Moves to introduce a sale and leaseback scheme in France have been scrapped, with the government planning to introduce a tax credit system specifically to benefit the French production sector.

The tax credit measure should go into effect in January 2004, but is currently being worked on to clarify certain points and will await ratification by the French finance ministry later in the year.

Under the new tax credit, a production entity will be able to write off between 10% and 20% of its below the line costs - covering expenditure such as crew, art and set work, camera, wardrobe, electrical, transportation and post-production.

The tax credit is essentially a tax deduction and has a cap of roughly Euros 500,000 per film.

Qualifying films, including co-productions, will have to have a stamp of approval from France's National Cinema Centre and the possible deductions will be made on work done in France only.

In that way, the scheme should benefit France's production sector by inciting producers to use local technicians and post facilities.

A similar system already exists in France across many sectors for research and development. Film financier Didier Duverger of Coficine calls the system "magnificent and one thousand times better than the sale and leaseback."

Proposals for a French sale and leaseback system, similar to those already in place in the UK, Germany and Belgium, had been announced as a possibility at the beginning of the summer (see, June 11).

A recent meeting of the public treasury and the Prime Minister's office, however, decided that a tax credit would be better suited to France's production needs. It was felt that a sale and leaseback would tend to favour bigger budget films and edge out smaller independent films.