The Belgian Tax Shelter is an efficient and transparent government-approved tax incentive designed to encourage the production of audiovisual works in Belgium. The system is open to Belgian productions, as well as to qualifying European and international co-productions with Belgium.
Type of Projects
European co-productions such as animation, documentary and fiction features, medium-length and short films qualify for the system, as well as animation and live-action series, telefilms and TV documentaries. These can be intended for cinema exhibition or television and multimedia (VR, web series, documentary web) broadcasting (or screening) and need to be certified as a European work, as defined in the Audiovisual Media Services Directive (2010/13/EU).
International co-productions such as animation, documentary and fiction features intended for cinema qualify, provided that they fall within the scope of the Audiovisual Media Services Directive (2010/13/EU) or within the scope of a bilateral co-production agreement concluded by Belgium (or one of the country’s communities) with another state.
How does it work?
The benefit of the system is based on the amount of direct and indirect qualifying audiovisual costs the production will spend in the European Economic Area and in Belgium. By investing in the audiovisual production, investors can obtain Tax Shelter certificates from the Ministry of Finance that allow them to get fiscal deductions.
The value of all the Tax Shelter certificates issued for one audiovisual work may not exceed 15 million euros and is limited to 70% of the qualifying audiovisual costs of the production in the European Economic Area.
In order to achieve an optimal return on investment, the investor will invest 48.218% of the Tax Shelter certificate’s audiovisual expenditure value in the production. Through their Tax Shelter Certificate, the investors benefit from a temporary tax exemption of any retained taxable profits (with limits). Investors also receive a return on the sums paid to the producer; the applied rate is based on the Euribor 12-month rate augmented with 450 basis points. The investors must make full payment within three months of signing the framework agreement. They thus pre-finance the production and/or post-production costs in return for a temporary tax exemption.
Investors can be approached directly by certified producers to arrange investment under the Tax Shelter, which will involve some legal work. An alternative is for the producer to work with an intermediary company certified by the Belgian authorities. The intermediary will match potential investors with productions and handle all the paperwork. In return for these services, the intermediary charges a fee to the producer.
Once the audiovisual work has been completed, the Ministry of Finance delivers the final Tax Shelter Certificate based upon the audited expenditure.
It is a win-win-win situation for the three parties involved: the producer is offered a very attractive way to finance and cash-flow projects; the investors obtain a tax exemption through a virtually risk-free investment; and the Belgian state benefits from increased economic activity and spending.
What's the advantage for the producer?
If we take the example of a production with a 2 million euros direct and indirect qualifying audiovisual spend in the European Economic Area, this means that Tax Shelter Certificates can be issued for a total value of 70% - in this case 1,400,000 euros. Of this expenditure, 90% (1,260,000 euros) needs to be spent in Belgium on qualifying audiovisual costs, of which a minimum of 70% (882,000 euros) needs to be directly related to the production and/or post-production of the audiovisual work.
To acquire the optimal investment rate (48.218%), the investors will invest a total of 675,052 euros in the production in return for Tax Shelter certificates with a total value of 1,400,000 euros of qualifying expenditure.
In order to find potential investors and deal with the framework agreement and legal documents, a producer may hire the services of an intermediary company. In return for its services, the intermediary will charge a fee, in this example 15% or 101,258 euros.
In addition to a tax benefit, the investor also earns a return on the sums paid to the producer. The return percentage is defined by the Euribor interest rate (in this example -0.439% over 12 months) augmented with 450 basis points x 18 months/12, in this case 41,121 euros.
The net advantage of the Tax Shelter Certificate for the producer comes to 675,052 euros - 101,258 euros (commission) – 41,121 euros (return) = 532,673 euros = 42% of the qualifying audiovisual spend in Belgium.