Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 2

Income tax and corporation tax: reliefs applicable to both

Overview

Chapter 2 of Part 15 provides relief from income tax and corporation tax in respect of certain investments, expenditure and gifts.

481 Relief for investment in films

Summary

This section provides relief for investment in films by film producer companies. The relief takes the form of a payable Corporation Tax credit. The credit is calculated at a rate of 32 per cent of the lowest of the eligible expenditure incurred on the production of the film; 80 per cent of the total cost of production of the film; or €70,000,000. An increased rate of film corporation tax credit, the regional film development uplift, may be claimed where

  1. the production is largely undertaken in an assisted region,
  2. there is a limited availability of qualified personnel in that immediate area, and
  3. additional expenditure is incurred training individuals within that area.

A producer company must enter into a contract with a qualifying company in relation to the production of a qualifying film. A qualifying company is a special purpose production company. A producer company must hold all of the shares in the qualifying company.The qualifying company must exist solely for the production of one qualifying film.

The amount of a film budget, which qualifies for relief under the scheme, will generally be restricted to the amount expended in the State on the production of the film. This is achieved by the inclusion of a requirement, in section 481, that a minimum amount must be expended on the employment of eligible individuals and on the provision of certain goods, services and facilities in the State.

Regulations are made by the Revenue Commissioners in relation to the operation of the relief. These Regulations are made with the consent of the Minister for Finance and the Minister for Culture, Heritage and the Gaeltacht.

Details

(1) Definitions

Assisted region” is defined with reference to a decision by the Commission on the areas of Ireland that can receive regional aid. The purpose of the definition is to define the geographic areas where producer companies may be entitled to the regional uplift.

broadcast” and “broadcaster” have the meanings assigned to them by section 2 of the Broadcasting Act 2009.

Certificate” means the formal confirmation issued by the Minister for Arts, Heritage and the Gaeltacht certifying that a film may be treated as a qualifying film for the purposes of the film tax credit.

director” shall be understood within the meaning of section 433(4) of the TCA 1997.

eligible expenditure” means the portion of the total cost of production of a qualifying film expended in the state on the employment of eligible individuals and on the provision of certain goods, services and facilities.

eligible individual” means an individual employed by a qualifying company for the purposes of the production of a qualifying film.

film” means a film that is eligible for certification within certain categories that are set out in the Film Regulations. The film must be made as a genuine commercial venture to be shown in the cinema or for broadcast. This requirement is necessary to ensure that private films or films made for some incidental purpose other than the profitable exploitation of the film are excluded. Advertising films are also excluded.

film corporation tax credit” is calculated at 32% of whichever of the following is the lowest –

  1. the eligible expenditure amount,
  2. 80 per cent of the total cost of production of the film, and
  3. €70,000,000.

producer company”, means an Irish incorporated and resident company, or a company incorporated or resident in another EEA state which is carrying on a trade of producing films in the State through a branch or agency. It cannot be, or be connected to a company that is a broadcaster or a company whose main business is transmitting films on the internet. It must hold all the shares in the qualifying company that is making the film. It must be trading for a minimum period of 21 months in advance of making a claim for the credit and be fully tax compliant. Furthermore, for the purposes of State Aid, it must not be part of an undertaking in difficulty as understood by the Rescuing and Restructuring guidelines.

qualifying company” means an Irish incorporated and resident company, or a company incorporated or resident outside the State but which is carrying on a trade in the State through a branch or agency, which has been set up for the production of only one qualifying film. This ensures that the relief granted is clearly targeted for the production of a specific film so that the Revenue Commissioners are aware of how the relief is to be utilised. The qualifying company cannot have in its name the words “Ireland”, “Irish”, “Éireann”, “Éire” or “National”.

qualifying film” is a film in respect of which the Minister has issued a certificate.

qualifying period” refers to the most recent accounting period of the producer company, for which the specified return date for corporation tax has already occurred, that falls before the date the claim for the credit. Where the accounting period is less than 12 months, then the last 12 month accounting period before the short accounting period immediately preceding the claim date should be used.

Rescuing and Restructuring Guidelines” refers to the 2014 Commission Guidelines for State aid for rescuing and restructuring non-financial undertakings in difficulty.

specified amount” means the amount by which the film corporation tax credit exceeds the corporation tax paid by the producer company in the qualifying period.

specified relevant person” means any director or secretary of the producer company at any time during the period commencing when the qualifying period commences and ending 12 months after the date referred to in subsection (2C)(d) being the date of completion of the production of the qualifying film.

the Minister” means the Minister for Arts, Heritage and the Gaeltacht.

total cost of production” means the part of the global expenditure of a qualifying film that meets the qualifications set out in the Film Regulations and that was wholly, exclusively and necessarily incurred to produce the qualifying film.

undertaking” refers to an economic group or entity within the meaning used by the Commission Rescuing and Restructuring guidelines.

undertaking in difficulty” is given the same meaning as in the Rescuing & Restructuring Guidelines.

Application by a producer company for Certification

(1A)(a) A producer company may apply to the Minister for Certification that a film may be treated as meeting the cultural criteria for the purposes of Section 481.

(1A)(b) The information to accompany the application is specified in regulations.

(1B)(a) After 1 January 2019 a producer company may also apply when making its application to the Minister for certification for an increased rate of film corporation tax credit known as a “regional film development uplift” where certain conditions are met. These conditions are that the production is largely undertaken in an assisted region, where there is a limited availability of qualified personnel, and the company provides and incurs additional expenditure training individuals within the immediate area the film is being made.

(1B)(b) The availability of the regional film development uplift tapers over a five-year period as follows:

  1. for qualifying claims made on or before 31 December 2021 the film corporation tax credit will be calculated at a rate of 37%
  2. for qualifying claims made after 31 December 2021 but on or before 31 December 2022 the credit will be calculated at a rate of 35%
  3. for qualifying claims made after 31 December 2022 but on or before 31 December 2023 the credit will be calculated at a rate of 34%
  4. for all claims made after 31 December 2023 the maximum rate is 32%.

Certificate to be issued by the Minister for Arts, Heritage and the Gaeltacht

(2)(a) The Minister may, following receipt of an application from a producer company and consideration in accordance with regulations, certify that a film is a qualifying film and specify whether or not the regional film development uplift applies.

(2)(b) The Minister for Arts, Heritage and the Gaeltacht in considering whether to issue the certificate must consider:

  • the categories of films eligible for certification (as set out in the regulations), and
  • any contribution which the film is expected to make to the development of the Irish film industry and/or the promotion and expression of Irish culture
  • the timing of the application i.e. the application must be received in advance of the commencement of production in the State
  • the criteria specified in subsection (1B)(a)(ii) that must be met for a film to qualify for the regional film development uplift.

(2)(b)(II) Additionally, the Minister for Arts, Heritage and the Gaeltacht must specify certain conditions in any certificate given, including:

  • a condition in relation to the employment and responsibilities of the producer and the producer company for the production of the film and
  • a condition in relation to the employment of other personnel, including trainees.
  • (2)(b)(III) a condition in relation to the nature and detail of acknowledgement of the support from the incentive in the opening titles or closing credits of the film
  • (2)(b)(IV) conditions in respect of Communication from the Commission (2013/C/332/01)1 regarding
    • the maximum state aid intensity which may be availed of for the production of the film and
    • whether or not the film may be regarded as difficult audiovisual work

(2)(b)(c) There is no obligation on the Minister to issue a certificate.

Alteration of conditions in a certificate

(2)(b)(d) The Minister for Arts, Heritage and the Gaeltacht may amend or revoke any condition specified in a certificate or add to such conditions, by giving notice in writing to the producer company and in those circumstances this section will apply as if any amended, additional or revoked condition was always reflected in the certificate.

Claim by a producer company for Film Corporation Tax Credit

(2A)(b) A producer company may not make a claim for film corporation tax credit if any of the following conditions apply:

  1. A certificate has not been issued by the Minister for Arts, Heritage and the Gaeltacht for the film.
  2. The producer company, the qualifying company, any company controlled by the producer company and the majority shareholders of the producer company or qualifying company is not tax compliant
  3. The eligible expenditure amount is less than €125,000, or
  4. The total cost of production of the film is less than €250,000
  5. The company is an undertaking in difficulty
  6. Any company in an undertaking of which the producer company is part is the subject of an outstanding recovery order made by the Commission for illegal state aid
  7. Where when making a claim under subsection (2G)(b)(i), for 90% of the budgeted film corporation tax credit in advance of completion of the film,
    1. if the financing agreements for the film have not been executed, or the conditions precedent to the commencement of the funding have not been satisfied, and
    2. where an amount not less than 68% of the amount on which the film corporation tax credit is based has not been lodged to an account held by the qualifying company with a financial institution where that amount is to be expended by the qualifying company on the production of the film unless other acceptable confirmations of financing as set out in regulations are available.

(2A)(f) A producer company shall not make a claim for the film corporation tax credit if

  1. when making a claim under subsection (2G)(b)(i), for 90% of the budgeted film corporation tax credit in advance of completion of the film, if the budget, or any particular item of proposed expenditure in the budget, is inflated,
  2. there is no commercial rationale for the corporate structure proposed for either the production, financing, distribution or sale of the film, or for all of those purposes.
  3. the corporate structure would hinder the Revenue Commissioners in verifying compliance with the conditions governing the relief.

(2A)(i) A producer company is required to have such information and records available in advance of making a claim as the Revenue Commissioners may require to determine that any claim made is in compliance with the section.

(2B) Consultation by the Revenue Commissioners with other persons

In carrying out their functions under the section, the Revenue Commissioners may consult with any person, agency or body of persons and may disclose any detail of the company’s application, where necessary, for the purposes of such consultations. This includes where there is reason to believe that financial arrangements not allowed under subsection (2C)(b) have be entered into.

Conditions in relation to producer companies

(2C) A company will not be regarded as a producer company if any of the following apply:

  • (2C)(b) if the financial arrangements which the company enters into in relation to the film are:
    • financial arrangements of any type with a person resident, registered or operating in a country other than a Member State of the European Communities, or other than a country with which Ireland has a Double Taxation Agreement under section 826(1), or,
    • financial arrangements under which funds are channelled, directly or indirectly, to or through a territory other than a Member State of the European Communities, or other than a country with which Ireland has a Double Taxation Agreement unless subclauses (A), (B) and (C) apply.
      These subclauses set out the circumstances in which a producer company or a qualifying company that enters into the type of financial arrangements to which subsection (2C)(b)(i) and (ii) relate shall nonetheless be regarded as a producer company which are as follows:
      1. where the arrangements relate to the filming of a part of a film in a territory other than a Member State of the European Communities, or a country with which Ireland has a Double Taxation Agreement under section 826(1),
      2. the producer company has sufficient records to verify the amount of each item of expenditure in the territory and
      3. the producer company has such records in place to substantiate such expenditure in advance of making a claim for the film corporation tax credit.

Vouching of expenditure and maintenance of records generally

(2C)(c) A company will not be regarded as a producer company unless it provides evidence to vouch each item of expenditure in the State, or elsewhere, on the production and distribution of the film when requested to do so by the Revenue Commissioners, for the purposes of verifying compliance with the provisions governing the relief. This requirement applies whether expenditure is by the company or by any other person engaged, directly or indirectly, by the company to provide goods, services or facilities in relation to the film. In particular the evidence provided must include:

  • records required to be kept or retained by the company by virtue of section 886 (for example, accounts, books of account, documents etc. relating to all sums of money received or expended in the course of the carrying on of the trade, all purchases and sales of goods and services, the assets and liabilities of the trade and all transactions which constitute the acquisition or disposal of an asset for CGT purposes).
  • similar records required to be maintained by any other person under section 886, or which would be so required if that other person was subject to the provisions of that section.

Provision of copies of film

(2C)(ca) A company shall not be a producer company unless the company provides a copy of the film to the Revenue Commissioners when requested to do so for the purposes of verifying compliance with the section or with any condition specified in a certificate issued by the Minister.

Notification of Completion

(2C)(d) A company will not be regarded as a producer company unless the company,:

  • notifies the Minister in writing of the date of completion of the film.
  • provides to the Minister copies of the film in the format and manner specified in regulations.
  • provides to the Revenue Commissioners a compliance report, in the format and manner specified in those regulations, which proves to their satisfaction that the provisions of this section which relate to the company and the film have been met and that any conditions attaching to a certificate have been fulfilled.

Compliance Report

(2C)(da) Where a producer company makes a claim for film corporation tax credit, the company must have a compliance report available within the time specified in Regulations which proves that

  1. the provisions of the section have been complied with, and
  2. any conditions attaching to a certificate have been fulfilled.

(2C)(e) (2C)(f) A company will not be regarded as a producer company if it ceases to carry on the trade of producing films or disposes of its shares in the qualifying company within 12 months of submitting a compliance report.

(2C)(g) A company shall not be regarded as a producer company unless it enters into a contract with the qualifying company for the production of the film and provides it with an amount not less than the specified amount.

Regulations to be made by the Revenue Commissioners

(2E) The Revenue Commissioners will make regulations relating to the administration of the relief with the consent of the Minister for Finance and with the consent of the Minister for Arts, Heritage and the Gaeltacht in relation to the matters to be considered by that Minister regarding the issue of authorisations.

The regulations may include provisions as follows:

  • (2E)(a) governing applications for certification, the timing of such application, and the information and documents to be provided with an application.
  • (2E)(b) specifying the categories of films eligible for certification
  • (2E)(d) and (e) governing the records that a producer company and a qualifying company must maintain and provide to the Revenue Commissioners, the period for which and place at which such records must be maintained.
  • (2E)(f) and (g) specifying the time within which a producer company must notify the Minister of the completion of the production of a qualifying film, the time within which and the format, number and manner in which copies of the film shall be provided to the Minister
  • (2E)(h) specifying the form, content, manner of the making and verification, of the compliance report to be available to the Revenue Commissioners and the documents to accompany the report.
  • (2E)(i) governing the type of expenditure which may be treated as qualifying or eligible by the Revenue Commissioners on the production of a qualifying film.
  • (2E)(j) governing the provision of the goods, services and facilities referred to in the definition of eligible expenditure used on the production of the qualifying film, including the place of origin, the place in which they are provided and the location of the supplier.
  • (2E)(k) specifying the currency exchange rate to be applied to expenditure on the production of a qualifying film.
  • (2E)(l) specifying the criteria to be considered by the Minister for Culture, Heritage and the Gaeltacht in deciding whether to issue a certificate and in specifying any conditions in such certificate, and the information required for those purposes to be included in the application by a producer company.
  • (2E)(la) specifying the criteria to be considered in deciding if the regional film development uplift shall apply, and in specifying the conditions in that regard to be included in the Certificate.
  • (2E)(m) governing financial arrangements in accordance with subsection (2C)(b).
  • (2E)(ma) specifying the confirmations of financing that are acceptable in the case of a claim for 90 per cent of the credit where the financing agreements are not fully executed or less than 68 per cent of the Irish cost of the film has been lodged to the qualifying company’s account.
  • (2E)(n) governing the employment of eligible individuals and the circumstances in which expenditure by a qualifying company would be regarded as being on the employment of those individuals in the production of a qualifying film.
  • (2E)(o) Governing the payment of the specified amount by the Revenue Commissioners to the producer company.

Claiming the film corporation tax credit

(2G)(a) and (b) Where the Minister has issued a certificate, and the provisions of Section 481 have been complied with, a producer company may make a claim for the following:

Either

  1. no more than 90% of the budgeted film corporation tax credit in advance of completion of the film, or
  2. the balance of the budgeted film corporation tax credit, where a claim for 90% has already been made, or the entire film corporation tax credit where a claim for 90% has not been made, and the film has been completed.

The budgeted film corporation tax credit is the amount of the film corporation tax credit that would be payable if the amounts as set out in the budget of a qualifying film were incurred on the production of that film.

(2G)(c)A claim for the film corporation tax credit shall be made in the corporation tax return which immediately precedes the making of the claim, being the last corporation tax return that the producer company was required to file.

Corporation Tax relief for producer companies

(3)(a) Where a claim has been made in accordance with the provisions of the section, the corporation tax of the producer company for the qualifying period will be reduced by an amount equal to the film corporation tax credit. The corporation tax of an earlier period will be reduced in priority to a later period.

(3)(b) Where the amount of the film corporation tax credit exceeds the corporation tax of the producer company for the qualifying period, the excess, known as the “specified amount”, shall be paid to the producer company by the Revenue Commissioners

(3A)(a) Any amount payable by the Revenue Commissioners to the company by virtue of subsection (3)(b) shall be deemed to be an overpayment of corporation tax, for the purpose only of section 960H(2).

(3A)(b) Any claim in respect of a specified amount shall be deemed for the purposes of section 1077E to be a claim in connection with a credit and, for the purposes of determining an amount in accordance with section 1077E(11) or 1077E(12), a reference to an amount of tax that would have been payable for the relevant periods by the person concerned shall be read as if it were a specified amount.

(3A)(c) Where the Revenue Commissioners have paid a specified amount and it is subsequently found that all or part of the amount is not as authorised then the company, any director of the company, or the majority shareholders of the producer company or qualifying company shall be liable to tax in an amount equal to 4 times, in the case of a company, or one hundred fortieths in the case of an individual, of the unauthorised amount.

(3A)(d) The circumstances in which an unauthorised amount arises shall include any circumstances where the amount was claimed by the producer company or paid by the Revenue Commissioners and

  1. the company made a claim contrary to the section,
  2. the producer company or qualifying company failed to comply with any conditions or obligations imposed by section 481, the Film Regulations or the certificate issued or fails to remain tax compliant for at least 12 months after the date of provision of a compliance report, or
  3. (3A)(e) where there has been a reduction in the budget subsequent to the making of the claim for 90% of the credit such that the amount claimed exceeds 90% of the reduced budget or where an amount equal to the budgeted eligible expenditure following a claim for 90% of the credit has not been expended on the production of the film without unreasonable delay.

(3B)(a) Where the Revenue Commissioners make or amends an assessment in respect of a specified amount, the assessment will be deemed to be tax due and shall carry interest as determined in accordance with section 1080.

(3B)(b)The amount which is provided by the producer company to the qualifying company shall not be deducted in computing the profits or gains to be charged to tax or otherwise reduce the income of the producer company. Nor shall it be used to reduce the corporation tax of the producer company or be provided in a manner for the purpose of securing a tax advantage or be income of the qualifying company for any tax purpose.

(3B)(c) A failure by a qualifying company to repay any amount to a producer company shall not be a sum that may be deducted in computing the profits or gains of, or shall not otherwise reduce the income of the producer company.

(3B)(d) The producer and the qualifying companies shall be deemed not to be members of the same group of companies for the purposes of section 411 or, except for the purposes of section 626, section 611.

(3B)(e) A loss for the purposes of section 546, shall not be treated as arising on the disposal by the producer company of shares in the qualifying company.

(3B)(f) Section 626B shall not apply to the disposal by the producer company of shares in the qualifying company.

(3C) For the purposes of section 538(2) the value of the shares held by the producer company in the qualifying company, shall not, at any time, be negligible.

The Revenue Commissioners shall not pay a specified amount to a producer company in respect of a film certificate issued after 31 December 2024.

Laying of Regulations before Dáil Éireann

(23) Every regulation made by the Revenue Commissioners under this section shall be laid before Dáil Éireann as soon as may be after it is made. This is in line with the customary procedure in relation to the laying of statutory instruments and provides Dáil Éireann with the opportunity to annul the regulations, if it so wishes, within the next 21 days on which Dáil Éireann has sat after the regulations are laid before it.

Transition Arrangements

Once the provisions of the Finance Act 2018 are commenced all future applications for the film corporation tax credit are made on a self-assessment basis. The transitional arrangements for applications on hand on the date of commencement are as follows:

(24) For qualifying films in respect of which the Minister had already provided the Revenue Commissioners with authorisation, that authorisation is treated as if it were a Minister’s certificate and the project will continue under self-assessment.

(25) For qualifying films in respect of which the Revenue Commissioners had issued a certificate that certificate is treated as if it were a Minister’s certificate and the project will continue under self-assessment.

(26) For qualifying films where the Revenue Commissioners had issued a payment under subsection (3)(b) but a full compliance report had not been received prior to commencement of the 2018 provisions the amount paid will be treated as if it had been made under the revised process and the final claim will continue under self-assessment

(27) For qualifying films in respect of which the Revenue Commissioners had approved financial arrangements prior to the commencement of the Finance Act 2018 provisions, notwithstanding such approval, a company shall not be a producer company if the financial arrangements contravene subsection (2C)(b).

Footnotes

1 OJ C 332, 15.11.2013, p. 1-11

Relevant Date: Finance Act 2020