Belgian Tax Shelter

An incentive for investments in audiovisual productions

The Tax Scheme

• A fiscal incentive to encourage companies to invest a share of their pre-tax profits in a European audiovisual production.

• Maximum exemption is 50% of pre-tax profits or € 750.000 per annum per company.

• Deduction from pre-tax profits for the investor of 150% of the invested amount.

• Covering a maximum of 50% of the production budget.

• Spending obligation in Belgium of 150% of the invested equity.

The Investor

• Legal Structure– Belgian corporation– or foreign corporation with a stable taxable branch in Belgium– not private investor and not audiovisual company

• Investment– maximum of € 500,000 per annum per company– can be split into a minimum of 60% equity and a maximum of 40% loan– can be invested in one or several audiovisual productions– in European Audiovisual Work not in audiovisual companies

• Deduction from pre-tax profits of 150% of the total investment• Framework Agreement with Belgian production company

The Producer

• Legal Structure– Belgian corporation

– activity of audiovisual development and production

– not broadcaster and not company related to one

• Investments– maximum of 50% of budget of audiovisual production

– can be split into a minimum of 60% equity (production finance) and a maximum of 40% loan (cash flow)

– several investors per production possible

• Spend in Belgium must be 150% of equity investment

• Framework Agreement with Investing Companies

Eligibility of Audiovisual Productions

• Certificate confirming access to tax shelter finance– from Flemish Community or French Community of Belgium

– Criteria:• Belgian production company

• European Audiovisual Work “Television without Frontiers” Directive

as ratified by Belgium:– Fiction, documentary or animation for theatrical release

– Animated series for television

– Documentary for television

– Long form fiction for television

– Children series (educational and cultural content)

The Framework Agreement

• Name and purpose of both companies

• Name and description of the audiovisual work

• Amount and nature of the investment– part loan (max. 40% and not to be provided by bank)

– part equity

• Breakdown financing plan investor / producer

• Breakdown budget Belgian expenditure

• Reimbursement / Profit participation investor

• Investor’s commitment to limit:– investment to 50% of pre-tax profits

– part loan to 40% of investment

• Producer’s commitment to finalize production within 18 months after signature

Summary

Pre-tax Profit investor

InvestmentInvestment

Loan

100

Production Budget

Tax Deduction

Spend in Belgium

= 100 x 150% x 34%

= max. 50%= max. 50%

Corporate tax = 34 %

= 30%

= 45%

200200

51

90

40

x 150%

x min. 60% x max. 40%

Equity

60

Tax Savings

Pre-tax Profits (a) 200 Corporate Tax* 68

Investment 100

Tax deductible (b) 150

Pre-tax Profits (a-b) 50 Corporate Tax* -17

* Corporate Tax = 34%Tax Savings 51

Investor pays corporate tax

Investor invests in film

Investor’s Risk

Initial investment 100 100

Tax Savings* -51 -51

Reimbursement Loan** 0 -44

Risk Investor 49 5

% Risk Investor 49,00% 5,00%

* cfr previous** reimbursement with interest after 18 months

WithTax Shelter 100% equity

With Tax Shelter

40% loan - 60% equity

Equity

Production Cash Flow

BudgetBudget

100

Loan

Producer

2030

50

30

- Producer has 70% covered

- Needs an additional 30%

- Needs cash flow

20Guarantee

50Cash Flow

+

Investor

70