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In sunny California, the state’s film tax credits are helping to secure its place as a leader in the film and television industry.
On July 10, 2023, Governor Gavin Newsom signed a new law that extends and expands California’s Film and TV Tax Credit Program 3.0.
Originally set to expire in June 2025, the program will now run until June 2030, under the new name “Program 4.0”.
This program, which offers $330 million a year in tax credits, has already started attracting new productions to California.
With the launch of Program 4.0, California has become an even more appealing destination for film and television productions.
Colleen Bell, the Director of the California Film Commission, noted that by mid-2024, the state had already welcomed 12 new TV series and one relocating series.
One of the major projects drawn to California was “Suits: L.A.” by Universal Content Productions LLC, which was awarded a $12 million tax credit.
The show’s shift from Canada to California is expected to inject $50.7 million into the state’s economy and create around 2,600 jobs.
California’s move to extend its film tax credits isn’t just about keeping the state’s film industry alive; it’s about ensuring its dominance in a competitive market.
Since 2021, 17 other states have introduced or expanded their own film tax incentive programs. By supporting local productions, states can encourage economic growth, create jobs, and even boost tourism.
California, recognising the growing competition, made significant changes in Program 4.0. The most notable change is that the tax credits are now refundable, which makes them more attractive to filmmakers.
Additionally, the program aims to support people from underserved communities by requiring projects to submit diversity, equity, inclusion, and accessibility (DEIA) workplans.
Projects must also show a commitment to hiring individuals who reflect the diversity of California’s population.
The film and television industry in California provides more than 700,000 jobs and generates nearly $70 billion in wages.
It also brings in billions of dollars in production spending. This makes it clear why the state is so invested in keeping film productions in California.
The tax credits aren’t just about supporting big-budget films; they’re a key part of the state’s economic strategy.
In September 2024, the California Film Commission awarded $51.6 million in tax credits to 18 projects, including a film about singer Janis Joplin.
Shailene Woodley, one of the producers and stars of the Janis Joplin biopic, expressed her gratitude to the California Film Commission, saying that California was the best place to capture Janis’s life story authentically.
California’s Film and TV Tax Credit Program 4.0 has proven to be a valuable tool for keeping the state at the forefront of the entertainment industry.
By offering generous, refundable tax credits and promoting diversity within productions, California is ensuring that it remains a top choice for filmmakers around the world.
If you have any queries about this article on film tax credits or tax matters in the US more generally, then please get in touch.
Alternatively, if you are a tax adviser in the US. and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
Cyprus has long been recognized as a strategic location for businesses looking to optimize their intellectual property (IP) management.
In 2016, Cyprus further enhanced its appeal by aligning its IP Box Regime with EU regulations and the OECD’s Base Erosion and Profit Shifting (BEPS) Action 5 rules.
Recent amendments in 2020 to Section 9(1)(l) of the Income Tax Law have introduced significant tax advantages for intangible assets, reaffirming Cyprus as a prime destination for IP-centric companies.
The 2020 amendments came at a crucial time, offering tax exemptions on incomes derived from the disposal of intangible assets, effectively exempting them from capital gains tax since January 1, 2020.
This move aims to boost innovation by making it more financially viable for companies to invest in IP development.
Cyprus stands out in the EU for its competitive IP tax regime. As a member of the EU and a signatory to all major IP treaties, Cyprus ensures robust protection for IP owners.
The IP Box Regime in Cyprus offers one of the most advantageous programs in the EU, characterized by low effective tax rates, a broad range of qualifying IP assets, and generous deductions on gains from disposals.
The regime’s hallmark is the substantial tax exemption provided for IP income.
Specifically, 80% of worldwide qualifying profits generated from qualifying assets is deemed a tax-deductible expense, and the same percentage of profits from the disposal of IP is exempt from income tax.
This arrangement results in a maximum effective tax rate of just 2.5%.
Qualifying Assets (QAs) include patents, certain software and computer programs, and other legally protected intangible assets that meet specific criteria, such as utility models and orphan drug designations.
These assets must be the result of the business’s research and development (R&D) activities. Notably, marketing-related IP such as trademarks and brand names does not qualify.
The regime employs a nexus approach to determine the portion of income eligible for tax benefits, relating it to the company’s actual R&D expenditure.
The formula for Qualifying Profits (QP) considers the ratio of qualifying R&D expenditure and total expenditure on the QA, fostering a direct link between tax benefits and genuine innovation efforts.
Qualifying Expenditure includes all R&D costs directly associated with the development of a QA, such as salaries, direct costs, and certain outsourced expenses.
However, acquisition costs of intangible assets and expenditures not directly linked to a QA do not qualify.
Entities eligible for the Cyprus IP Regime’s benefits include Cyprus tax resident companies, tax resident Permanent Establishments (PEs) of non-resident entities, and foreign PEs subjected to Cyprus taxation, provided they meet certain criteria.
The Income Tax Law amendments also introduced capital allowances for all intangible assets, allowing for the spread of these costs over the asset’s useful life (up to 20 years).
This provision supports businesses in managing the financial impact of large IP investments over time.
Moreover, the regime permits taxpayers to opt out of claiming these allowances in a given tax year, offering flexibility in tax planning.
Upon the disposal of an IP asset, a taxpayer must provide a detailed balance statement to determine any taxable gains or deductible amounts.
With its favorable IP Box Regime and recent legislative enhancements, Cyprus continues to cement its status as an attractive location for IP-rich companies seeking tax efficiency within the European Union.
Companies operating in high-tech and innovative industries should consider Cyprus for their IP management and development activities, benefiting from substantial tax incentives and robust legal protections.
If you have any queries about this article on Cyprus and Intellectual Property, or tax matters in Cyprus more generally, then please get in touch.
In an announcement by the Chancellor of the Exchequer during the Spring Budget on 6 March 2024, the UK government has introduced the Independent Film Tax Credit (IFTC).
The credit is aimed at revitalising the UK’s independent film industry.
This initiative emerges in the wake of the Culture, Media and Sport Committee‘s examination of sectoral challenges, underlining the government’s commitment to nurturing filmmaking within the country.
The IFTC aims to offer producers of eligible films the opportunity to claim an enhanced Audio-Visual Expenditure Credit (AVEC) on qualifying expenditure.
With a gross rate of 53%, this translates to a net tax credit of 39.75%, capped at £6.36 million per film.
The introduction of IFTC builds upon the AVEC regime, initiated on 1 January 2024, which already provides a tax credit for film and high-end TV programmes, children’s TV, and animation projects.
Notably, the Spring Budget also announced an increase in AVEC for visual effects costs and the removal of the 80% cap on qualifying expenditure in this category from 1 April 2025.
Films aiming to qualify for IFTC must meet specific criteria, including a theatrical release, a production budget up to £15 million, commencement of principal photography on or after 1 April 2024, and adherence to the British Film Institute (BFI) test for UK independent film.
The BFI’s assessment will ensure that films either feature a UK writer or director, or are certified as official UK co-productions.
Films commencing principal photography from 1 April 2024 are eligible to opt-in for IFTC, with claims being submitted from 1 April 2025.
This transitional period allows production companies to choose between AVEC and the previous tax relief schemes for expenditure incurred from 1 January 2024.
However, all new productions from 1 April 2025 must utilize AVEC, with a complete transition to AVEC mandated by 1 April 2027.
The introduction of IFTC and adjustments to AVEC represent a significant boon for independent filmmakers in the UK.
By enhancing support for the independent film sector and incentivizing visual effects production, these measures are expected to bolster creative endeavors, attract new talent, and secure the industry’s future.
The government’s strategic investment in independent filmmaking not only acknowledges the sector’s cultural significance but also aims to catalyze growth and innovation post-pandemic and beyond.
If you have any queries about the new Independent Film Tax Credit, or any other UK tax matters, then please do get in touch.