Foreign shoots can get break on VAT in Italy

Foreign productions decamping to Italy for their shoots will no longer be forced to pay 20% VAT tax up front on services, effectively removing the post shoot red tape associated with Italy’s lengthy VAT reimbursement, says Cinecitta Studios general-director Lamberto Mancini.

“This is a benefit for a foreign producer from a financial point of view,” Mancini explained to ScreenDaily. While Italy’s VAT (or value added tax) has always been recoverable, there were no set time lines for that reimbursement, which often came months — or years — down the line.

“It created a temporary gap,” said Mancini. “Italy was not particularly rapid in reimbursing the funds.”

Mancini further explained that many productions simply added the 20% to their budgets, since the foreign production was often reimbursed long after a project’s completion.

The benefit has been in vigor since January 1, 2011 thanks to a modification in the EU regulation governing VAT.

Now, films working through an Italian production service company will receive invoices on services which are VAT-free.

Italian production service companies, however are not VAT exempt, which has led to the formation of two strategic alliances that serve to reinforce the small to medium size Italian production service companies financial strength.

One non-exclusive alliance is between Cinecitta Studios and Marco Valerio Pugini’s Rome-based Panorama Films.

Panorama has worked on such projects as Eat, Pray, Love and Da Vinci Code among other Hollywood projects.

The second alliance is between FilmMaster Group, the largest Italian production and live events group and Enzo Sisti, who has provided production services to films such as The American and The Life Aquatic among others films.

Mancini pointed out that foreign productions can work with any Italian production service company and still benefit from the VAT exclusion.

In both cases, the alliances aim to provide extra assurance to those producers that require the increased financial security of a large company, such as Cinecitta or FilmMaster, behind their projects.

FilmMaster is a large-scale events and advertising group, which has been charged with several aspects of the in the works Cinecitta World theme park and related traveling shows. In December, Cinecitta Holding took 40% share in FilmMaster, which in turn took 4% of the studios.

Italy currently has a three-year-old 25% tax credit, capping at €5m ($7m) that has been extended through June 2011 at which time, its renewal will be discussed in the Italian parliament.

“The Italian tax credit works, it is real money, we have seen it put to use on important films such as The Tourist, Nine, Letters To Juliet and The American,” among others, Mancini said.