A variety of film tax incentives has developed around the world to encourage the production of films and the expression of local stories. Although the film industry has been long established in places like Hollywood or Bollywood, global destinations provide the potential for new and interesting locations in movie production.
Film tax incentives can be seen in a variety of formats and benefits for qualifying productions. The Aspen Trust Group examines the various advantages of film tax incentives and the value of choosing to film in Cyprus.
The Development of Movie Production Incentives
The United States has dominated the movie production industry with its unprecedented historical expansion of Hollywood. By the 1990s, movies weren’t the only beloved film products. Television culture had captured the attention of a global audience.
As the entertainment industry continued to experience rapid growth, the American film industry wondered about the impacts of “runaway productions” – film productions for cinema and television that were intended for the American audience yet were filmed in cheaper global destinations.
Seeing the opportunities to capitalize on the expanding industry, Canada introduced the world’s first film tax incentives in 1995 and 1997, leading to a surge of productions crossing the border to film. Studies indicated that Canada had the vast majority (81%) of film productions outside the United States. 232 productions went to Canada just one year after the introduction of Canadian film tax incentives.
Following the example of Canada, various U.S. states took the opportunity to establish their own incentives for film and television production. The first American state to introduce legislation for film tax incentives was Louisiana in 2001 and 2002, and by 2009, 44 other states had implemented film production incentives.
Yet, North America is not the only destination to find production incentives. A report by the consultants at Olsberg SPI highlighted the vast number of countries in 2020 offering production incentives globally, with approximately 100 incentives to consider.
Beyond Tax Incentives
Production advantages go beyond film tax incentives for production. Proponents of the measure lead to job creation, infrastructure and small business development, as well as increased revenue and tourism. Jurisdictions that offer production incentives gain positive byproducts and attract films that would have most likely gone elsewhere.
During the filming processes, the production cast and crew spend locally on hotel rooms, equipment rentals, and other basic necessities during their stay. They contribute to the overall local economy with large amounts of direct spending.
Moreover, as the filming process takes place, infrastructure and small businesses are further developed or new ones emerge to support the production. Training and experience lead to on-the-job training on the nuances of filmmaking and aids the foundation for the area’s experience for future productions.
Beyond the basic revenue that comes with any large-scale production for its filming location, film tourism amplifies the regional investment by providing tourism marketing opportunities with fewer expenditures on the initial media marketing. Iconic locations become prime tourist destinations by movie fans and lead to greater filming interest in the future.
The Cyprus Filming Scheme
Aiming to attract international producers and filmmakers and unlock the unrealized potentials of Cyprus as a production hub, the Cypriot Government introduced a package of financial incentives in its 2018 Cyprus Filming Scheme.
Cyprus as a filming location has the potential to become a state-of-the-art production hub with its diversity in cultural and natural filming locations, from stunning cities to scenic mountains and top-rated beaches.
Production categories qualifying for these incentives include:
- Feature Films, long films with a minimum duration of 1 hour or 45 minutes for IMAX
- Television Films, Series, or Mini-Series
- Creative Documentaries
- Animated Films
- Reality Programs that promote Cyprus
The Cyprus Investment Promotion Agency allows production companies to choose between cash rebates and tax credits, tax allowances for equipment and infrastructure investments, and VAT refunds on qualified income.
The Aspen Trust Group breaks down the myriad of film tax incentives in Cyprus for filmmakers scanning the world for the perfect shooting locations.
Film Tax Incentives in Cyprus
There are four ways international film productions can score big with the Cyprus Filming Scheme – cash rebates, tax credit, tax allowance, and VAT refunds.
Cash Rebates
Up to 35% rebate on eligible expenditures occurring in-country is granted. The minimum expenditure (insofar that it does not exceed 50% of the total production budget) needs to be at least:
- 200,000 Euros in the case of feature films
- 100,000 Euros for TV drama series or self-contained drama films
- 50,000 Euros for documentaries for TV or cinema broadcast
- 30,000 Euros for other TV programs
Further, the production must promote Cypriot, European, or world culture through cultural test criteria. The maximum amount of aid for each production is 650,000 Euros after an audited report is produced and submitted.
Tax Credit
Under the same guidelines of cash rebates, production companies can receive a reduced corporate tax rate. The maximum aid shall represent 35% of eligible expenditures made in Cyprus. (minimum expenditure is the same as that under Cash Rebates).
The sum of the tax credit cannot be greater than 50% of the total taxable yearly income in which the production is made. The tax credit can be carried forward within the next five years as long as it does not exceed the 50% restriction.
VAT Refund
VAT refunds are granted for qualifying expenditures incurring in Cyprus and related to the implementation of the production.
Tax Allowance by Investment
Investment in filmmaking infrastructure and equipment by small and medium-sized enterprises can be eligible to deduct the investment from the taxable income. This includes premises, studies, and film equipment.
The tax allowance aid cannot be greater than 20% of eligible expenditures for small enterprises and 10% for medium ones. The equipment must stay in Cyprus for at least 5 years to be eligible for the tax allowance.
How Does Cyprus Compare?
Cyprus is an ideal location for a production besides just the film tax incentives. Already, demand has been high for the jurisdiction and the government is already considering lifting the annual cap to attract huge productions from the United States.
In comparison, Malta offers a 25 to 40% rebate but many rebates are awarded based on the percentage of Malta features within the film. The program also requires a screen credit.
In Ireland, there is a 32% tax credit on local expenditures but the production company must reside within Ireland or trade through an agency or branch.
Germany has significantly reduced its film funding over the years but they offer a grant that covers 20% of production costs in-country with limitations. However, the film must have an office in Germany, spend 25% of the production costs within the country, and have 75% of its financing in place, among other requirements.
New Zealand is known for its many filming locations, but the country only grants a 20% cash rebate on qualified expenditures and has several requirements, such as the 11 million USD minimum expenditure on a feature film.
Although the local film industry is still growing, Cyprus has a strong pool of talent and multilingual professionals with international experience. Further, English is universally spoken and helps limit barriers between international and local production crews that might present a challenge in other jurisdictions.
The island of Cyprus also has a rich range of historical and cultural landscape for films exploring various historical periods. Its harmonious blend of tradition and modernity makes it a unique shooting location. Its famously distinctive natural beauty, with pristine sandy beaches, picturesque mountains, valleys, and waterfalls, has already caught the attention of international film producers.
The weather is another key selling point for Cyprus. With over 300 days of sunshine per year, production can rely on the abundance of natural lighting and predictable climate to film year-round.
Internal short distances and well-built infrastructure on the island allow for quick and easy movement of crew and equipment while safety is guaranteed as the country is one of the safest destinations in the world. Being at the crossroads of three continents, Europe, Africa, and Asia, its close proximity to diverse cultures and scenery is unparalleled.
Several films filmed in Cyprus have won awards at major film festivals. Cyprus has also attracted a major league movie with an estimated 25 million Euros of production costs starring Nicolas Cage. Finally, the Cyprus Film Commission has pre-approved two major Hollywood movies to be filmed in Cyprus just one year after the introduction of the new film tax incentives, putting Cyprus as the next major filming location.
The Aspen Trust Group assists film production companies navigate these new film tax incentives and provides advice on the best financial options available in Cyprus for your film. Contact our consultants today to find out how your production can qualify under the scheme.
