Tax incentives for the film industry
On 11 December 2018, an amendment to the Income Tax Law was published which provides certain tax incentives for the film industry as follows:
1) Tax exemption
A company involved in film production can enjoy a tax exemption of up to 50% of its taxable income.
The exemption is restricted to 35% of the “eligible expenditure” incurred by the company.
Any amount not claimed as tax deductible in the year the expenditure is incurred due to the restriction, can be carried forward and claimed in the following five years.
2) Tax deduction
Individuals, small as well as medium sized enterprises investing in film infrastructure and equipment are entitled to deduct the amount of the investment from their taxable income in the year of the investment.
The tax deduction cannot exceed 20% of the “eligible expenditure” for individuals and small enterprises and 10% for medium sized enterprises.
The tax deduction is given provided that the investment in equipment would need to remain in Cyprus for at least 5 years.
Any amount not claimed as tax deductible in the year the expenditure is incurred due to the restriction, can be carried forward and claimed in the following five years.
Alternative to tax exemption.
Cash rebate instead of tax exemption
As an alternative to the tax exemption, companies can claim a cash rebate of up to 35% of “eligible expenditure” incurred in Cyprus.
The maximum annual cash rebate cannot exceed €650.000 per production and €1.500.000 for all productions.
The final percentage of the rebate will be determined based on a “cultural test” that takes into account certain criteria like the participation of local actors, the use of the Greek language and highlighting Cypriot culture in the production.
VAT refund on eligible production expenditure
Companies and individuals from third countries incurring “eligible expenditure” on film productions, are entitled to a VAT refund in the same way as those from EU Member States in accordance with the EU Directive 9/2008.
The refund shall arise within 6 months from the end of the last deadline for submitting the VAT declaration for the period during which the expense occurred, or from the date on which the application for the VAT refund is filed.
