Smart Financing for Your Production Company: How to Turn Your Tax Deductions into Immediate Cash Flow

In the competitive world of film and TV series production, the financing plan is just as critical as the script. Traditionally, production companies have relied on a complex mix of public subsidies, pre-sales to television networks, and bank loans. However, there is an underutilized financial tool that allows production companies to monetize an asset they already own: their own tax credits.

We’re talking about the mechanism outlined in Article 39.7 of the Corporate Income Tax Law (LIS). This system allows your production company to “sell” the right to the tax deduction generated by its production expenses to an external investor, raising fresh capital without incurring bank debt.

The Producer's Problem: Money “Trapped” on the Balance Sheet

Audiovisual productions in Spain generate very attractive tax credits (typically 30% or more of the cost). However, the reality for many production companies is that they do not have sufficient profits to claim those savings immediately.

This turns the deduction into a fixed asset. A production company may have a deduction entitlement of €300,000, but if it does not have an equivalent tax liability, that money remains tied up. Traditionally, companies wait for future profits or apply to the tax authorities for monetization, a slow process (taking over a year) that involves a 20% deduction.

The solution: early and efficient monetization

Section 39.7 of the Corporate Income Tax Law (LIS) is the fastest and most efficient way to unlock that capital. It allows your production company to enter into a financing agreement with an investor (a profitable company in any sector).

• What does the production company do? It transfers the right to claim the tax deduction to the investor.
• What does the production company get in return? It receives cash during filming, which helps cover critical cash flow needs.

Essentially, it involves converting a future tax credit into immediate cash. It is not a loan, it does not appear on the CIRBE credit registry, and it does not dilute the intellectual property rights to the work.

Allyon's Strategic Role

Structuring a transaction of this kind requires meticulous attention to detail and deep expertise in audiovisual taxation. At Allyon, we serve as the production company’s strategic partner throughout the entire process:

1. Audit and certification of expenses. We ensure that every euro spent strictly complies with the requirements of the ICAA and the Spanish Tax Agency to qualify for the tax deduction, safeguarding the production company’s position and providing assurance to investors.
2. Legal structuring. We draft robust financing agreements that clearly define production milestones and the assignment of the tax credit, protecting the production company’s interests.
3. Connection to corporate capital. As part of the ETL Global network, we have access to a pool of corporate investors interested in this type of transaction, facilitating the closing of the financing plan.

The Strategic Conclusion: Under Article 39.7 of the Corporate Income Tax Law (LIS), you obtain the same capital (€100,000) without incurring debt and by leveraging an asset (the tax deduction) that would otherwise remain idle on your balance sheet. It’s pure financial efficiency for your production company.

Don’t let your tax deductions sit idle on your balance sheet. At Allyon | ETL Global, we help you turn them into the liquidity your next production needs. We analyze your financing plan and structure the transaction to maximize your capital and legal certainty. Let’s discuss how to secure financing for your next project.