Everything you need to know before you invest.
Would you like to benefit from tax relief while at the same time supporting the production of European cinematographic works within Belgium? Offering ample yields and significant economic benefits on national soil, the audiovisual Tax Shelter is just the job!
Since 20041, thousands of Belgian businesses and branches of foreign companies of all sizes and from all sectors have been investing in the cinema each year. As a Tax Shelter pioneer and special partner of investors, SCOPE has participated in the funding of nearly 200 films produced fully or partly in Belgium. The exponential growth seen in the amounts raised – nearly 300 million through SCOPE – is first and foremost the result of the appeal of this secure and transparent product. SCOPE’s unique structure as both a Tax Shelter specialist (SCOPE Invest) and an executive producer of feature films (SCOPE Pictures) is likely to better secure the obtaining of tax breaks and an overall potential net gain of nearly 10% on the amount contributed by investors.
1. Legal references: Law of 26/05.2016 amending the Law of 12.05.2014 (MB 07.06.2016); Law of 12.05.2014 amending Article 194ter of the 1992 CIR on the Tax Shelter system for audiovisual production (MB 27.05.2014).
Last update on : 13.05.2020
It’s a tax incentive, but what else? The Tax Shelter enables Belgian companies which make a profit and are subject to corporation tax to invest an amount capped at €238,764 (for the 2019 financial year) per tax year and to fiscally immunise the sum invested multiplied by 356% (2019 financial year). The resulting tax break comes to 5.3%. Moreover, the investor receives an additional yield (a form of interest) paid no later than 18 months after the investment, which currently amounts to an additional net yield of 4.59% of the amount invested. What with the tax relief and the additional yield, the overall potential net gain offered by SCOPE Invest comes to 9.90% of the invested sum over an 18-month period.
So how is operation carried out in practice? The Tax Shelter permits the deductibility of the investment amount up to a level of 356% (2019 financial year). Let’s take the example of a company which closes its accounts on 31 December 2018 (2019 financial year) and is subject to the normal corporation tax rate of 29.58%. Based on a pre-tax profit of €1,000,000 and a Tax Shelter investment of €100,000, €356,000 could be tax-exempted (100,000 x 356%). The new taxable base is thereby set at €644,000. On the basis of a taxation rate of 29.58%, their tax bill would thus come to €190,495 compared with €295,800 without the Tax Shelter operation. The investment therefore generates a gain of 5.30%, a tax break which is further boosted by a net yield of 4.59% (giving a total of 9.90%)2.
What’s the limit of the operation? The Tax Shelter enables participating companies to tax-deduct up to €850,000. This exemption is also subject to a second limit of 50% of the business’s taxable profit reserves3, so the investment in itself is capped at €238.764 (2019 financial year) per year and per company.
What’s the procedure? SCOPE simplifies the administrative management and monitoring. The process unfolds in 4 separate phases. In the year of the exemption, the investor and the approved producer sign a framework agreement (J) that specifies the amount invested and the audiovisual work selected. The agreement is submitted to the SPF Finances in the month following the agreement (J+1). The investment amount is then paid by the investor within three months of the signing of the framework agreement (J+3), after which the investor can go ahead with the provisional exemption of its taxable profit4. The payment of the interest takes place at the moment of the issue of the tax certificate and no more than eighteen months after the investment’s payment date (J+21). The provisional exemption becomes final once the tax certificate is issued by the Administration.
2. http://www.scopeinvest.be/en/whats-the-yield
3. During the tax year of the investment.
Last update on : 13.05.2020
How is the granting of the tax certificate best ensured and the risks therefore minimised? Since 2003, SCOPE has raised nearly 300 million euros in funds and successfully passed the fiscal controls for dozens of film projects. Because it is directly involved in the management of the budgets for the films it coproduces, SCOPE directly manages a key aspect of the Tax Shelter: the control of Belgian expenditure. Since the Tax Shelter aims to promote the cinema sector and its infrastructure in Belgium, the issue of certification is dependent on actual expenditure in the country of an amount equivalent to at least 90% of the value of the Tax Shelter certification. By carrying out the “executive production” of films in Belgium through the intermediary of its sister company SCOPE Pictures, SCOPE Invest offers investors greater security. Despite that, there is still a possibility that tax certificates will not be issued. The main reasons for this are stated in the section headed "Risks & Guarantees". With this in mind, it is essential to carefully examine the guarantees offered by the Tax Shelter intermediary in all cases where compensation may be paid to offset any loss of the tax benefit.
A Tax Shelter investment features risks that need to be taken into account before investing.
Investors should examine their own specific situation with their usual tax adviser prior to making any investment decision
One investment, one film? Linked to SCOPE Pictures, SCOPE Invest ensures the independent selection of films and the maintaining of an editorial line: European productions capable of combining commercial success and critical acclaim5 (La vie d’Adèle, Mr. Nobody, L’écume des jours, L’enfant ou Marguerite). SCOPE will inform the investor of its choice by the date of the framework agreement at the latest.
A Tax Shelter operation in partnership with SCOPE offers the best possible scenario for your investments.
5. http://www.scopeinvest.be/en/filmography
Last update on : 13.05.2020