Contributions or donations to entities and institutions covered by Law 49/2002 that are allocated to the execution and development of priority patronage activities and programs are eligible for a tax deduction. Since 2002, this law has encouraged the private sector to provide financial support for certain activities. These donations must be directed exclusively to non-profit entities or organizations that carry out activities considered to be of general interest, such as film productions or musical performances.
The law is actually divided into three sections, depending on the type of activity that qualifies:
1. Deduction for investments in Spanish film productions and audiovisual series.
Since January 1, 2021, funders of these activities can apply a deduction of up to 30% for the first million euros of the deduction base, and 25% for the excess amount. These funders cannot assume more than 30% of the total costs, nor can they acquire intellectual property rights over the production results in other words, they must remain independent from the production company. At the same time, the producers themselves are also eligible for this deduction, where "producer" refers to the person with initiative, responsibility, or ownership of the production rights. The maximum deductible amount for them may not exceed 20 million euros in total, or 10 million per episode produced.
2. Deduction for foreign film productions in Spain.
Production companies registered in the relevant registry and responsible for executing a foreign feature film or audiovisual work in Spain are eligible for a deduction, but only for expenses incurred within Spanish territory, and only if total costs exceed 2 million euros. As in the previous case, the deductible amount is generally 30% for the first million euros and 25% for the remainder. The minimum amount of expenses in Spanish territory must be 1 million euros (except for animated works, where the threshold is 200,000 euros). The maximum deductible amounts are the same as in the previous case.
Interestingly, the film credits must include a specific reference to having benefited from the tax incentive, as well as to the various institutions involved: the central government, regional governments, etc. Additionally, the administration reserves the right to use explicit images of Spanish locations shown in the film for cultural or tourism-related purposes, provided it is not a feature film.
3. Deduction for the production of certain live performances.
Applying the same requirements regarding the maximum cost assumable by the funder and their disassociation from ownership rights, the deduction percentage is 20%, and the maximum allowed amount is the result of multiplying 1.20 by the amount contributed. For the producer, the maximum deductible amount per taxpayer is 500,000 euros.
Moreover, the production must have a special certificate from the National Institute of Performing Arts and Music, and at least 50% of the profits must be reinvested in the same activity, either within the same fiscal year or over the following four years.
This is not something given away for free to these associations or non-profit entities; therefore, they must meet certain additional transparency requirements, such as submitting their annual accounts. Whether you're looking to support cultural initiatives while enjoying tax benefits, or you’re unsure about the type of deduction you may be eligible for as a producer, don’t hesitate to contact us #bettercallmonday.