With US-style services, skilled crews, impressive locations and a 40% tax incentive, this Caribbean island has a lot to offer producers. Wendy Mitchell reports
George Clooney and Johnny Depp are not shooting in Puerto Rico just for the sunshine and rum.
For many international film-makers, Puerto Rico represents the best of all worlds, offering Caribbean locations and year-round filmable weather while still being a US commonwealth with US-style crews and ways of working. And there certainly is a sunny outlook for the bottom line, thank to the popular 40% tax credit on local spend.
“There is enough experience in Puerto Rico for us to build on. They are capable of stepping up.”
Kirk D’Amico, Myriad
“We have one of the most aggressive tax incentives, but we’re also part of the US,” says Luillo Ruiz, a local producer who runs production services company Pimienta, sister outfit to London-based international sales company Salt. “We have a great infrastructure compared with Latin America, there’s a great level of crews and there is such a range of locations.”
It is not just the locals who are bullish — recent shoots on the island include Steven Soderbergh’s Che: Part One; Grant Heslov’s Men Who Stare At Goats, starring Clooney and Ewan McGregor for BBC Films, Smoke House and Winchester Capital Partners; David Twohy’s A Perfect Getaway starring Milla Jovovich for Relativity Media and MGM; Paul Breuls’ Meant To Be starring Kelly Reilly, for Corsan; and Todd Solondz’s Life During Wartime, for Werc Werk Works.
Depp is in Puerto Rico shooting Bruce Robinson’s The Rum Diary for GK Films and Infinitum Nihil, while projects on the horizon include Tommy Lee Jones’ Islands In The Stream for Intandem, comic book adaptation Hybrid for Myriad, and The Losers for Warner Bros and Silver Pictures.
Bahman Naraghi , COO of Rum Diary producer GK Films, says: “Our experience has been tremendously positive. People don’t necessarily register that this is a US territory — it’s not the same headaches as filming in a foreign country.”
Gary Smith, CEO of London-based Intandem, says the company did not look anywhere else when deciding where to shoot the $30m Islands In The Stream, set in Cuba and the Caribbean, later this summer. “There was no point,” he explains. “In addition to the tax credit, it’s about the locations.”
As international production on the island increases, crews in Puerto Rico keep getting better and better, visiting producers say. The consensus is that two large projects could comfortably shoot simultaneously, or up to five smaller projects. Kirk D’Amico, president of Los Angeles-based production outfit Myriad Films, notes that in line with most big productions, Myriad’s forthcoming Hybrid shoot will bring in key department heads from the US. “In Puerto Rico there is enough experience for us to build on to fill out the departments. They are capable of stepping up.”
Patrick McCormick, executive producer of The Rum Diary, says the shoot is ahead of schedule: “These are extremely good crews and it has worked out well.” With each project, local crews gain even more experience. “A movie like this can help to continue to build the ranks to work on more ambitious films,” McCormick notes.
Kip Konwiser is a Los Angeles-based producer who started working in Puerto Rico about six years ago. “I became a cheerleader for Puerto Rico, and now I’m doing my 13th movie,” he says. Konwiser co-owns KCPR, a Puerto Rico-based production services company. He says the infrastructure and crew situation has improved in those past six years. “People are really good at sharing resources.”
Puerto Rico’s government authorities are keen on encouraging the film industry and working to ensure shoots go smoothly. The film commission leads that charge, and the Tourism Company helps co-ordinate with other agencies, such as the police department, when needed. McCormick says: “Locations and permits have been easy. The authorities were enormously helpful, even on something like big action sequence of a car rolling down steps in Old San Juan.”
It is key to get the right local partners. “It’s like anywhere new: you want to work with the experienced people there, rather than going in thinking you know it all,” D’Amico says.
Most film-makers agree Puerto Rico’s drawbacks are few, but the one to be aware of is hurricane season, which lasts from June to November. Luckily it has not been a problem in recent years, says Nadia Barbarossa, head of communications and corporate relations for the film commission. “We only get one [hurricane] about every 10 years. The completion bond people are used to it and it doesn’t affect interest in the island.”
The other problem is a lack of studio space. “The next thing that Puerto Rico needs is a soundstage — that’s an important part of the equation,” says Los Angeles-based James Holt, executive producer of Men Who Stare At Goats.
There are some converted warehouse spaces, but an official studio and/or a water tank would be a bonus. Several groups are in discussions to build a studio, helped by the fact that the tax incentive applies to infrastructure as well.
“There is such potential for growth, and a studio project is pivotal,” says film commissioner Mariella Perez Serrano. “There are plans in the pipeline that we want to happen sooner rather than later.”
The 40% tax credit is the major draw for the island. It was set up in 1999 but most international producers did not hear about it until after 2005, when the film commission and local industry started to promote it internationally. It has also been amended in recent years to make it easier for foreign producers to access.
Attraction of the tax credit
Experienced producers say the credit is straightforward, and can be accessed more quickly than some US state credits and international incentives (see page 19). “[Puerto Rico] has a very well honed system for the tax credit,“ says one of Todd Solondz’s producers, Elizabeth Redleaf of New York-based production outfit Werc Werk Works. “Selling the tax credit to Puerto Ricans is not a problem.” That business is so strong that Winchester Capital, one of the backers of Men Who Stare At Goats, is now set up to discount the Puerto Rican credits itself.
Bickford said Soderbergh’s Che: Part One “saw a total credit of about $4m. It’s not totally uncomplicated but it’s pretty simple. And it’s great that you can monetise the rebate when you’re filming.”
With the 40% credit likely to be stable, crews and equipment houses getting better and better with each big film, and a studio likely to be built in the next few years, Puerto Rico’s outlook looks strong.
The producers who have shot in Puerto Rico recently all said they would shoot there again. “We didn’t set out to film Che in Puerto Rico but it just ended up being definitely the best location creatively and economically,” Bickford notes. Kirk D’Amico is already so impressed with the process that Myriad plans to shoot at least one more film there later this year.
Puerto Rican government support for film is likely to continue, even with the global recession. Lawyer and consultant Antonio Sifre, who has worked with clients such as Fox, Sony, Relativity Media and GK Films, says: “Everyone agrees this is great business for the island.”
Sifre says each production that goes well is further testament for future productions. “The best promotion is when someone comes to shoot here and has a good experience.”
Need to know: Puerto Rico
- Puerto Rico — a US commonwealth since 1952 — is an island 110 miles long and 35 miles wide.
- Almost everyone on the island is bilingual in Spanish and English
- The currency is the US dollars
- No visas or passports are needed for US cast or crew (for international crew, the usual US visa process is straightforward).
- Flight links between Puerto Rico and the US or Europe are frequent; there are several airports on the island.
- The locations available include 438km of coastline, as well as rainforests, mountains, caves, forts, military bases, sports facilities, churches and modern hotels — often within a short distance. The Spanish colonial architecture of Old San Juan, for instance, is only a few minutes from modern high-rises.
Need to know: tax incentive
What it is
A transferable tax credit, worth 40% of all payments (not limited to labour) to Puerto Rican residents. There is no cultural test for content or nationality of cast and crew. Films and TV projects can get a 40% tax credit on above- and below-the-line local spend, which can include equipment, crew, actors, travel (if through a local travel agency), hotels, stage ground rental. Development and post-production can also qualify.
What it is worth
After transaction costs, fees and discounting the sale of credits, producers should expect to net 33%-35% of the Puerto Rican spend. Consultant and producer Kip Konwiser of KCPR notes that a better deal can be brokered near tax time (April or the end of the fiscal year in June).
Who to apply to
The film commission and then the Puerto Rico treasury for tax credit certification.
Which projects are eligible
At least 50% of principal photography has to be in Puerto Rico or at least $1m paid to Puerto Rican residents. The credit can apply to non-Puerto Rican shoots if $700,000 is spent on Puerto Rican crews shooting abroad. Before shooting, a local production service company or consultant would have to do a Puerto Rican production budget.
When the money arrives
The treasury certifies the transferable tax credit after a simple auditing process, but many productions request an advance of the tax credit before wrap. Companies can get a 50% advance from the treasury department with a completion bond, or after spending 40% of their Puerto Rican budget. The credit is received after an audit of Puerto Rican spend. Lawyer and tax consultant Antonio Sifre says: “The government felt more comfortable that the credit came after the injection of capital into the local economy.”
Where the money comes from
Once the treasury and film commission issue a letter of tax credits granted, local firms (including Sifre’s Production Advisory Services) sell on those credits to local Puerto Rican taxpayers. That part of the process has not presented a problem, although Sifre warns that, with the recession, “this tax season was a little slower and prices were down somewhat. This year we sold some credits at 85% but we have done 90%-95% in the past and we hope to be back closer to those numbers soon.” The entire process is fairly speedy, so the credit can be monetised within four to six months of shooting.
How much money there is
At present there is an aggregate cap of $15m per fiscal year, but the treasury and film commission have the power to give credits above that and have been doing that with larger shoots.
THE WORlD’S MOST LUCRATIVE TAX INCENTIVES
Nova Scotia, Iowa*
Puerto Rico, Michigan, Australia**
Missouri, New York City and State (combined), South Africa †
Connecticut, Cayman Islands
* Not yet in place. Under consideration.
** For Australian qualifying projects.
† On first $700,000 (r6m) on official co-productions