COVID-19: Tax measures approved to support donations and the cultural sector

Spain - 06 / 05 / 2020

Spain Tax Alert

The May 6 edition of the Official State Gazette published Royal Decree-Law 17/2020, of May 5, 2020, approving measures to support the cultural sector and tax measures to confront the social and economic impact of COVID-19.

It has introduced the following tax amendments:

a) Tax credit for donations

Taking effect from January 1, 2020, a higher tax credit is available for donations made by individuals and by nonresident income taxpayers operating in Spain without a permanent establishment. Namely:

The tax credit percentage for donations on the first €150 has been increased from 75% to 80%.
The tax credit percentage on the excess over the first €150 has gone up from 30% to 35%.
As a loyalty reward, in other words, if in the two immediately preceding tax periods, donations giving entitlement to a tax credit were made to a same entity in an amount that in each of the two periods is equal to or higher than the previous year’s donation, the tax credit percentage on amounts in excess of €150 has been increased from 35% to 40%.

b) Corporate income tax credit for investments in cinematographic productions and audiovisual series

Taking effect from January 1, 2020, changes have been made to tax incentives related to film production:

One is the inclusion of short films among the investments giving entitlement to that tax credit.
On the other hand, an increase to tax credit percentages has been approved:

· To 30% (from 25%) on the first million of the tax credit basis.

· To 25% (from 20%) on amounts in excess of a million.

The maximum tax credit amount has also been brought up to €10 million (from €3 million).
Under the corporate income tax law, until now the amount of that tax credit, together with any other received aid, could not be above 50% of production cost. This limit went up to 60% (i) for cross-border productions funded by more than one EU member state with the participation of producers from more than one member state, and (ii) for productions directed by a new filmmaker with a budget of €1 million or lower (this last case has been removed).
The cases qualifying for a higher limit on the tax credit (together with other aid) have now been extended, and this limit has been raised in a few of those scenarios as follows:

· 85% for short films.

· 80% for (i) productions directed by a person who has not directed or codirected more than two feature films classified for their commercial use at cinema halls, and with a production budget of €1,500,000 or lower, (ii) productions filmed entirely in any of the official languages in Spain other than Castilian Spanish and which are shown in Spain in that official language or with subtitles; and (iii) productions directed exclusively by individuals with a disability level equal to or higher 33 percent recognized by the competent body.

· 75% for (i) productions made exclusively by female directors, (ii) productions with a special cultural and artistic value needing exceptional funding support as determined by criteria determined by ministerial order or in the relevant aid programs, (iii) documentaries, and (iv) animation works with a production budget of €2,500,000 or lower.

· 60% for (i) cross-border productions funded by more than one EU member state with the participation of producers from more than one member state (this case has not been changed from how it was before) and (ii) international coproductions with Latin American countries.

Both the increased tax credit percentages mentioned above and the maximum tax credit amount can also be claimed for expenses incurred in making foreign productions (article 36.2 of the Corporate Income Tax Law). In these cases, the tax credit may be claimed if those expenses are €1 million or lower. However, for preproduction and postproduction expenses incurred in Spain in respect of animation and visual effects, the limit has been set at €200,000.

c) Events of exceptional public interest

The following are classed as events of exceptional public interest, for the purposes of article 27 of Law 49/2002, of December 23, 2002, on the tax regime for not-for-profit entities and on tax incentives for patronage:

“Plan Berlanga”. The program will start on April 1, 2020 and end on March 31, 2023.
Alicante 2021. Starting point of the Ocean Race. The program will start on May 7, 2020 and end on December 31, 2022.
Spain as guest of honor at Frankfurt Book Fair. The program will start on May 7, 2020 and end on November 30, 2021.
Plan for development of the opera at Calle del Teatro Real. The program will start on July 1, 2020 and end on June 30, 2023.
175th anniversary of the construction of Gran Teatre del Liceu opera house. The program will start on December 1, 2020 and end on November 30, 2023.

Additionally, programs for the following events of exceptional public interest have been extended:

Program for preparation of Spanish athletes for the Tokyo 2020 Games. This program was initially set to run between January 1, 2017 and December 31, 2020 and has now been extended until December 31, 2021.
5th centenary of the first circumnavigation of the Earth made by Ferdinand Magellan’s and Sebastián Elcano’s expedition. This program was initially set to run between May 8, 2017 and May 7, 2020 and has now been extended until December 31, 2022.
Andalucía Valderrama Masters This program was initially set to run between July 1, 2018 and December 31, 2020 and has now been extended until December 31, 2021.
Jacobean year in 2021. This program was initially set to run between October 1, 2018 and September 30, 2021 and has now been extended until September 30, 2022.