax credit allocated, €11.16 of investment is made in the sector and €3.10 of tax and social-security revenues are collected by the state.
Also of note in the draft finance bill for 2016 is that the CNC’s budget will be set at €672 million (a rise of 1.38%) and will not be taxed in order to top up the overall budget of the state, as had previously been the case over the last few years, to the great displeasure of industry professionals. The French system, based on a process of pooling together film and audiovisual distributors, thus encouraging reinvestment and promoting creation, sees the CNC directly receive three taxes (on the price of cinema tickets, standing at 10.72% of the cost of the ticket, on television services, and from the physical video and VoD sector), the income from which is then redistributed across the whole sector through the support fund.
(Translated from French)