Spain slams the door on Hollywood

The new fiscal reform’s disappointingly low tax breaks for film will do little to attract big productions

Gregorio Belinchón
Sean Penn on the Barcelona set of ‘The Gunman’ in July 2013.
Sean Penn on the Barcelona set of ‘The Gunman’ in July 2013.cordon press

Tom Cruise might have shot Mission Impossible 5 in the Canary Islands. But that is not going to happen. Pirates of the Caribbean could have been filmed in Spain. But neither was that to be. Nor did any Spanish region provide the setting for sci-fi adventure After Earth, starring Will Smith, or the recently released Pompeii.

And following the government’s recent announcement of paltry raises to tax breaks for film shoots, which are being offset by new limits to tax deductions, it is unlikely Spain will attract projects such as World War Z 2, even though Spanish director Juan Antonio Bayona and his producer Belén Atienza of Apaches Entertainment had considered it.

“The Americans have sent us a list of great locations for the shoot ... and next to each, the estimated tax exemption,” says Atienza. “In these conditions it is impossible to attract big productions to Spain.”

The draft fiscal reform now making its way through parliament establishes that investments in Spanish film productions will be eligible for a 20-percent deduction up to the first €1 million, and 18 percent (the current rate) after that.

This is one of the lowest rates in Europe and the entire world. EL PAÍS unsuccessfully attempted to reach the Finance Ministry on Tuesday for comment. Minister Cristóbal Montoro said on Monday that the reforms represented “a decided boost” for the culture industry.

We are not talking about gifts.We are talking about money that could be invested in Spain in exchange for getting some of it back”

Belén Atienza, film producer

“You know what’s going to happen? Big Spanish productions, even television series – it already happened with the Alatriste series – will go shoot in other countries with better tax conditions,” says Adrián Guerra of Nostromo Pictures, which has produced director Rodrigo Cortés’ Buried and Red Lights, and also Eugenio Mira’s Grand Piano, all of which were originally filmed in English.

“We will no longer host shoots like The Gunman, with Sean Penn, Idris Elba and Javier Bardem,” he goes on. This thriller, which was filmed in Barcelona last year, left €30 million in the city and €5 million in taxes.

Mission Impossible 5 could have left behind quite a lot of its €200 million budget, analysts feel.

Before the government’s announcement on Monday, Spanish producers were hoping that the new deductions would be in the range of 30 percent, “which would allow us to be competitive,” says Atienza.

Even more significantly, the new limits on deductions mean that the most money any production can expect to get back is €3 million. So big-budget films will get the same back as more modest movies, reducing their incentives to shoot in Spain.

In recent years, Spain has lost eight out of every 10 international film shoots that considered coming here, according to the Spain Film Commission. The reason is clear: the bottom line.

“Any Hollywood production with a budget of over $100 million takes Spain into consideration,” says Guerra. “We have great talent, excellent technicians, a wide variety of landscapes a short distance apart from each other, a benign climate ... But it’s all forgotten because of the tax exemptions.”

Big Spanish productions, even television series, will go shoot in other countries with better tax conditions”

Adrián Guerra, film producer

“And not even the Canary Islands with its 38-percent tax breaks, or the upcoming regional laws in Andalusia and Navarre, with excellent conditions, will stem the flow,” he adds. “No matter what percentage they offer, they will never be able to offset that top return of €3 million.”

Atienza insists: “We are not talking about gifts.We are talking about money that could be invested in Spain in exchange for getting some of it back. There are higher percentages elsewhere in Europe. And in countries like Canada, the amount increases if you invest in digital effects companies. In Spain, zero can only yield zero.”

A big-budget production leaves money behind: besides the taxes, there are wages to be paid, hotels to be booked ... During the shoot of Ridley Scott’s Exodus in Almería, the director often dined at the outdoor restaurant of the Hotel Catedral. Whenever he did, the restaurant would fill up around him. These revenues will be no more.

But the worst part, say Atienza and Guerra, is “the terrible image we’re projecting abroad.” A Spanish filmmaker who works in L.A. said that the talk of the industry last week was whether the tax exemption would reach 30 percent. Suddenly, there was a renewed interest in Spain.

“I have received calls from producers in English-speaking countries to halt my projects because they say they can’t trust the Spanish government, that they were counting on a 25 to 30 percent incentive [30 percent was the figure agreed to by the government and industry representatives],” says this native of the Canary Islands. “I myself am considering filming two movies that I already have funding for right here.”

It could be that future Spanish movies will end up being filmed abroad.

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