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 €50,000,000.

A producer company must hold all of the shares in the qualifying company, that is, the company producing a qualifying film. 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 will be achieved by the inclusion of a condition, in any film certificate issued by the Revenue Commissioners, that a minimum amount of money must be expended on the employment of eligible individuals and on the provision of certain goods, services and facilities.

The qualifying period for relief for producer companies is the period commencing on 01 January 2015.

Regulations are required to be made by the Revenue Commissioners in relation to the operation of the relief. These Regulations are made with the prior consent of the Minister for Arts, Heritage and the Gaeltacht.

Details

Definitions

(1) “the Minister” means the Minister for Arts, Heritage and the Gaeltacht.

“authorised officer” is an officer of the Revenue Commissioners authorised by them in writing for the purposes of the section.

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

“director” shall be construed in accordance with section 433(4).

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

“film” requires that the film must be made as a genuine commercial venture and that it be a film such as would be shown in the cinema or on television. 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. Moreover, the categories of film eligible for relief are confined to those eligible for certification, as set out in the Regulations made by the Revenue Commissioners.

“film corporation tax credit” means an amount equal to 32% of the lowest of –

1. The eligible expenditure amount,
2. 80 per cent of the total cost of production of the film, and
3. €50,000,000. (Finance Act 2015 raises this to €70,000,000 but is subject to EU State Aid approval)

“producer company”, in relation to a film corporation tax credit specified in a film certificate, requires that the company is an Irish incorporated and resident company, or a company incorporated or resident in another EEA state which is carrying on a trade 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 and be fully tax compliant.

“qualifying company” requires that the company is 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 the words “Ireland”, “Irish”, “Éireann”, “Éire” or “National” in its name.

“qualifying film” is a film in respect of which the Revenue Commissioners have issued a certificate which has not been revoked.

“qualifying period” means the accounting period of the producer company, in respect of which the specified return date for the chargeable period, within the meaning of section 959A, immediately precedes the date the application referred to in subsection (2A)(a) was made.

“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 the compliance report referred to in subparagraph (iii) of subsection (2C)(d)(iii) is provided to the Revenue Commissioners

Authorisation to be issued by the Minister for Tourism, Culture and Sport

(2)(a) When the Revenue Commissioners receive an application for certification from a producer company they will request an authorisation from the Minister for Arts, heritage and the Gaeltacht that they may, subject to the provisions of subsection (2A) (i.e. a detailed examination of the company’s proposal etc. by Revenue), issue a certificate to the company in relation to the film. The authorisation to be given is subject to the provisions of paragraph (b) of this subsection (see below) and is to be given in accordance with regulations made under subsection (2E).

(2)(b) The Minister for Arts, Heritage and the Gaeltacht in considering whether to give the authorisation must have regard to:

• the categories of films eligible for certification by the Revenue Commissioners (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.

(2)(b)(II) Additionally, the Minister for Arts, Heritage and the Gaeltacht must specify certain conditions in any authorisation 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 in relation to the employment of other personnel, including trainees.

Certification by the Revenue Commissioners

(2A)(a) The Revenue Commissioners, following an application made by a producer company, may, in accordance with regulations made under subsection (2E), issue a certificate to a producer company to the effect that the film to be produced by the company may be treated as a qualifying film for the purposes of the section. This is subject to all the other provisions of subsection (2A) which are addressed below.

(2A)(b) The Revenue Commissioners will not issue a certificate unless

1. an authorisation has been given by the Minister for Arts, Heritage and the Gaeltacht.
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 tax compliant
3. The eligible expenditure amount is greater than €125,000, or
4. The total cost of production of the film is greater than €250,000

(2A)(c) There is no obligation on the Revenue Commissioners to issue a certificate.

(2A)(d) An application by a qualifying company for a certificate must be in the form prescribed by the Revenue Commissioners and contain such information as may be specified in regulations under subsection (2E).

(2A)(e) In considering whether to issue a certificate, the Revenue Commissioners shall examine all aspects of the qualifying company’s proposal.

Refusal to issue certificate: inflated budget and corporate structures

(2A)(f) The Revenue Commissioners may refuse to issue a certificate if they are not satisfied with any aspect of the producer company’s application and, in particular, they may refuse to issue a certificate if:

• they have reason to believe that the budget, or any particular item of proposed expenditure in the budget, is inflated,
• they are not satisfied that there is a commercial rationale for the corporate structure proposed for either the production, financing, distribution or sale of the film, or for all of those purposes.
• they are of the opinion that the corporate structure proposed would hinder the Revenue Commissioners in verifying compliance with the conditions governing the relief.

Conditions to be specified in the certificate

(2A)(g) Where the Revenue Commissioners issue a certificate, it shall be subject to various conditions which the Revenue Commissioners consider proper, having regard to the examination provided for by paragraph (e) and the conditions specified by the Minister for Arts, Heritage and the Gaeltacht in the authorisation given under subsection (2)(a). In particular, the Revenue Commissioners shall specify in the certificate a condition:

• relating to the amount of the Corporation Tax credit to be paid and the timing and manner of its payment
• Relating to the amount of the film Corporation Tax credit by which the producer company’s Corporation Tax is to be reduced
• relating to the employment and responsibilities of the producer and producer company for the production of the film and the employment of other personnel including trainees [which the Minister specifies in the authorisation by virtue of subsection (2)(b)(II)],
• relating to the minimum amount of money to be expended on the production of the qualifying film:
• directly by the qualifying company on the employment by it of eligible individuals where those individuals exercise their employment in the State in the production of the qualifying film,
• directly or indirectly by the qualifying company on the provision of certain goods, services and facilities (as set out in regulations under subsection (2E)).
• in relation to matters pertaining to financial arrangements, approved by the Revenue Commissioners in accordance with subsection (2CA).

Alteration of conditions in a certificate

(2A)(h) The Revenue Commissioners, having consulted with 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 qualifying company and in those circumstances this section will apply as if any amended, additional or revoked condition was always reflected in the certificate.

Consultation by the Revenue Commissioners with other persons

(2B) 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.

Conditions in relation to producer companies

A company will not be regarded as a producer company:

• (2C)(a) unless the company notifies the Revenue Commissioners in writing within seven days of the first occasion on which they incurred eligible expenditure after they submitted an application.
• (2C)(b) subject to subsection (2CA), 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),
  • 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.

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. This evidence must be provided by the company, when requested to do so by the Revenue Commissioners, for the purposes of verifying compliance with the provisions governing the relief or with any condition specified in a certificate issued. 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.

Compliance report, provision of copies of film and notification of completion

(2C)(d) A company will not be regarded as a producer company unless the company, within the time limits to be set out in regulations under subsection (2E):

• notifies the Revenue Commissioners in writing of the date of completion of the film.
• provides to the Revenue Commissioners and to the Minister for Arts, Heritage and the Gaeltacht, copies of the film in the format and manner specified in those 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.

(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.

(2C)(h) A company shall not be regarded as a producer company unless an amount not less than the eligible expenditure amount is spent by the qualifying company, wholly and exclusively on the production of the film

Approval of certain financial arrangements involving territories outside the EU

(2CA) Subsection (2CA) provides for approval by the Revenue Commissioners of certain financial arrangements involving territories outside the EU with which Ireland does not have a double taxation treaty, in limited circumstances. The arrangements involving such a territory must relate to the filming of part of a film in the territory. Requests for approval must be made before the arrangements are effected and the Revenue Commissioners must be satisfied with the arrangements and the ability of the qualifying company to provide records.

The Revenue Commissioners may seek information in relation to the arrangements and any person directly or indirectly involved. Where approval is given, money expended as part of the arrangements cannot be treated as money expended on the employment of eligible individuals or on the provision of eligible goods, services and facilities.

Consequence of failure to comply

(2D) Where a producer company or a qualifying company fails to comply with any of the provisions of section 481 or fails to fulfil any of the conditions to which a certificate is subject, then relief may be withdrawn and the Revenue Commissioners may revoke the certificate. Such revocation is to be done in writing by registered post.

Regulations to be made by the Revenue Commissioners

(2E) This section provides that the Revenue Commissioners will make regulations relating to the administration of the relief. The regulations are made 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. [Film Regulations 2015, effective from 12 January 2015, were issued by the Revenue Commissioners. (S.I. No.4 of 2015)].

The regulations may include provisions:

• (2E)(a) governing applications for certificates under subsection (2A) and the information and documents to be provided with an application.
• (2E)(b) specifying the categories of films eligible for certification by the Revenue Commissioners under subsection (2A).
• (2E)(c) prescribing the form of applications.
• (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 Revenue Commissioners 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 Revenue Commissioners and to the Minister for Arts, Heritage and the Gaeltacht.
• (2E)(h) specifying the form, content, manner of the making and verification, of the compliance report to be provided to the Revenue Commissioners and the time limit within which it must be provided.
• (2E)(i) governing the type of expenditure which may be accepted by the Revenue Commissioners as expenditure on the production of a qualifying film.
• (2E)(j) governing the provision of the goods, services and facilities (referred to in subsection (2A)(g)) 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 Arts, Heritage and the Gaeltacht in deciding whether to give authorisation to the Revenue Commissioners and in specifying any conditions in such authorisation, and the information required for those purposes to be included in the application made to the Revenue Commissioners by a film company.
• (2E)(m) governing financial arrangements approved in accordance with subsection (2CA).
• (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.
• governing when the specified amount may be paid by the Revenue Commissioners to the producer company.

(2F) Where a producer company fails to provide a compliance report to the Revenue Commissioners within the specified time, the specified relevant person must provide that report within a further period of 2 months.

Corporation Tax relief for producer companies

(3)(a) Where the Revenue Commissioners have issued a film certificate to a producer company and that certificate specifies an amount of relief to be granted, then the corporation tax of the company for the qualifying period will be reduced by the specified amount. The corporation tax of an earlier period will be reduced in priority to a later period.

(3)(b) Where the amount of the credit exceeds the corporation tax of the qualifying period, the excess shall be paid to the producer company by the Revenue Commissioners.

(3)(c) The credit shall be paid by the Revenue Commissioners not later than the date specified in the certificate issued and not earlier than the date set out in the regulations made under subsection (2E).

(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 the certificate being revoked by the Revenue Commissioners, the producer company or qualifying company failing 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.

(3A)(e) Where an inspector makes 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)(a) 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)(b) 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)(c) 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)(d) 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)(e) Section 626B shall not apply to the disposal by the producer company of shares in the qualifying company.

(3B)(f) 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.

(3C) The Revenue Commissioners shall not pay a specified amount to a producer company in respect of a film certificate issued after 31 December 2020.

(22A) The various functions within the remit of the Revenue Commissioners, in particular the certification of qualifying films, may be delegated to an authorised officer of the Revenue Commissioners.

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.

Relevant Date: Finance Act 2019