Principles of financing a film.
Amounts collected under the Tax Shelter, allocation of funds, management of expenditure… what percentage of a TS investment is actually used for the production of a film?
Only a part of the film’s overall budget can be funded via the Tax Shelter. The legislator also requires a substantial part of the expenditure to be incurred in Belgium. Read on for more details.
Last update on : 13.05.2020
The entirety of the sums collected through the Tax Shelter mechanism is allocated by SCOPE Pictures to the expenditure budget associated with the eligible works1. However, a film’s budget can only be partly funded through the TS, with a maximum contribution level of 50%2. The provisional overall expenditure budget for the production of a work basically consists of the part supplied by SCOPE Pictures, that of each of the investors already committed, and the minimum amount of Belgian expenditure to be made after the date of the Framework Agreement.
Because the TS system complies with the wishes of the legislator in terms of promoting the cinema sector and its infrastructure in Belgium, a substantial part of the expenditure must be incurred on Belgian soil with a period of 18 months, a window extended to 24 months for animated TV films or series. Within this framework, SCOPE Pictures is obliged to spend in Belgium an amount equivalent to 90% of the Tax Shelter certificate’s value. It’s also advantageous to break down this figure into expenditure directly linked to the production (70%) and administrative expenses, which are limited to 30%.
1. By virtue of Article 194ter of the 1992 CIR. Provisions included in Article 9, point 4 of the Standard Agreement binding the investor to SCOPE.
2. By virtue of Article 194ter of the 1992 CIR. Provisions included in Article 9, point 3 of the Standard Agreement binding the investor to SCOPE.
Last update on : 13.05.2020
To what practical activities or items are these amounts allocated? The types of expenditure that qualify “directly” are those which come under the creative and technical production of the eligible work. For instance, they include the expenses covering the artistic rights3, the salary and allowances of staff or service providers, expenses allocated to the payment of the actors, musicians and other artistic roles, the related social security charges, costs of scenery, costumes and accessories, logistical (transport, accommodation) and insurance costs, the cost of the equipment, technical resources and laboratory costs, expenses more generally linked to editing and to the promotion work, as well as the salaries of the production manager, the post-production coordinator and the executive producer.
Representing a smaller proportion is expenditure not directly linked to the production, such as the administrative and financial organisation of the audiovisual production, the financial costs and commission paid as part of the recruitment of companies signing a framework agreement, costs of a legal nature and representation costs inherent to the work’s funding, the majority of the invoices emanating from the investor and the distribution costs payable by the production company4.
Generally speaking, SCOPE Pictures is required to keep the investor informed, once a month until the film has been completed, of the development of this expenditure and to notify them of any issues with the budget. Furthermore, and although it does not constitute an obligation within the sense of the audiovisual Tax Shelter legislation, SCOPE Pictures undertakes to inform SCOPE Invest and the investors without delay of the work’s date of completion.
3. With the exception of screenplay development costs incurred prior to the date of the framework agreement.
4. For more details regarding the types of eligible expenditure, please see the section 7.2.1.1.5 (p.75) of the Prospectus.
Last update on : 13.05.2020