Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

261. To ask the Minister for Finance the process by which a percentage of the section 481 tax relief for film production can be obtained up front in advance of production; and the way that this is calculated by headings (details supplied) in tabular form. [53459/22]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Deputy will be aware that prior to 2015, film relief took the form of an income tax relief which provided an incentive to individual taxpayers to invest in Irish film production. The income tax scheme allowed investors in a qualifying Irish film to claim an income tax relief on their investment, once the film had been certified by Revenue and filming had commenced. In general, this was claimed by individuals against the higher income tax rate (which was either at 40% or 41% during the time this scheme operated).

From January 2015 the scheme was amended to provide relief to production companies as a credit against corporation tax. From 2015 to March 2019 the producer company applied to Revenue with a comprehensive set of information supporting the filming, post-production and financial plan for the film for certification under section 481. Revenue extracted the cultural and employment aspects of the application and forwarded same to the then Department of Culture, Heritage and the Gaeltacht for consideration. Once an authorisation was received from the Department, Revenue would scrutinise in detail the budgets and other financial aspects of the proposed claim to confirm the expected value of film tax credit and issue a certificate to this effect. The credit could be claimed by the company in one of two ways. Firstly, in two installments with an upfront claim of 90% of the expected credit based on budgeted expenditure during the production of the film, followed by a balancing payment on completion of the film based on actual spend. Alternatively, once certified, the production company could wait and claim the credit in one payment after completion of the film on submission of the compliance report.

As part of this 2015-2019 claiming mechanism, Revenue examined applications based on budgeted expenditure to certify the value of the initial 90% that could be claimed up-front. Upon completion of the film and receipt of the compliance report, Revenue conducted another full examination of the actual expenditure incurred before certifying the balancing 10% of the claim. This process meant that Revenue adjusted the value of the claim where it was incorrect. In this manner Revenue verified that the amount claimed was correct. Therefore there was no incorrect amount claimed to which interest and penalties could apply.

The relief was amended through Finance Act 2018. Applications for section 481 relief are now sent directly to the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media (DTCAGSM), who are responsible for certifying that the film is a qualifying film for the purpose of the credit. An application for certification must be made in writing to the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media at least 21 working days prior to the commencement of the Irish production. If DTCAGSM are satisfied that the application meets the cultural and industry development requirements set out in the Regulations, the film will be issued with a certificate to be treated as a qualifying film.

Should a production be certified by the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, a producer company may claim the film corporation tax credit on a self-assessment basis through its corporation tax return (Form CT1), provided it has met all the other procedural and financial requirements of the relief. The producer company is required to have extensive documentation available to support the value of the claim. This documentation is set out in Schedules 2-5 of the Film Regulations 2019.

There are two options available to claimants when claiming the credit. A claimant may claim 100% of the credit based on actual expenditure. This claim must be made within 6 months of completion of the production. Alternatively a claim can be made during the course of the production. In this scenario the claim is made in two instalments. The first part of the claim may be made for 90% of the credit based on budgeted expenditure. The balance of the claim is calculated based on actual expenditure, and must be claimed within 6 months of completion. As the relief is now claimed on a self-assessment basis, any claim may be subject to review in future in accordance with Revenue’s Code of Practice for Revenue Audit and Other Compliance Interventions.

With regard to the Deputy’s request for detailed project-level data, I am advised by the Revenue Commissioners that the tax affairs of individual taxpayers cannot be disclosed due to the obligation to protect taxpayer confidentiality as provided for by section 851A of the Taxes Consolidation Act, 1997. Section 851A(8A) only permits Revenue to disclose specific taxpayer information in relation to recipients of section 481 film tax credit in line with requirements under the European Cinema Communication C332/01. As a result, the Revenue Commissioners cannot provide the detailed data requested by the Deputy. Details of beneficiaries of section 481 are published, and updated on a quarterly basis at: www.revenue.ie/en/companies-and-charities/reliefs-and-exemptions/film-relief/beneficiaries-film-relief.aspx.

My Department also published a Cost-Benefit Analysis of the film tax credit in advance of Budget 2023, which is available online at: www.assets.gov.ie/236353/40880d90-4a34-41e0-8692-076da43f813b.pdf. This report provides information at aggregate level on employments in productions supported by the section 481 tax credit.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

262. To ask the Minister for Finance the work that has been undertaken to ensure that section 481 tax relief complies with both the culture test and industry development test required under European Union state aid rules; and the engagement between his Department and the European Commission on this matter since 2012. [53460/22]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In order to qualify for Section 481 relief, an application for certification must be made in writing to the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media at least 21 working days prior to the commencement of the Irish production. In considering whether to issue a certificate in relation to a film, the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media will consider whether the film will either or both:

i. act as an effective stimulus to film making in the State through among other things, the provision of quality employment and training and skills development opportunities (referred to as ‘the Industry Development test’); and

ii. be of importance to the promotion, development and enhancement of the national culture including, where applicable, the Irish language (referred to as ‘the Culture test’).

With every Section 481 application, a producer company must demonstrate how, in promoting, developing and enhancing culture, the project will act as an effective stimulus to film making in the State through, among other things, the provision of quality employment and training opportunities. Detailed information is required concerning the film’s production schedule, production budget, key personnel and employment information.

All applications must also include a Skills Development Plan. For all projects with eligible expenditure in excess of €2 million, a copy of the Skills Development Plan are submitted to Screen Ireland for approval.

DTCAGSM conduct an in-depth examination of the information supplied as part of the Section 481 application. As part of the certification process DTCAGSM officials review how the production has identified the skills needs that will be addressed through the skills development plan. DTCAGSM also check what type of skills activity, training courses and mentoring / shadowing activity will be completed as part of the skills development plan. DTCAGSM examine the curriculum vitaes of the Heads of Departments (e.g. Producer, Director, Writers) to ensure there is a strong track record of experience and expertise in the industry which can be passed on to the less experienced individuals on the production.

Applicants must also complete an undertaking in respect of quality employment. This undertaking commits applicants to compliance with all relevant employment legislation and to have in place written policies and procedures in relation to grievances, discipline and dignity at work (including harassment, bullying and equal opportunity). These conditions shall be met by both the producer company and the qualifying company. If an applicant does not comply with the employment and skills development requirements set out by the Minister, they may not be eligible for the corporation tax credit. Any amount already claimed may be recoverable, with interest.

To ensure aid is provided to projects which promote European culture, the scheme must have an effective verification mechanism in place. The mechanism applicable to Section 481 is the Culture Test. As part of the application to DTCAGSM, applicants must demonstrate how the project will be of importance to the promotion, development and enhancement of the national culture.

If the application is successful, the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media will issue a certificate to the applicant.

Both the Department of Finance and the DTCAGSM have engaged with the European Commission in recent years in relation to Section 481.

Prior to 2015, the scheme operated by giving tax relief to individuals investing in the film industry. From 2015 the scheme provides direct support to film producer companies in the form of a tax credit. DTCAGSM engaged with the European Commission to seek approval for this amended relief structure. In October 2014 the Commission published its decision to approve the aid and the new relief came into operation from January 2015.

In 2017, Section 481 was reviewed by the Directorate-General for Competition of the European Commission as part their ex-post monitoring of aid measures implemented by Member States. This review examined whether the scheme respected the provisions of the applicable aid rules and the Commission’s decision to authorise the aid. The review also included a sample of individual aid awards granted under the scheme. Following this monitoring, DG Competition considered that the scheme and the individual aid granted on the basis of the scheme was in line with their prior decisions with regard to its operation.

Finance Act 2018 amended the certification process for the relief, introduced a short-term, tapered regional uplift for productions made in areas designated under the State aid regional guidelines, and extended the availability of the relief to 31 December 2024. The extension of the relief and the introduction of the regional uplift was subject to European Commission state aid approval, which was received in June 2019.