Section 481 film tax credit now extended to 2028 was originally due to expire in 2020 but has been extended twice owing to its success of the credit with the latest extension introduced in the Finance Act 2022.
The past decade has shown phenomenal growth in the Irish entertainment industry, greatly assisted by the film tax credit, which was introduced in 2015, replacing the previous investor model. The film tax credit makes Ireland very attractive for international productions and supporting and developing indigenous film producers.
The Revenue Commission has confirmed the value of payments to qualifying firms under the film corporation tax credit in 2022 was €127.3 million. This followed the value of payments totaling €137.1 million in 2021 and €138.7 million in 2020.
In 2021, across feature films, documentaries, animation and TV drama, the total production spend in the Irish economy for 2021 was €500 million – 40% higher than 2019’s previous record spend. The S481 tax credit is a key part of this growth.
What is the S481 film tax credit?
The S481 tax credit is a refundable corporation tax credit on qualifying productions produced by qualifying production companies where the total cost of production exceeds €250,000.
The tax credit is given at 32% of the lowest of
- the “eligible expenditure” amount
- 80% of the “total cost of production” of the film
“Total cost of production” is the cost incurred on the production of the film from the development phase up to and including post-production with fewer costs not wholly, exclusively, and necessarily incurred on production of the film. This excludes distribution and advertising costs post film completion.
"Eligible expenditure" is the total cost of production less expenditure incurred outside of the state. There is a further deduction from costs in the state equal to any expenses outside employee, labour-only services, and goods, services or facilities provided by a person carrying on a business in the state which are consumed during production. Eligible expenditure must not be less than €125,000.
For films produced in an assisted region, an additional 2% regional film uplift applies until 31 December 2023. After 2023 all S481 claims made are at 32%. An assisted region is specified in the Annex to the EU Commission Decision C(2014)3153, linked below. Assisted regions include the borders, midlands, southeast, west and parts of the mid-east.
A qualifying film, not produced in an assisted region, with a production budget of €6,000,000 of which €3,000,000 is eligible expenditure, would receive S481 relief at 32% of the lowest of:
1. Eligible expenditure
2. 80% of the total cost of production of the film
€6,000,000 * 80% = €4,800,000
In this case, Irish eligible expenditure is the lowest of the three amounts. This results in a S481 tax credit of €960,000 (€3,000,000 *32%).
Who can claim the credit?
The S481 tax credit is available for “qualifying producer companies”.
A qualifying producer company is:
- resident in the state or a European Economic Area (EEA) state
- trades in producing films for exhibition to the public by cinema or by broadcast on a commercial basis
- not connected to a broadcaster or a company that principally trades in transmitting films online
- has previously submitted a corporation tax return to Revenue
- is not undertaken in difficulty
- establishes a special-purpose vehicle for each qualifying film
A qualifying film is a film in which the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media has issued a cultural certificate.
How to claim the credit?
The first step is to apply for a cultural certificate from the Minister of Tourism, Culture, Arts, Gaeltacht, Sport and Media.
Once a certificate has been received, the S481 tax credit is claimed by amending the Corporation Tax Return (CT1) immediately preceding the expenditure being incurred. There are two ways to claim the tax credit.
Option 1 – Single instalment
On completion of the production, a claim of 100% of the S481 tax credit can be made for the incurred expenditure.
Option 2 – 90% instalment & balancing instalment
90% of S481 credit can be claimed in advance of the completed production. As the spending has yet to be incurred, the S481 tax credit is based off budgeted production costs. The 90% budgeted expenditure claim can only be made after a cultural cert is received and on the condition of:
- over 68% of the eligible expenditure amount has been lodged to the account of the qualifying company for the purposes of producing the film, or,
- a certificate from the broadcasting authority of Ireland (BAI), Screen Ireland or an equivalent EEA body confirming funding agreements and the attaching conditions have been satisfied
Additional documentation should be compiled at this time as Revenue may request supporting documents to substantiate the claim. A complete list of the supporting documents is detailed under Schedule 2 of the film regulations 2019, which is linked below.
After production has been completed, a compliance report must be prepared in order for the balancing instalment to be claimed. The balancing installment is the S481 tax credit based on incurred expenditure less any amount already claimed. To claim the balancing installment, the Corporation Tax Return (CT1) the 90% installment was originally claimed in is amended.
The additional documents to support the balancing installment claim is listed under schedule 3 of the film regulations 2019. Schedules 4 & 5 detail the information required in the compliance report.
As the majority of the S481 tax credit can be received in advance, the S481 legislation contains strict clawback provisions to prevent misuse of the tax credit.
Where Revenue has paid an amount to a producer company and it is subsequently found out that the amount is not authorised or the producer company fails to comply with the conditions set of the S481 legislation, the persons liable to any clawback of the credit are:
- the producer company
- any director of the producer company
- each person able directly or indirectly to control more than 15% of the ordinary share capital of the producer company
To an amount equal to:
- in the case of a company, four times, and
- in the case of an individual, one hundred fortieths
How can Mazars help
As the above is just a summary of the film tax credit legislation, regulations and application procedure, further advice should be sought before proceeding with a project. If you would like to know more about the S481 tax credit or are interested in claiming the credit and seeking advice, please get in touch.
We can offer help across all aspects of film production tax compliance, including:
- Assistance with S481 application process
- Establishing a special-purpose vehicle
- Calculation and claiming of tax credit
- Support with Revenue audits
- Tax services including corporation tax, income tax, payroll and film withholding tax
- VAT services, including registration, compliance, and advice
Application form for the cultural certificate
Guidelines for completing the application form
Revenue guidelines on section 481 tax credit
EU Commission Decision C(2014)3153
Film Regulations 2019
For more information, contact the film tax credit team:
Paul Mee, Tax Partner - email@example.com
Paul Burke, Tax - Paul.Burke@mazars.ie
Collette O’Shea, Tax - Collette.OShea@mazars.ie