PRESENTATION OF FRENCH TAX CREDITS FOR FRENCH OR FOREIGN PRODUCTIONS
Media & Entertainment/Tax
France has implemented two types of tax credit systems benefiting French producers either as “producteur délégué” or as “producteur exécutif”:
– A tax credit for French productions, since 2004 (1)
– A tax credit for foreign productions, since 2009 (2).
These two systems are not cumulative but alternative.
A “producteur délégué” is defined under French law as the person or entity that takes the initiative and the financial, technical and artistic responsibility for the making of the audiovisual work, and that guarantees its successful completion.
A “producteur exécutif” (ie. the production services company in France), is defined as the company that is in charge of (i) collecting the technical and artistic means for the purpose of making the work, and (ii) managing the material operations for the making of this work and to ensure they have been properly executed.
Since their creation in 2004 and 2009, the tax credit systems for French and foreign productions have been modified several times in the recent years.
This note presents the conditions to fulfill and the process to follow in order to benefit from one of these two tax credits.
1. THE TAX CREDIT SYSTEM FOR FRENCH PRODUCTIONS (CRÉDIT D’IMPÔT CINÉMA ET AUDIOVISUEL)
A. General presentation
An Act of 2004 introduced into French law the tax credit system benefitting French producers, for their expenses spent in France within the frame of the production of films or audiovisual works which benefit from the financial support offered by the CNC.
This tax credit is applied to corporate taxes paid by such producers and is in the form of (i) a reduction of the amount of taxes due or (ii) a payment by the French tax authorities of the difference between the amount of taxes due and the amount of tax credit granted if the latter is higher.
B. Conditions to fulfill
B.1. which companies can ask for such tax credit?
The companies that can ask to benefit from this tax credit must:
– Be a producteur délégué in France, or its activities must include executive production functions.
– Be subject to the taxes applicable to corporations under French law.
– Comply with all applicable employment and social legislation regulations (for example, pay wages to performers and technical operators in accordance with applicable collective bargaining agreements). This includes, especially, the fact that the company must not use temporary employment agreements in order to fill permanent positions (ie. jobs not directly linked to the production of a specific work).
– Produce works that already benefit from the subsidies offered by the CNC as part of the financial support system.
B.2. which productions are eligible?
The work being produced must:
– Be of a particular genre, including but not limited to: fiction, animation, documentary. (Note: if the work is an audiovisual documentary, the amount of eligible expenses must be equal to or higher than €2,000 per minute produced).
– Be made entirely or mainly in the French language or in a regional language in use in France, except for animation films, fiction films assimilated to animation films and films for which the use of a foreign language is justified by artistic reasons related to the script.
– Be mainly made on French territory.
– Be of a minimum length and cost a minimum price per minute.
– Be eligible to benefit from the financial support offered by the CNC to films or audiovisual productions.
– Contribute to the development of film and audiovisual creation in France and in the European Union as well as to its diversity.
– Authors, performing artists and production staff have to be French or from a member state of the European Union. Also, the work must be made mainly with the contribution of creative technicians and technical industries that are French or come from a European Union member state, and of animation preparation and production service providers that are established in France.
This tax credit is not applicable to certain categories of works: works of pornographic nature; works inciting violence; advertising; or news program, sports program, TV talk shows/game shows, etc.
C. Calculation of the credit and applicable caps.
Calculation of the tax credit: it is equal to 20% of eligible expenses. It works on a per fiscal year basis.
It is increased to 25% for fiction and animation audiovisual works.
It is increased to 30% for:
– animation films (or assimilated; ie : fiction films in which at least 15% of the footage are digitally processed in order to add characters, set elements or objects participating to the action, or in order to modify the scene aspect or the camera’s point of view);
– films other than animated films made wholly or mainly in French or in a regional language commonly used in France;
Eligible expenses are the following:
– Remunerations paid to authors, as well as applicable social contributions for such remunerations ;
– Remunerations paid to performers, as well as applicable social contributions for such remunerations ; (note : this is restricted to the minimum amounts specified in bargaining agreements)
– Wages paid to the personnel working on the making and the production of the film, as well as applicable social contributions for such wages ;
– Expenses incurred in France in connection with services of technical industries and of other service providers within the cinematographic or audiovisual creation (for example filming equipment rental companies) ;
– Expenses for transport, catering and accommodation on the French territory necessary for the production (some of them being capped) ;
For documentaries only: expenses incurred in relation with the acquisition of rights in and to archive images for at least 4 years from an entity established in France.
The tax credit for French productions is subject to three different caps.
– The amount of eligible expenses on the basis of which the credit is calculated cannot be higher than 80% of the overall final budget of the production (or, in case of an international coproduction, 80% of the part managed by the French co-producer);
– The total amount of tax credit granted for films (ie. works that are initially released theatrically) is capped at €30,000,000 (thirty million euros).
For audiovisual productions (ie. audiovisual content such as TV films and series, that are intended for a first exploitation by means of TV, VOD, SVOD etc.), it is capped per minute.
– The total amount of tax credit granted cannot raise the total amount of public subsidies to more than 50% of the production budget.
D. Process to follow
The producteur délégué needs to file an application in order to request to benefit from the tax credit.
After examination of the eligibility:
– The CNC will grant a temporary approval (agrément provisoire) for the tax credit and the amount to be received ;
– When the film or audiovisual work is completed and all conditions are fulfilled, the CNC finally grants a final approval (agrément définitif).
2. THE TAX CREDIT SYSTEM FOR FOREIGN PRODUCTIONS (CRÉDIT D’IMPÔT INTERNATIONAL)
A. General presentation
The French Government implemented in 2009 a tax credit system for production costs incurred in France for international cinematographic and audiovisual productions. This tax credit system is commonly known as the “TRIP” (Tax Rebate for International Productions).
It is open for works which production is initiated by a foreign company (the producteur délégué) and for which all or part of the making is taking place in France.
This tax credit is applied in the form of (i) a reduction of the amount of taxes due by the producteur exécutif, or (ii) a payment by the French tax authorities to the producteur exécutif of the difference between the amount of taxes due and the amount of tax credit granted if the latter is higher; the producteur exécutif can be a subsidiary of the foreign producteur délégué or an SPV created for the production
B. Conditions to fulfill
B.1. which companies can ask for such tax credit?
The companies that can ask to benefit from this tax credit must:
– Qualify as “producteur exécutif” of the work (ie. be the production services company in France)
The producteur délégué (who must be established outside of France) orders from the producteur exécutif to be in charge of the part of the making of the production that is to take place on the French territory.
– Be submitted to French corporate income tax.
– Comply with all applicable employment and social legislation and regulations (for example, pay wages to performers and technical operators in accordance with applicable collective bargaining agreements). This includes, especially, the fact that the company must not use temporary employment agreements in order to fill permanent positions (ie. jobs not directly linked to the production of a specific work).
B.2. which productions are eligible?
This tax credit system is only applicable to:
– Fictions and animations, cinematographic and audiovisual productions ;
– Which content includes elements connected to French culture, heritage or territory (note: a grading scale has been implemented to determine whether this condition is fulfilled or not) ;
– Which do not benefit from any of the CNC subsidies ;
– For which eligible expenses are superior or equal to €250,000 or, when the production budget of the work is below €500,000 (of an amount equivalent to at least 50% of this budget ; and
– For which shooting in France lasts for a minimum of five days (for fictional works only).
This tax credit is not applicable to certain categories of works: documentaries; works of pornographic nature; works inciting violence; or advertising.
C. Calculation of the credit and applicable caps.
Calculation of the tax credit: it is equal to 30% of the eligible expenses. It works on a per fiscal year basis.
Eligible expenses are the following:
– Remunerations paid to authors, as well as applicable social contributions for such remunerations ;
– Remunerations paid to performers, as well as applicable social contributions for such remunerations ; (note : this is restricted to the minimum amounts specified in bargaining agreements)
– Wages paid to the personnel working on the making and the production of the film, as well as applicable social contributions for such wages ;
– Expenses in connection with services of technical industries and of other service providers within the cinematographic or audiovisual creation (for example filming equipment rental companies). Such expenses must be incurred with providers or operators established in France;
– Expenses for transport, catering and accommodation on the French territory necessary for the production (note: accommodation expenses are capped).
Note: the remunerations paid to authors, performers and the personnel working on the making and the production of the film only qualify insofar as they are paid to French citizens, French residents, or nationals of European countries or countries party to an international co-production treaty with the European Union.
The tax credit for foreign productions is subject to three different caps.
– The amount of eligible expenses on the basis of which the credit is calculated cannot be higher than 80% of the overall final budget of the production ;
– The total amount of tax credits granted for one production is capped at €30,000,000 (thirty million euros) ;
– The total amount of tax credit granted cannot raise the total amount of public subsidies to more than 50% of the production budget.
D. Process to follow
The producteur exécutif needs to file an application in order to request to benefit from the tax credit.
After examination of the eligibility the CNC will grant a temporary approval (agrément provisoire) for the tax credit and the amount to be received;
When the film or audiovisual work is completed and all conditions are fulfilled, the CNC finally grants a final approval (agrément définitif).
***
The application of these two tax credit systems is alternative and not cumulative. For one film or TV series, the producer can only request the application of either the tax credit for French productions or the TRIP.
If the film or the series is produced by a French producer he may apply for the tax credit for French productions.
On the contrary, if the film or the series to be produced is/are produced by a foreign production company, but who incurs costs in France; the French production services company in charge of the part of the making of the work in France may apply for the TRIP.
In case of international co-production, the French producer may have the choice to apply for either.