The Italian legislature has established several measures in favour of the cinema and audio-visual sector and a mandate has been given to the Government to reform some sector laws, assimilating – in some cases – video games and audio-visual products with film products. Among other innovations, a new law introduces, with effect from 2017, new tax benefits based on the instrument of the tax credit and indicates the main rules and areas of application. However, it is not yet clear to what extent video game companies will actually benefit from the new schemes.
The new Law dated 14 November 2016, n. 220 – “Discipline of cinema and audio-visual” (16G00233 – published in the Official Gazette, General Series n. 277 on 26 November 2016 with entry into force on 11 December 2016) provides for a number of tax benefits to be newly created or extended to various companies involved in the creation of „audio-visual works“:
- Film and audio-visual production companies (imprese di produzione cinematografica e audiovisiva) : tax credit of not less than 15% and not exceeding 30% of the overall cost of production of cinematographic and audio-visual works.
- Distribution companies of films and audio-visual works (imprese di distribuzione cinematografica e audiovisiva) : tax credit of not less than 15% and not exceeding 30%, (or 40% in the cases expressly provided) of the overall costs borne for the national and international distribution of cinematographic and audio-visual works.
- Cinema operating companies (imprese di esercizio cinematografico) : tax credit of not less than 20% and not exceeding 40% of the overal costs borne for the realization of new screens or the making good of inactive screens, of the restructuring and structural and technological adjustment of cinema screens, for the installation, restructuring, renewal of plant, equipment, furnishing and accessory services to screening theatres.
- Technical and post-production industries (industrie tecniche e di post-produzione), including restoration laboratories: tax credit of not less than 20% and not exceeding 30% of costs borne for the updating of technology and structures within their businesses. In determining the percentage of the tax credit, the implementing decree will take into account, inter alia, the existence of the cinema screen prior to 1 January 1980.
- Italian executive production and post-production industries (imprese italiane di produzione esecutiva e di post-produzione): tax credit, in relation to cinematographic and audio-visual works or part of these realised within Italy, using Italian labour, at the commission of foreign production companies, in a sum of not less than 25% and not exceeding 30% of the costs borne within Italy.
Who is Eligible?
However, for the definition of the terms and conditions of the various benefits, the Law refers to one or more Ministerial Implementing Decrees to be issued within 120 days from the entry into force of the Law.
Once issued it will be possible to verify the extent of the tax benefit of the cinematographic and audio-visual sector and in particular to verify and measure the announced extension of the fiscal benefit to the video games industry.
In addition, a tax credit is attributed to businesses not falling within the cinematographic and audio-visual sector. In particular, the entities stated at art. 73 of the TUIR (income tax code) and those individuals with business income for the purposes of IRPEF, not operating within the cinematographic and audio-visual sector, established as joint ventures (associati in partecipazione) according to art. 2549 civil code are granted tax credits up to a maximum of 30% of their capital contributions for the production and distribution in Italy and abroad of cinematographic and audio-visual work. The maximum percentage is increased to 40% when the investment is made for the development and production of works that have received the selective contributions provided for by Law 220.