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Industry Report: Produce - Co-Produce...

How to coproduce with Spain


- The Spanish film market has shown an intense growth in the last years, due to the current system of national subsidies. Despite the generous grant scheme, the incompatibility between EU and national laws makes it complicated for EU partners to co-produce in Spain. The urgent reformation of EU legislation remains a primary task for cultural integration in Europe.

How to coproduce with Spain

1. Europe’s China

Spain, an ex symbol of bullfights, siesta and sangria, started a wonderful business race, which has been well reflected on the film market. The 300% growth in the number of films produced from 1990 to 2004, the 500% growth in co-produced films, the 250% growth on the average budget, are numbers that need not be commented on. Spain’s market evolution owes a lot to a subsidy system that even if it does not reach high contribution levels on one single film, it gives funding to almost all feature films produced in the country.

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2. The subsidy system

The current subsidy system in Spain for film production is divided into 2 main sections:
1. subsidies for cinematic project production;
2. subsidies for active film producers.

1. The subsidies for cinematic Project production are 3:
- General help with the financing: gives 15% of the gross box-office numbers during the first 12 months, with a limit of € 901,518
- Complementary help to the financing: gives 33% of the producers investment (note!, the investment includes pre-sales and the M.G.), as long as the film has over €330,557 and no more than €600,000 in earnings. Funding can go up to €660,000 if the film earns over €390,000. If the film is made by debutant directors or filmed in one of Spain’s other regional languages (Catalan, Galician or Basque), a smaller amount of earnings is required for receiving this funding.

These two helps are automatic and complementary. If the director decides to apply for them, he must not earn over €900,000, and the funding will not go over 75% of his investment nor 50% of the film’s cost. Nevertheless, Spain’s Ministry of Culture allows production companies to include P&A costs. This shows a great level of knowledge of the film industry by the Spanish burocrats and legislators. This way, producers will be able to finance, even if it’s only partially, the distribution costs that distributors are not willing to cover.

- Funding for a new project: a selective subsidy for low budget, experimental, or films that include new directors. The amount depends on the national budget. (In 2003 the average subsidy was for €150,000, while in has now increased to €300,000)

2. Subsidies for active film producers:
- Subsidy for the preservation of film negatives: economic help for the production companies that keep the film’s original negatives in Spain. (up to 50% of the interpositve or internegative’s cost).
- Subsidy for the participation in festivals and markets (as long as the film is cosen for an international festival).
- Subsidy for financial costs: this is a subsidy given when the film is completed, premiered and audited. This way, the producers that decide to go for this funding through Spain’s Official Credit Institute, complying with the ICO-ICAA convention, he will be able to benefit from a subsidy that reduces the operation’s financial costs.

To this subsidies, we must add a complex and very useful incentive and tax deduction mechanism for film producers (creative and financial).

3. Co-productions with Spain

If it’s Europe’s China because of its amazing growth, it’s also a gate to Latin America because of its geographical position and linguistic affinities. Before adopting the European Co-production Convention in 1997, Spain already had co-production agreements with most Latin American countries. Nowadays, Spain is an attractive country to most of the world’s producers. Unfortunately, the 500% of the increase in the number of co-productions with European countries is not the result of promotion policies. In fact, the European legislation that makes all EU citizens equal in front of the national institutions leaves Spain’s regulations and every producer asking the question: What are co-production conventions for?

To clarify this and other aspects, we must make a distinction between:

1. Co-productions with countries not belonging to the EU, or which do not have a co-production convention with Spain.
These co-productions may obtain Spanish nationality and apply for the above mentioned subsidies if they comply with one of these conditions:
- At least 75% of the team must be Spanish or an EU citizen (is a must for the authors), the film must be filmed in Spain or the EU and in one of Spain’s official languages.
This means that, for instance, the filmed can be shot in Spain and be a co-production with the USA ( up to 30%), without there being any convention or legal regulation.

2. Co-productions with EU countries or other countries that hold a convention with Spain.
These are strictly regulated by the European Convention or bilateral agreements, where conditions normally are:
- For bilateral agreements; the minor producer’s participation cannot account for less than 20%, while the main producer’s cannot account for more than 80%, only allowing co-productions with real creative participation.
- For multilateral agreements, where the European or Ibero American Conventions are applied; the minor producer’s participation cannot account for less than 10%, while the main producers cannot exceed 70%. In this last case, certain financial co-productions are permitted.

4. The other side of the coin

Co-producing in Spain can become an obstacle course. In fact, even in a European co-production, we can find particular situations caused by the incompatibility between European and national laws. In these cases, not even the great contribution of ministry workers can solve the problem. Here are some examples and questions for Spain’s legislators and burocrats.

A: I am a European producer and I want to co-produce with Spain.
Bilateral conventions with EU countries, or those lacking in terms of the European Convention, establish that bilateral co-productions can only be creative and must comply with the 80%-20% participation scheme. Anyhow, according to the current European legislation, EU citizens benefit from a positive discrimination principle.

What’s the purpose of filling in infinite forms, going into legal costs in order to give nationalities for two countries, when on their own these productions would qualify for dual nationality because they are produced and made by a team which is 100% European?

These productions would have to be a partnership between companies in the EU. Nevertheless, the recognition process for achieving Spanish nationality is lengthy and must go through a committee that authorizes co-productions and imposes the conditions. This is the great dilemma of the EU, where all citizens are equal, in theory, but not in practice in front of the institutions.

B. I am an American producer and I want to co-produce with Spain, even though it is really a “service”.
In this case, the Spanish legislation is more flexible than the European legislation. In fact, if the film was shot in Spain with Spanish technicians and the non EU investment is under 30%, the film is automatically considered Spanish, no questions asked.

As a Spanish producer, why can’t I co-produce with a European country which provides 30% of the finances, while I can do so with a non EU country and that’s outside of the European Convention?

The Insider
We find ourselves in a legal gap, caused by several factors:
- The eligibility for Spanish nationality in a European co-production depends in the acceptance by the minor co-producing country.
- The eligibility for US nationality is in no way connected with the Spanish requirements.

5. Tips for co-producing with Spain

- Verify the existence of a co-production agreement (study it carefully)
- Follow what is established in the treaty
- Develop a co-production contract (an original one, not modelled after a previous production) that includes important elements for the Spanish Ministry, such as:
o A place for keeping the negatives
o An exact definition for the nationality of each teams chief
o Participation percentages

Important note: Start preparing the forms requested by the Spanish producer ahead of time. It does not matter if the situation changes, because the Spanish Ministry makes room for changes. The important thing is to be approved as soon as possible, and that way apply for the subsidies.

A bit of advice: do not specify the budget in the contract. Do so in an annex. This way, you can modify the annex as you approach the shooting, without having to change the entire contract.

6. Conclusion

We have been talking for years about promoting European culture, but except great programmes like Eurimages and MEDIA, European producers clash with national legislations that do not help the integration process. The progress made in Brussels has yet to penetrate completely in national legislations. It might be the time to work on the EU harmonisation, instead of stretching it geographically.

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