IrelandWith the Section 481 tax incentive, producers can shave an average 12% from their budget by choosing Ireland for location work. Ted Sheehy reportsSteven Spielberg and Alan Parker are just two big-name directors who have made films using Ireland's Section 481 tax incentive for the film and television industry. Along with such Irish counterparts as Neil Jordan and Jim Sheridan, they have contributed to an Irish production spend of $779m since 1994, of which $638m has been raised from Section 481 tax investment. So far this year, 17 film and television projects have received Section 481 certification. They have a local spend of $81.3m to which Section 481 investments are contributing $56.1m.

Section 481 enables producers to raise up to 66% of their budgets for films costing up to $5m (Euros 5.1m), and up to 55% of their budgets for films costing $6.3m-$18.8m. There is a sliding scale adjustment (between 55%-66%) for films costing $5m-$6.3m. The maximum that can be raised is $18.8m, unless half of the investment is secured from private corporate investors, in which case the limit is doubled to $37.5m.

Section 481 investment is only available for production spend in Ireland, and a minimum of 10% of a film's total work must be carried out locally. A producer can typically shave about 12% from their budget. Money raised from Section 481 can count as front-end financing as the finance is usually released to the producer once the investors' funds have been secured by sales and/or distribution contracts and production has commenced.

Section 481 certification can take up to six or eight weeks, but with fully prepared documentation usually takes three or four weeks. Estimations of the cost vary with the size of the production, a significant factor being the number of investors and volume of shares required to raise the finance needed. Each share incurs a stamp duty charge and, for low-budget productions, there is a diminishing return to the production since the base level cost is around $100,000 per production in fees and charges.

Whether a film is a local or an incoming production, each project must be produced by a newly-established Irish- or EU/EEA-based company. Foreign producers generally collaborate with an established Irish producer or production company on setting up a one-off company and the Irish partners can usually source Section 481 funds in conjunction with Irish legal, accountancy and banking firms. The local partners will also provide budget breakdowns.

Tax relief is available to Irish investors who buy shares in the new company. Since 80% of the amount invested can be written off for tax purposes, the investor looks for a return on the net cost rather than on the total invested. The new company is commissioned to produce the film for an agreed fee, payable on delivery. There is also a further entitlement to either a net profit or an adjusted gross position.

Last year, Spyglass Entertainment's Reign Of Fire made a massive contribution to the Irish industry by spending $40m in Ireland at a cost of only $3m to the taxpayer, according to the Audiovisual Federation of the Irish Business and Employer's Confederation. Reign Of Fire also highlights the increasingly common pattern whereby foreign producers can combine Section 481 with the UK's sale-and-leaseback scheme. Productions tend to opt for location and studio work in Ireland and then head to the UK for lab, post-production and effects work. As there is no official co-production treaty between the two countries, productions can qualify as co-productions under the terms of the European Convention on Cinematographic Co-productions. This automatically enables a production to apply for a sale-and-leaseback deal with a minimum spend of 20% on UK elements.

A production will get provisional approval, ahead of production, from the UK authorities on the basis of submitted cast and crew lists from, and production spend in, the co-producing countries. Full qualification is certified in retrospect when the producer files audited figures on completion of the film. The net value of combining the Irish and UK schemes is approximately 22% of the production spend.

While the Irish Film Board concentrates its efforts on the indigenous industry, it does have personnel whose role it is to market Ireland as a location and to assist incoming producers to find suitable locations for their projects.

Subotica Entertainment's Song For A Raggy Boy is one of three Irish low- to mid-budget projects to have utilised the Section 481 scheme this year. Budgeted at $3.7m for a six-week location shoot in rural Ireland, and a patchwork of production finance from Denmark's Moviefan, the UK's Zoma Films, Spain's Lolafilms and Eurimages, Raggy Boy was dependent on Section 481 to the tune of approximately $370,000 in cash value to the production.

Raggy Boy producer Tristan Lynch believes a review of Section 481 would be timely in order to make the Irish qualification process automatic, where a project satisfies the Convention criteria, as already happens in the UK. As his film heads into the final, sound mixing phase of post-production, Lynch says Section 481 obligations continue for a considerable time after post-production. "At the audit stage you have to be absolutely rigorous about meeting compliance. If you don't satisfy requirements, your investors could possibly lose their tax write-off."

Section 481 has been extended until April 2005, but it is likely discussions will start much sooner about the need to restore Ireland's competitive position in the market for international productions.