An amendment to the Act on Audiovision (the “amendment”) came into effect on 1 January 2017. The amendment simplifies the application procedure by allowing applications for film incentives at any time of the year, lowers the qualification criteria, and broadens the eligible costs. Since the incentives scheme was first introduced in 2010, the Czech government has paid out more than EUR 93.6 million in film rebates, and the amount of incentives earmarked by the government for the scheme in 2017 alone is EUR 29.8 million. 186 film projects have been supported so far.

Enhanced flexibility

Before the amendment took effect, the applicant for a film incentive in an application procedure administered by Czech State Cinematography Fund (the “Fund”) could only be a person who was a producer or co-producer having a place of business, permanent residence, or registered office in the Czech Republic and who was registered in the Czech Republic with a local tax authority. The amendment also provides the opportunity to apply for film incentives in the Czech Republic to foreign persons (producers, co-producers, and service companies) who are tax residents in other EU Member States or any EEA state and have a permanent establishment in the Czech Republic. Hence, the scope of applicants has been broadened territorially and materially. Importantly, as opposed to the previous regime, a service company assisting with the production of audio-visual work may also apply for an incentive and no longer needs to hold any IP rights in the work result.

The amendment also brings more flexibility for the timing of the application for film incentives. Under the previous regime, applicants had to queue for registration in the scheme at the beginning of the year and were then less flexible in terms of scheduling their shooting timetable. Under the new rules, eligible applicants may file an Application for Registration to the Fund at any time of the year.

Cash rebates available

Qualifying audio-visual works continue to be eligible for a cash rebate. Successful applicants may receive a 20% rebate of the eligible costs spent on the Registration Fee paid upon filing an application in the scheme and on Czech goods and services provided by and paid to individuals or companies registered to pay income tax in the Czech Republic. In addition, the amendment provides that eligible costs include the service fee paid to a service company which applies for the incentive. The amendment also introduced a new rebate of 66% of the withholding tax actually paid in the Czech Republic from remunerations paid to foreign actors and crew members.

The total eligible costs may not be more than 80% of the total project costs.

Lower qualification standards

The threshold for the minimum volume of eligible costs to be spent in the Czech Republic has favourably decreased for documentary films from CZK 3 million to CZK 2 million, for an episode of a fictional TV series from CZK 10 million to CZK 8 million, and for an episode of an animated series from CZK 10 million to CZK 1 million. With regard to an episode of a fictional TV series and for an episode of an animated series, the minimum levels of footage eligible for a rebate have also decreased (from 40 minutes to 30 minutes in the case of the former and from 40 minutes to 5 minutes in the case of the latter).

The Czech film incentives have been designed to support filming in the Czech Republic where film production has a long tradition. The new rules are a welcome change for foreign film producers and financiers and bring more flexibility and certainty into the application process.  As a result, foreign producers may now benefit more from the unique skills of the local film industry and some of the most picturesque settings in the world.