The initial measures of Italy's first tax incentive law geared to the cinema sector has been approved by the European Union.

Thenews announced by Italian Culture Minister Sandro Bondi is a breakthrough for an initiative that has proved ahard sell in Italy and follows more than a decade of lobbying.

The law was finally accepted by the Italian parliament and has been pending European Union approval since the summer.

The main beneficiaries are intended to belocal producers and the wider Italian industrybutthere areadvantages for foreign film-makers wanting to shoot in Italy if they work through an executive producer.

Specifically, foreign productions coming to Italy can obtain a
reduction in costs up to 25% on a cap of $ 6.95m (Euros 5m)
per film (for the part shot on national territory).

However, this is not a direct rebate credit to foreign producers. The law is shaped so that, by working with an executive producer, foreign productions would see an up-front reduction to overall costs.

An Italian executive producer would receive 25% tax credit on services from the Italian government.

The incentive extends to co-productions. Italian producers can obtain a 15% tax credit of the overall cost of production (of films recognised as
being of Italian nationality) for up to $4.86m (Euros 3.5m)
per tax year. If the film has varied nationalities, the Italian portion would see the 15% tax credit.

It is likely that productions can apply for retroactive tax credit starting from June 2008 although these details are yet to be clarified.

As proposed to the EU, the law includes incentives for distribution and exhibition and incentivises non-cinema oriented businesses willingto invest in cinema as long as their principal businesses is not film-making.

These aspects of the law are awaiting EU approval. However the Culture Ministry's Cinema Director Gaetano Blandini has said he will attempt to create a loophole not reliant on EU approval where such investors can get involved in film investment with a cap of $0.27m (Euros 0.2m) over three years (for a single company).

'I would like to express my joy at this great success that comprises
an important opportunity for the effective application of tax
incentives for cinema in Italy that already exist in the EU and have
been awaited for almost fifteen years in our country,' Blandini said
in a statement.