The film industry has always been associated with established places like Hollywood or Bollywood. During the past few years, we have seen other global destinations becoming more favourable as they provide new and diverse locations for movie productions. At the same time, a variety of tax incentives programmes in regard to the film industry has been developed in many countries of the world.
The variety of benefits in the film tax incentive schemes can be seen in many formats for qualifying productions. Here, at Michael Kyprianou & Co LLC, we have examined the advantages of such film productions taking place in Cyprus by looking into the Cyprus Filming Scheme and its benefits.
The Cyprus Filming Scheme was introduced in 2018 through the initiative of the Government of the Republic of Cyprus. Its primary aim is to attract international producers and filmmakers, so as to place Cyprus on the map, as a state-of-the-art production hub and as a natural filming studio, taking into consideration the geostrategic location of Cyprus at the crux of the busy shipping and air routes, which links three continents, Europe, Africa and Asia.
In addition, the rich history and diversity in culture, natural filming locations and more than 300 days of sunlight are just some of the advantages which the island has to offer and hence a package of financial incentives was put together.
The Cyprus Investment Promotion Agency (CIPA) gives production companies from across the globe the opportunity to choose between cash rebates and tax credits, tax allowances for equipment and infrastructure investments, as well as VAT refunds on qualified income.
The Cyprus Filming Scheme is very straightforward as the production categories qualifying for these incentives include:
With regard to the four categories of the incentives of the Filming Scheme, below is a clear synopsis:
Cash Rebates: Up to a 35% rebate on eligible expenditures occurring in-country is granted. The minimum expenditure (provided it does not exceed 50% of the total production budget) needs to be at least:
The target is also for the production to promote culture in a local, European and International level through a cultural test criterion.
Tax Credit: The production companies may receive a reduced corporate tax rate. The maximum aid shall represent 35% of eligible expenditures made in Cyprus. (minimum expenditure is the same as that of Cash Rebates).
The sum of the tax credit cannot be greater than 50% of the total taxable yearly income in which the production is made. The tax credit can be carried forward within the next five years as long as it does not exceed the 50% restriction.
VAT Refund: VAT refunds are granted for qualifying expenditure incurring in Cyprus and in relation to the implementation of the production.
Tax Allowance by Investment: Small and medium-sized enterprises investing in filmmaking infrastructure and equipment may be eligible to deduct the investment from the taxable income. This includes premises, studios, and film equipment.
The tax allowance aid cannot be greater than 20% of eligible expenditures for small enterprises and 10% for medium-sized ones. The equipment must remain in Cyprus for at least 5 years to be eligible for the tax allowance.
We have already seen films that were filmed in Cyprus which have won awards at major film festivals, such as the Major League movie “Jiu Jitsu”, starring Nicolas Cage, with an estimated amount of 25 million Euros for production costs.
Moreover, there are currently movies which were approved to be filmed during the first months of 2021 and this makes us believe that Cyprus can indeed become the next major filming location, where the words “Lights, Camera, Action!” will be heard more often.
Although Cyprus offers important tax incentives for the Film Industry, it is of high importance for any production company to receive the correct legal information and guidance for fulfilling all the steps, in order to qualify for the Cyprus Filming Scheme, while receiving assistance and support to ensure the success of the movie.
Michael Kyprianou & Co LLC has a large, dedicated and experienced team which is ready to assist film production companies to navigate these new film tax incentives, providing solid advice to production companies on the best options available in Cyprus.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, please contact Paola Hadjilambri at Tel +357 26930800 or via email Paola.Hadjilambri@kyprianou.com