New rules have been introduced around national and international tax credit in Italy, aimed at greater transparency and enhanced checks
- The Italian Ministry for Culture is introducing more stringent obligations: a copy of their work, a dedicated current account and an expert analysis of their costs
By way of two decrees issued by Italy’s Film and Audiovisual Department, the Italian Ministry for Culture has introduced new provisions regarding tax credit for national and international productions, a tax incentive which allows the film industry to support the production, distribution and promotion of works. The new provisions are aimed at enhancing transparency and scrutiny of tax relief (click here for further details).
The main additions introduced by the decrees are as follows: in order to obtain full approval of tax credit from this point onwards, applicants will need to present a complete copy of their finished work. The beneficiaries of these incentives must hold a current account solely dedicated to managing tax relief cash flows, in order to ensure their full traceability, which will be further enhanced by the provision that all invoices for upwards of 1,000 euros must display the title of the work in question. The Film and Audiovisual Department will be allowed to ask for a report on the appropriateness of the eligible costs declared, which might also be used to assess the transferability of tax credit. Such checks should be carried out by an independent third party who has been approved in advance by the Film and Audiovisual Department. The decrees have also reinforced the rules already in force around staff recruitment and outsourcing services to external parties.
These measures were deemed necessary following the controversy created by the “Francis Kaufmann affair”, revolving around a Californian director accused of a double homicide in Rome, who had obtained tax credit amounting to 863,000 euros for an international production by using a false identity, by way of the Italian firm Coevolutions, for a film which was never going to be made. Last night, Nicola Borrelli announced his resignation as head of the Film and Audiovisual Department, having only been reappointed to that role two weeks previously.
The Italian Minister for Culture Alessandro Giuli broached the subject yesterday during “question time” in the Chamber of Deputies. “The government’s aim is to make tax credit a scam-proof incentive”, Giuli explained, emphasising how the adopted steps are heading “in the direction of greater efficiency of checks. Following constructive dialogue with sector operators, and in light of close monitoring of public spending, the government has deemed it necessary to rationalise the criteria for awarding resources and incentives, with a view to eliminating the obvious distortions which have taken place in the past and which have caused improper use of resources”.
Giuli directly referred to the ban on subcontracting to third parties; the possibility of the Department carrying out assessments on the appropriateness of costs; the tightening up of sanctions suggested by the reviewers carrying out the certification of costs; extending the exclusion period to five years for beneficiaries who make false declarations or who fail to respect reinvestment obligations.
In order to heighten controls, Giuli reminded those present of the introduction of full traceability for cash flows and the need for executive producers of foreign works to produce a complete copy of the finished work. “These regulatory additions will be accompanied by ever more significant checks on each and every applicant, carried out by the competent ministerial Department who will initiate further in-depth analyses on applications demonstrating particular weaknesses”.
(Translated from Italian)
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