Pellerano & Herrera The Pellerano & Herrera Foundation

New financial incentives for the film industry

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Introduction
An increasing number of films are being made in the Dominican Republic as a direct result of the country's interest in supporting the film industry. The lower costs and other economic advantages of operating in the Dominican Republic, as well as the country's location and locales, ranging from beaches to mountains and from colonial buildings to modern architecture, all contribute to the substantial growth of the film industry. These advantages, combined with the financial incentives set out in the recently adopted Film Industry Law, are making the Dominican Republic an important destination for producers to consider.

Tax incentives
The new Film Industry Law amended the Dominican tax system to provide seven important tax incentives that are intended to stimulate the film industry and encourage both domestic and foreign investment in the industry. The new tax incentives are as follows:

·There is a complete income tax exemption for 15 years from the effective date of the Film Industry Law for income earned by any film studio established in the Dominican Republic.

·Producers can deduct 100% of their investment when determining the income tax payable for the period in which an investment was made, subject to a cap of 25% of the income tax that would otherwise have to be paid. This tax benefit is available for producers of Dominican feature films that are approved by the General Directorate of Films, a position created by the new Film Industry Law.

·All income that is capitalised or reserved for new films or investments in films by producers and distributors of films in the Dominican Republic is completely tax exempt.

·Individuals or businesses domiciled in the Dominican Republic that provide technical services for all films made in the country pay no Dominican income tax on the income that they make from such services.

·Foreign films produced in the Dominican Republic do not pay the value added tax applicable to the transfer and import of most goods and services.

·Film companies enjoy an exemption from essentially all other municipal taxes with respect to filming, film equipment and general production.

·As of the effective date of the Film Industry Law, capital goods imported into the country enjoy a 10-year exemption from duty.

Under the law, these incentives are available to any individuals or companies that administer, promote or develop films and other audiovisual works that meet certain minimum requirements, such as:

·obtaining a filming permit (issued at no cost by the General Directorate of Films);

·having appropriate insurance coverage;

·spending at least 20% of the budget for the film (or other audiovisual work) in the Dominican Republic, or such budget comprising at least 20% of Dominican capital funding; and

·employing a minimum number of Dominicans (subject to that requirement being reduced by the General Directorate of Films if sufficient qualified employees are unavailable).

Additional advantages
The tax and other financial incentives provided in the new Film Industry Law are not the only benefits that are helping to promote the industry. For example, the new law facilitates customs procedures and administrative systems. Moreover, it created a special tariff schedule for the production of foreign films in the country.

The new law also eliminates bureaucratic roadblocks so that it is now easier for films to be produced in the Dominican Republic. For example, the law created the General Directorate of Films, under the Ministry of Culture, which has the authority to facilitate and encourage imports of raw materials, capital, equipment and services relating to the film industry. The directorate also supports the growth of technical businesses required by the film industry.

Additionally, the directorate has the authority to take any steps necessary to promote the production of films in the country and to adopt policies to encourage the financing of the film industry from both Dominican and foreign sources. The directorate itself can provide financial support to the industry through incentives, including:

·a new film promotion fund, which provides financial support, guarantees and investments for the benefit of producers, distributors and exhibitors from funds that it receives from the Dominican Republic's general budget;

·taxes on ticket or entrance fees to cinemas;

·revenues generated by the transfer of goods and services on sales and rentals of films;

·revenues generated by the tax on the sale of goods inside cinemas;

·resources generated by the fund's operations; and

·donations, transfers and national or international contributions.

Thus, under the new law, funds that are generated by taxes on film-related goods and services are channeled back to the film industry.

Respect for film industry
The Dominican Republic's efforts to stimulate the growth of the country's film industry and to enhance the ability for films to be made and financed in the Dominican Republic illustrate its respect for the industry. Moreover, the new Film Industry Law created the Intersectoral Council for the Promotion of the Film Industry in the Dominican Republic under the General Directorate of Films, which is composed of leading business executives and senior government officials from the Ministry of Culture, the Ministry of Tourism, the General Directorate of Internal Revenue, the General Directorate of Films and the Centre for Export and Foreign Investment. The new law also encourages respect for films with its creation of the Dominican Cinematheque, an agency of the General Directorate of Films.

Comment
The new Film Industry Law exemplifies the country's welcoming atmosphere for film producers and investors, and for the film industry as a whole. With tax incentives, industry and government support and an industry-friendly environment, filmmakers and the film industry are finding the Dominican Republic to be an exceptional place to work.



Source: International Law Office