The financial prospects of the lucrative film and TV industry has been on the Cyprus Government agenda for the last few years as it is evident that the island offers unique qualities when it comes to film production.
The Cyprus government has approved recently a scheme to attract overseas productions offering tax incentives to production companies. The scheme aims not only to attract investments in Cyprus, but also to serve as a medium for promoting the islands great advantages in terms of local professionals, climate, short distances and ease of access to various locations.
Drafting the scheme has been a joint effort of the Unit of Administrative Reform in cooperation with the Ministry of Finance and the Cyprus Investment Promotion Agency (CIPA). The task is undertaken in an effort to utilize the scheme in harnessing the competitive advantages of the island as an investment destination.
The investment scheme offers tax incentives and redemptions and subsidies to encourage production companies that opt to film in Cyprus. The eligible companies can choose either a cash rebate or a tax credit and take advantage of offered tax discounts on investments made on equipment, infrastructure, and VAT returns on expenditure.
The production categories that qualify for incentives are:
- Feature Films – Long Films
- Television film or Television series or mini series
- Digital or analogue Animation
- Creative documentaries
- Transmedia and Crossmedia productions
- Reality programs which directly or indirectly promote the Republic of Cyprus and its culture.
The Incentives are:
- The Cyprus Filming Scheme
- A variety of tax incentives for corporate companies and individuals
- An attractive IP regime
According to CIPA, the Cyprus filming scheme offers:
Cash rebate: Rebate of up to 25%-35% on eligible expenditures incurred in Cyprus. The amount granted will depend on the score of the production at the cultural test. The rebate will be given once filming is completed, on receipt of the audit report and its review by the committee.
Tax Credit: The maximum aid, as a reduction of applicable corporate tax for the Applicant, shall represent 35% of the eligible expenditure made in the Republic of Cyprus. The sum of the tax credit against the taxable income shall not exceed 50% of the Applicants’ taxable income for the tax year within which the production is made.
The tax credit, to the extent that it is not granted due to the above percentage restriction, shall be carried forward and be given within the next five years, subject to the above percentage restriction.
Tax Allowance for investment in infrastructure and equipment: Any small and medium-sized enterprise subject to a tax liability in Cyprus investing in film production infrastructure and technological equipment shall be entitled to deduct the amount of its investment from its taxable income.
The aid may not exceed 20% of the qualifying production expenditures in the case of small enterprises and 10% of the qualifying production expenditures in the case of medium-sized enterprises. Investment in the case of equipment should remain in the territory of Cyprus for a period of at least 5 years.
Return of VAT on expenditure
For qualifying production expenditures incurred in Cyprus by natural or legal persons from third countries and which are related to the implementation of productions, the company is entitled to a refund of VAT.
VAT returns arise within 6 months with respect to the legal person which carries out the foreign filming in Cyprus from the end of the last deadline for submitting the VAT declaration for the specific VAT period during which the expense occurred or from the date on which the application for VAT return is filed.
The application process is as follows:
- Submission of online application
- Temporary Approval Certificate
- Review by Committee
- Issuance of Approval Certificate within sixty (60) business days from the expiration date of the period for submission of applications
- Completion of Filming
- Submission of certified auditor report
- Issuance of Final Approval Certificate (FAC
- Bank transfer within 90 business days from the FAC date of issuance
PHS & Partners has the expertise, technical knowledge and know-how to help all entities that require high quality and dedicated Tax and Accounting advice and service. PHS operates a separate Accounting/VAT department led by VAT and IFRS specialists who can provide advice and technical guidance to all clients.
We can help your company prepare all the necessary financial documents and certified auditor report necessary to gain your qualification for the Filming scheme.
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