New regulations for tax shelter investments

The purpose of the law is to grant a tax exemption to companies  (either Belgium companies or branches of foreign companies in Belgium) investing in an European audiovisual production, in order to stimulate such productions in Belgium.

1. How does the system work?

An investor pre-finances an European production by purchasing a (future) tax shelter certificate from a production company. He needs to transfer the funds within three months after the signature of a formal agreement with the producer. 

In exchange, the investor obtains a provisional tax exemption of 310% of the sums paid, but ceiled to 150% of the expected ‘fiscal value’ of the tax shelter certificate. The fiscal value of this certificate is set at 70% of the direct production and exploitation costs made for an audiovisual production in the European Economic Area, and represents maximum 10/9ths of the expenses made in Belgium. Possibly, the investor will also obtain a compensation from the producer with a maximum interest based on the average EURIBOR 12 months increased with 450 basis points.

The producer spends the invested sums within 18 months (24 months for animation movies) to the production.  He needs to affect minimum 90% of the value of the tax shelter certificate for 'Belgium' expenses, and 70% of this amount must consist of expenses directly linked to production (costs linked to the creation and technical production of the audiovisual work). Indirect costs (with respect to administration, financial organization and managing  of the production) can be made for maximum 30% of the total expenses made in Belgium.

When the production is finalized, the tax authorities will re-compute the ‘final’ fiscal value of the tax shelter certificate, based on effective expenses made. If the total of direct costs made in Belgium is lower than 70%, the fiscal value will be reduced proportionally.

2. For whom?

Producers must be Belgium companies or Belgium branches of foreign companies with as main statutory purpose the production of audiovisual works. They may not be television broadcasters neither be linked to a television broadcaster (linked in the sense of article 11 of our Company Code).

A producer can look for investors or can ask the assistance of a specialized intermediary. Both the producer and the intermediary must be agreed by the Minister of Finance.

Each Belgium company or Belgium branch can invest in such tax shelter productions, unless it is itself a production company or a TV broadcaster.

3. Which projects?

Fiction movies, documentary films, animation or short films for cinema,  long fiction films for television (episodes may apply), fiction series, animation series, children series or documentary series for television, recognized by the Flemish or French Community as European audiovisual productions ( productions as meant in the EU Regulation 2010/13/EU or falling into the scope of a bilateral co-production agreement conclude by the Community or by the Belgium State).

4. Steps to be taken by the production company:

• Agreement of producer or investor by the Minister of Finance;
• Agreement of a production as European audiovisual work by the competent authority (Flemish Community for the Flemish Region) via a ‘tax shelter application’ form;
• Conclusion of a 'framework agreement' with the investor(s) with the purpose of financing a production, and deposit of the framework agreement(s) within one month after signature with the Ministry of Finance;
• The investor pays the funds within 3 months after signature of the agreement, and the producer spends the funds within an 18 months (24 months) period;
• The producer requests (via the tax shelter application form) a second certificate of completion to the competent Community;
• Audit of the certificates of the Community and tax audit of expenses made for the production by the Ministry of Finance, aiming to obtain the final tax shelter certificate;
• Forwarding the final certificate to the investor(s).

5. Example

Invested amount = EUR 48.387
Tax shelter certificate (estimated and final value) = EUR 100.000
Provisional tax exemption of EUR 48.387 x 310% =  EUR 150.000
Final tax exemption of EUR 100.000 x 150% = EUR 150.000

Tax saving: EUR 150.000 x 33,99% (corporate tax rate) = EUR 50.990

Yield (after tax) obtained by investor from tax exemption:
EUR 50.990 – EUR 48.387 = EUR 2.603

Yield received by investor from production company:
EUR 48.387 x (EURIBOR + 4,5%) x (18/12) = EUR 3.992 (before tax)

Total ROI: EUR 2.603 + EUR 3.992 = EUR 6.595 = 13,6% of EUR 48.387

Source : 
Article 194 ter Belgium Income Tax Code as ultimately modified by the law of 12 May 2014; Royal Decree of 19 December 2014 in execution of article 194 ter ITC.