Introduction
By decision number 1433/2017 of 27 September 2017, the Council of Ministers approved the Filming Scheme to promote the film industry and establish the Republic of Cyprus as a filming destination. The scheme is a policy framework based on development, financial and tax incentives and on the applicable Commission Regulation. It carried an annual budget of EUR 25 million.
The Committee’s Assessment Criteria
A dedicated committee assesses applications and determines the aid granted. In particular, the committee:
- Assesses producers’ proposals for aid based on the economic and cultural benefits for the Republic of Cyprus
- Recommends the amount of production expenditure satisfying the pre-requisites for a cash rebate or the issuance of a tax credit certificate
- Recommends tax deductions in relation to eligible infrastructure and equipment expenditure and investments meeting the criteria for a tax deduction certificate
- Determines the relevant requirements and pre-requisites
- Determines whether an applicant satisfies the pre-requisites of the initial and final applications for the cash rebate or tax credit certificate on completion of production
Types of Proposal Considered
A wide range of audiovisual productions may be examined for support:
- Cinematograph films (long films), including direct-to-video, of at least 60 minutes, or 45 minutes for large-format (IMAX) films
- Television films (drama)
- Television series or mini-series
- Digital and/or analogue animation
- Creative documentaries
- Transmedia and crossmedia productions
- Reality programmes which directly or indirectly promote the Republic of Cyprus and its culture
The Incentives
Cash Rebate
The annual available sum for this aid shall not exceed EUR 25,000,000, granted on the following basis:
- Maximum aid of 35% of the eligible expenditure made in the Republic of Cyprus
- Minimum expenditure in Cyprus of at least EUR 200,000 for feature films, EUR 100,000 for television drama series or self-contained drama films, EUR 50,000 for documentaries, and EUR 30,000 for other television programmes — in each case not exceeding 50% of the total production budget
- Applicants must satisfy cultural criteria ensuring the aid promotes Cypriot, European and/or world culture
- The aid is payable on completion of shooting following an accounting check of the eligible expenditure, with payment made within 90 business days of the issuance of the Final Approval Certificate
Tax Credit
As an alternative to the cash rebate, the tax credit provides a reduction of the applicable corporate tax:
- Maximum aid of 35% of the eligible expenditure made in the Republic of Cyprus
- The same minimum expenditure thresholds as the cash rebate apply, again capped at 50% of the total production budget
- The applicant must satisfy the cultural criteria
- The sum deducted from taxable income shall not exceed 50% of the applicant’s taxable income for the relevant tax year; any excess is carried forward and paid within the next five years, subject to the same percentage restriction
- The tax credit is not transferable to any third person and ceases to have value in a voluntary or involuntary liquidation or dissolution of the applicant
Tax Deduction for Infrastructure and Equipment
Applicants investing in film production infrastructure and technological equipment — such as studios, audiovisual processing premises, filming equipment and digital audiovisual means — may deduct the investment from their taxable income, subject to conditions:
- The aid cannot exceed 20% of eligible expenditure for small enterprises and 10% for medium-sized enterprises
- Equipment must remain within the Republic of Cyprus for at least five years
- Eligible expenditure comprises investment in tangible and intangible assets
- Directly created jobs must be created within three years of completing the investment, represent a clear increase over the average of the preceding twelve months, and be preserved for at least three years
Return of VAT on Expenditure
VAT rates in the Republic of Cyprus are 19%, 9% and 5% on products and services provided within Cyprus, and 19% and 5% on taxable imports. The applicant is entitled to a VAT return in relation to qualifying expenditure, as is every natural or legal person in an EU Member State.
The competent authority may study interstate agreements for mutual VAT return with countries including Russia, China, India, Ukraine, Canada, Australia, Japan, New Zealand, Thailand, Egypt and the United Arab Emirates, and may examine relevant measures for the United States, where only non-refundable sales tax applies. VAT returns arise within six months of the relevant deadline for the VAT period in which the expenditure occurred, or of the date the VAT return application is filed.
Eligible Expenditure
Eligible expenditure incurred in the Republic of Cyprus includes:
- Accommodation, travel and food in Cyprus
- Incoming and outgoing flights of cast and crew
- Equipment and grip rental sourced from Cyprus, and props purchase
- Construction and interior design
- Transport and transport service vehicles
- Insurance and accounting services
- Fees for licensed locations
- Post-production services related to the Cyprus production
- Compensation of cast and crew, based on the days worked on the Cyprus production as a proportion of total contracted working days
- Dispatch and other costs for equipment and materials
Cultural Content Assessment Criteria
Productions are assessed against cultural criteria, including whether they:
- Promote Cypriot, European or international stories, whether fiction or real
- Take place in Cyprus or another European country
- Are based on a literary work, real characters, or historical or legendary figures
- Address modern or historical issues of Cyprus or Europe (politics, religion, society, culture) or important worldwide events
- Valorise the architectural, archaeological and natural heritage of Cyprus or its cultural exhibits and attractions
- Incorporate at least one European language, or use the Greek language in a way that develops the story
- Show and promote diversity and culture
Step-by-Step Guide
A typical engagement follows a clear sequence:
- Incorporation of a Cyprus company, whose name carries the recognition initials "AVC" (Audio Visual Cyprus)
- Administration and maintenance of the company
- Liaison with accountants and auditors
- Liaison with the authorities and arranging meetings
- Preparation, advisory and submission of the online application with supporting documents — including the committee assessment form, a description of the film and its promotional value, the producer’s filmography, biographical data of the production team, commencement and completion dates, agreements with relevant parties, a detailed budget in euro, corporate certificates, the production programme, a list of cast and crew with passports, a sworn affidavit on state aid, and proof of funds
- Monitoring the application through the pre-approval stage (temporary certificate) and the final approval stage
How ASC Can Help
ASC guides producers through the entire Filming Scheme — from incorporating the AVC company and satisfying substance requirements to liaising with the authorities, preparing and submitting the application, and monitoring the assessment through to final approval. Contact us to discuss your production.