Section 481, the Irish tax incentive for Film and TV production has changed to provide a leaner, higher benefit payable tax credit of 32% on Irish eligible expenditure.
1. Key aspects
The incentive is administered as a payable corporation tax credit (Section 481) to a Producer Company (PC) in respect of Irish eligible expenditure incurred by an Irish subsidiary special purpose vehicle, defined as the Qualifying Company (QC). The value of the Section 481 tax credit is 32% of the lower of:
- 80% of the total cost of production;
- eligible Irish spend; and
1.1 Producer Company (PC)
A PC is a company that:
- is tax resident in Ireland, or an European Economic Area (EEA) tax resident company trading in Ireland through a branch or agency;
- has carried on a trade of producing films for at least 21 months prior to making an application to Irish Revenue;
- is not a broadcaster or connected to a broadcaster; or
- has filed the required tax returns with Irish Revenue for the qualifying period preceding the application.
1.2 Qualifying Company (QC)
The QC is a company incorporated and resident in Ireland set up to produce one qualifying film. The QC must be a wholly owned subsidiary of the PC.
2. Eligible expenditure
Eligible expenditure is defined as spend incurred by the QC:
- on ‘eligible individuals’ - defined as any individual (regardless of nationality or where they are tax resident) who is employed by a QC for the purposes of the production of a qualifying film; or
- on goods, services or facilities purchased from a business, where the company/sole trader operates from a fixed place of business in Ireland.
Where the QC employs an eligible individual and pays that individual directly, in respect of work carried on in Ireland, on the production of the qualifying film or where the QC makes a direct payment to a self-employed individual and that individual provides only labour, this expenditure will also be eligible expenditure, in relation to activities performed in Ireland.
3. What kind of projects qualify?
The following types of projects qualify when produced on a commercial basis with a view to the realisation of profit:
- a feature film;
- a television drama series;
- an animation feature film or TV series; and
- a creative documentary (subject to certain criteria).
The qualifying film produced must be made for exhibition to the public by means of theatrical release or broadcast.
4. Payment of the Section 481 tax credit
There are two options available to claim payment of the Section 481 tax credit:
- by instalments; or
- one payment on completion.
4.1 Payment by instalments
First instalment – a maximum payment of 90% of the Section 481 tax credit amount following the submission of a full Section 481 application and the happening of one of the following events:
- Irish Film Board (IFB) advise Irish Revenue to release payment (where IFB are a funder);
- confirmation that there is a guarantee or surety bond in place; or
- confirmation/sign off from a solicitor and a firm of chartered accountants that all funding contracts are in place and that 68% of the eligible spend has been made available to the production.
Second instalment – the balance of the Section 481 tax credit is paid within 30 days of the submission of a full compliance report as set out in the Film Regulations 2015 (i.e. after full delivery has taken place).
4.2 Payment on completion
If the Section 481 tax credit is not paid in instalments, it will be approved and paid within 30 days of submission of a full compliance report to Revenue as set out in the Film Regulations 2015 (i.e. following delivery).
To obtain payment of the Section 481 tax credit, the PC must amend the corporation tax return for the qualifying period (the accounting period of the PC immediately preceding the date of the application). It is treated as an overpayment of corporation tax and in that regard, the payable Section 481 tax credit is first offset against any outstanding tax liabilities of the PC. The excess should be received within seven days of the submission of the return, provided either full compliance has been received or the relevant conditions for a 90% payment have been adhered to.
5. ‘Artiste’ withholding tax - 20%
- applies to artistes (actors) not tax resident in EU/EEA;
- extension of definition of eligible expenditure;
- QCs must deduct if claiming tax credit on expenditure;
- applies to loan-out companies; and
- artiste must supply details to confirm their tax residency.
6. Areas to note that may require additional advice:
- taxation of individuals engaged in the Irish film industry and the operation of PAYE on foreign employees under foreign contracts of employment in Ireland;
- VAT 56B authorisations and group registration; and
- withholding tax on non-EU resident artistes/actors.
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