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Spanish film productions or co-productions may get up to 50% tax deduction on private investment, channeled through Economic Interest Groupings (AIE)

New Tax Incentives (II). An Invitation to Co-Produce and Invest in Spain

Filming resumption for the second season of the hit series “Hierro,” has marked the return to activity of the Spanish industry after the hiatus caused by the COVID-19 pandemic.

Fully shot in the Canary Island of the same name, this co-production by Movistar Plus and Portocabo with Atlantique Production and Arte Francia, has access to an attractive 50% tax deduction for the first million invested and a 45% thereafter.

The appreciable five-point improvement in tax incentives for the production of films, series, animation or documentaries with Spanish interest, is one of the many measures approved by the Council of Ministers on May 5 to boost co-productions and the reactivation of the audiovisual sector.

Under the common system, Spanish productions or co-productions can be deducted 30% of the first million euro from the deduction base and 25% of the remaining amount, retroactively from January 2020.

The Canary Islands, as an insular and outermost territory, has its own economic and tax system. In this case, the increase is 20 points higher than the rest of Spain, as is the case with tax incentives for international filming.

The ceiling of the deduction base is now EUR 40 million throughout Spain, while the ceiling of the deduction quota is set at EUR 10 million in the Peninsula. On the Canary Islands, this quota will reach EUR 18 million after the approval of a specific standard.

Investment in Spanish productions is channeled through an Economic Interest Grouping (AIE), a vehicle constituted as the producer of the project.

Taxation in Navarre and the Basque Country

The amendments introduced by the Spanish Government on tax incentives for audiovisual productions do not apply in the Basque Country and Navarre, as these regions also have their own taxation system.

In the Basque Country, tax incentives are regulated by corporate tax regulations, whose regulatory jurisdiction lies in the provincial territories of Álava, Vizcaya, and Guipúzcoa. There, the application of the deduction has no quota limit.

"Currently, in the Basque Country, producers can apply a 30% deduction, unlike the State, where the 30% deduction is applied only to the first million of the deduction base. Even in the local territories of Álava and Guipúzcoa, this deduction is 40% for works shot in Basque,” explains Ane Etxenausia, Director of the Tax Administration of the Basque Government.

For its part, Navarre offers a 35% deduction for investments in cinema and audiovisual productions. An accessible incentive for producers or co-producers as well as for companies providing their services to national and international producers, always affecting corporate tax in the form of a tax credit.

The main objective of these tax deductions is to promote the establishment of an industrial fabric linked to the audiovisual sector in the region.

Just before the suspension of filming caused by the pandemic, Navarre hosted the filming of the fiction series “The boarding school. Las Cumbres” produced by Globomedia (The Mediapro Studio), Atresmedia Studios and Amazon Prime Video, and "3Caminos,” a co-production of Ficción Producciones, Beta Film and the Galician Government, to be aired worldwide by Amazon Prime Video.

The film “All the Moons,” a production in Basque by Arcadia Motion Pictures, Kowalski Films, Pris&Batty Films and Ilargia Films in co-production with Noodles Production (France), which Filmax will distribute in Spain and on the international market, was also shot halfway between Navarre and the Basque Country.

After resumption, the three productions have already completed their respective filming.

Other productions in Navarre, at a more incipient stage at the time of the pandemic, the Tornasol Films series "Ana" and the feature films “La Casa 15-16” also by Tornasol, and "Espejo, espejo” by Rodar y Rodar, have delayed their filming until the months of July and August.

“In total, Navarre is planning to host the filming of 13 feature films and two television series this year”, says Sara Sevilla, Coordinator of the Navarra Film Commission.

For the filming of "Hierro,” the production company Portocabo "worked on the development of a strict safety protocol that was finally validated by the Health Department of the Government of the Canary Islands,” assures Natacha Mora, Coordinator of Canary Islands Film.

In the Canary Islands, the tax incentives for international filming and Spanish productions or co-productions are also compatible with the 4% corporate tax that a company can apply if it settles in the Canary Islands, on the so-called Canary Islands Special Zone.

According to Mora, it is “a very attractive incentive where mainly animation and VFX companies that have settled on the islands in recent years are benefiting.”