In the current economic climate, tax optimisation has become a strategic factor in business competitiveness. For many companies, the end of the financial year means an inevitable outflow of cash to the tax authorities. However, Spanish law offers a way to turn this obligation into an investment opportunity: the tax incentive for audiovisual production.
Under Article 39.7 of the Corporation Tax Act (LIS), companies in any sector can participate in the financing of cultural projects (films, series or animation) in exchange for a direct and guaranteed tax return.
1. The mechanism: from expenditure to financial assets
The system is based on the transfer of tax deductions. Audiovisual production companies generate tax credits from their production costs which, in many cases, they are unable to claim due to a lack of sufficient taxable income.
Through a financing agreement, your company contributes capital to the project. In return, the tax authorities allow the investor to deduct 120% of the amount contributed. This is not a grant, but a tax credit that directly reduces the amount of corporation tax payable.
2. Legal certainty and the absence of commercial risk
One of the main advantages of this model is that the investor does not bear the risk associated with the success of the audiovisual production. Their return does not depend on whether the production is a commercial success, but rather on the expenditure on production costs certified by the ICAA (Institute of Cinematography and Audiovisual Arts).
At Allyon, we ensure that every transaction includes:
- Valid certificates of nationality and cultural background.
- Waterproof contracts that protect the investor against any contingencies on the part of the producer.
- Expense audits that ensure the basis for the tax deduction in the event of an inspection.
3. Practical example: The impact on your cash flow
As shown in the chart above, the benefits of this approach are immediate. If your company expects to pay €100,000 in tax, the traditional approach would require you to pay the full amount.
By taking advantage of the audiovisual incentive, you would make a contribution of €83,333 to generate that same deduction of €100,000. The result is a net saving of €16,667, which equates to a financial return of 20% on the capital employed—a return that is difficult to find in other investment products with a similar risk profile.
4. Deadlines and planning
This solution is particularly attractive due to its flexibility. The investment is usually made during the tax year in which the film is shot, and the benefit is realised when the corporation tax return is filed (in July of the following year).
At Allyon, we understand that every business structure is unique. That is why we do not apply automated solutions; we carry out a detailed analysis of your profit forecast to identify the audiovisual project that best optimises your tax bill.
Would you like to know how much your company could save this year? Contact our tax consultancy team for a personalised feasibility study.
