After ten years the Belgian regime of the tax shelter has been reformed. The amendments will be effective when the Law of 12 May 2014 amending article 194 ter of the 1992 Code of Income Taxes will enter into force.
The tax shelter for the production of audiovisual works has been so far an effective tool to strengthen the Belgian film industry and to attract investments in the country, although it has been criticized for the possibility to generate abuses and frauds. We remind that the tax shelter is in force since 2004 and is regulated by article 194 ter of the 1992 Code of Income Taxes.
In order to increase transparency of the system, to avoid distortions and misconducts by investors and to prohibit investors from exploiting the produced work from the financial point of view, the Belgian Parliament enacted the Law of 12 May 2014 amending the tax shelter system.
In summary the most important features of the reform are that:
- The tax shelter has been extended to European audiovisual works, including short films;
- The investors cannot receive rights on the revenues of the work, as said above;
- The tax value of the tax shelter certificate (see below) is set at 70 % of the real production costs incurred within the European Economic Space. A part of this value must correspond to direct and indirect costs incurred in Belgium;
- A preliminary tax exemption equal to 310 % of the sums that the investor has paid in execution of the framework agreement (see below) is foreseen if some conditions are met and modalities are respected. The preliminary exemption is limited to 150 % of the expected tax value of the tax shelter attest based on the planned budget as described in the framework agreement;
- The framework agreement between the producer and the investor(s) plays a pivotal role in the new tax shelter system. Other than containing the abovementioned information and elements, the framework agreement must be registered with the federal tax authorities within one month from signature;
- The granted tax exemption for each investor is limited to 500.000 € per taxable period and to 750.000 € per year;
- Both the producing company and the intermediaries (i.e. the third parties that assist the investor in obtaining the tax exemption) must be licensed by the Minister of Finance, based on procedures and conditions that will be set forth in an ad-hoc Royal Decree;
- The tax shelter certificate is provided by the federal tax authorities based on the qualifying costs for the production of the audiovisual work. The value of the tax shelter certificates granted for each work that is produced is limited to 15 million €;
- The tax shelter certificate can be assigned to another investor or it can be divided and assigned to a plurality of investors, provided that the investor(s) sign(s) a framework agreement and pay(s) the sums indicated in the agreement within 3 months from the signature;
- The signature of the framework agreement is the starting point of a period of 18 months for the effective performance of the costs for the production of the work;
- The tax benefit becomes definitive when the tax shelter certificate is issued as said above, at the latest on 31 December of the 4th year following the year of signature of the framework agreement.
The law amending the tax shelter regime will enter into force on the first day of the second month following the preliminary approval of the law by the European Commission and it will apply to framework agreement signed as from that day.
