Exclusive: What Spain’s new tax incentives mean for int’l production

Foundation

Spain and its regions have made headlines with new tax incentives schemes to attract global productions. Irene Jiménez makes sense of what’s on offer for international companies.

Italian filmmaker Sergio Leone’s spaghetti western movies might have landed in Almería 50 years earlier, but it was Game Of Thrones that ultimately put Spain on the international map of audiovisual production.

The HBO drama was shot in different locations between seasons five and eight, with Madrid-based VFX firm El Ranchito creating the white walkers crowd and Khaleesi’s dragons in season seven.

And while Game Of Thrones became a calling card for Spain’s production industry, it also convinced local authorities to create an attractive tax incentive system. After years of negotiations, 2023 has borne some considerable fruit, with the country’s film and TV industry now recognised as a strategic economic sector by the Spanish government.
Sorting out the specifics

From 1 January, any foreign producer shooting in Spain can benefit from a 30% tax rebate for the first €1m ($1m) of deductible expenditures, and a 25% rebate beyond that. It applies to films and series, and is valid across live-action or animation, fiction or documentary (see box-out on page 24 for more details).

What makes Spain’s incentive schemes more complicated, but also so competitive, is that aside from the national program, there are three territories with their own tax laws and higher tax rebates.

Basque Country and Navarre offer a 35% via tax credit, while the Canary Islands grant a 50% tax rebate for the first €1m and 45% onwards. In the case of the archipelago, the cap of the deduction is €36m for each production, while for TV series, the cap is €18m per episode, with no limit on the number of episodes.

And the islands have already proven alluring to producers. In recent years, high-budget series such as Apple TV’s Foundation, Netflix’s The Witcher and Prime Video’s Jack Ryan have chosen the Canary Islands to shoot.

Both Gran Canaria and Tenerife have also become attractive animation hubs, with several studios serving European and US productions such as Netflix’s Arcane and Disney’s Tara Duncan. The Canary Islands Special Zone (ZEC) also allows companies to set up in the region at a reduced rate of 4% on corporate income tax, which is compatible with the previously mentioned tax relief schemes.

The Witcher

Race for rates

While that might sound tempting, Bizkaia, a province in the Basque Country, has decided to increase its bet with a 60% tax credit for national and international productions, if expenses in the territory surpass 50% of the total production cost.

The tax credit will be 50% if expenses are between 30-50%; and 40% if expenses are 20-30%. Bizkaia also offers a 35% tax credit overall and an additional 10% if the production is shot in the Basque language.

The consequences of these game-changer tax credits are yet to be seen – the territory totals only 2,200 square kilometres – but several national companies are already establishing tax residence there to benefit.

As the race to compete hots up, Guipúzcoa and Álava, the other two Basque Country provinces, are also revising their tax laws in order to put them at the same level as Bizkaia, retroactively since 1 January, 2023. And these regions have form in production: Game Of Throne’s castle, Dragonstone, was set in San Juan de Gaztelugatxe (Bizkaia), and Disney+’s upcoming series Balenciaga, the biopic of the famous haut couture designer, has been shot mainly in the Basque Country.

“Spain is a decentralised country, that is why we have different tax laws, and that is why I am almost hoarse at the end of international markets such as MIPCOM or AFM, after days spreading the word about our tax advantages”, says a smiling Fabia Buenaventura, head of the Audiovisual Department at ICEX Invest in Spain, the public agency that boosts the internationalisation of Spanish companies and helps international companies to establish in Spain.

Buenaventura adds that questions about shooting in Spain have increased significantly since December 2022, when the hike in the tax rebate was confirmed, “especially from producers based in the US, the Nordics, Germany, Australia and South Africa.”

Spain, she adds, is now competing on the international stage to secure productions, with an eight-part drama with a €3.5m budget per episode (€28m in total) being able to benefit from a €7m rebate, considering the national rate of 30% (if all expenses are eligible).

First steps…

There are two essential requirements for being able to access the Spanish tax rebate system: the first is hiring a Spanish production service company; and the second, is having the Spanish Cultural Certificate granted by the public Institute of Cinematography and Audiovisual Arts (ICAA is its Spanish acronym). Employing a percentage of local staff, as long as they are residents of the European Economic Area (EEA), is another requirement to keep in mind.

And while a 30% tax rebate may not sound mind-blowing – it is about average for Europe but below the 40% of Italy and Greece – Spain is compensating this with more measures.

There is a greater level of legal certainty and a new legal framework that simplifies the administrative procedures for granting visas to professionals and their families. The latter is especially attractive following the difficulties introduced by Brexit in the UK, which is a traditional hot spot for international productions. Spain also has international co-production agreements with 18 countries and has always tended to be a cost-effective country compared to the rest of Europe.

Spain has also developed a consolidated and growing network of production service companies. Earlier this year, three national prodcos – Bambú Producciones, Filmax and Brutal Media – launched a service division and joined Profilm, the association of international production service companies with more than 15 members, representing 90% of the whole sector.

“Spain was one of the first countries in the world to resume film and TV production after lockdown”, adds Fernando Victoria de Lecea, president of Profilm.

Although it does not have any special tax rebates, the region of Madrid concentrates the highest number of production service companies and crew members, behind and in front of the camera.

Indeed, the biggest European production hub for Netflix is located in the region, with ten sets and post-production facilities. There is also Peris Costumes, a globally known costume rental firm with 11 million garments in its catalogue, some of which have appeared on shows such as The Crown and Emily In Paris.

Game Of Thrones

Further expansion

With a new national tax incentive scheme, and competitive rates on a regional basis, Spain is finding itself with increased demand.

As this grows, and following requests from many international producers, the Spanish public and private sectors are now working on new studio facilities. One of the latest openings is Gran Canaria Studios, a 6,000 sqm audiovisual complex, made up of two sets with attached facilities, built by the regional government of the island after a €9.6m ($10m) investment.

Gran Canaria Studios will have a virtual production studio in the coming months, thanks to the NextGeneration EU funds. The public recovery plan, which aims to transform European economies, will allow more virtual production stages to be set up in other parts of the peninsula, such as Galicia and Murcia. There are also ambitious projects in the works in Madrid and Barcelona to host a virtual production studio.

Also preparing its relaunch is Ciudad de la Luz, the film studio located in Alicante that has been closed for ten years following a suspension imposed by the European Union for the illegal financing of its construction. The regional government achieved a shortened sanction and it is now reopening its 120,000 sqm facilities, divided into six sets, including a water tank.

For international producers, key contacts can be found at the Spain Audiovisual Bureau, a one-stop shop, available online and on the phone, that provides information about shooting in the country. There is also the Who Is Who Guide – Shooting In Spain, an annually updated directory of national service companies. The Spain Film Commission, a network of 41 film offices and film commissions, also cover the country and can offer assistance.

There are, of course, challenges too. In line with the recent international boom of film and TV production, Spain is suffering from crew shortages and teams with agendas booked up months in advance.There are also concerns that life is becoming more difficult for domestic productions, as national producers – not so interested in a service economy – ask for more protection.

Nevertheless, Spain is open for business but, as a piece of advice, prepare your shooting in advance.