Nordic regionProducers in the heavily-taxed Nordic region rely heavily on public subsidies, without which many would be unable to operate. Osman Kibar, Pia Lundberg and Jacob Neiiendam report.

The Nordic region has some of the highest rates of taxation in the world. But its film producers are major beneficiaries of the system and are heavily reliant on state subsidies. Quite simply, most of the Nordic industries would collapse without them. Norway and Sweden both have a tax on cinema tickets which funds a box-office bonus for producers whose films fare well at home, while Iceland has introduced a 12% rebate on all production costs incurred in the country that is open to local producers as well as US behemoths.

Since July 2001, the Norwegian Film Fund (NFF) has administered $28m in state subsidy for film. The fund aims to double the local production rate by investing less money in more films in an effort to draw more private investment into the sector. It has introduced a series of new measures, including a direct three-year development grant for production companies, cheap loans to producers and project-by-project funding for films with high local commercial potential.

Furthermore, once their films have been released at home, Norwegian producers are entitled to the 'box-office bonus', which can be as much as 55% of the box-office gross (children's films receive a 100% bonus). The NFF has to estimate each year how much to set aside for these bonuses, although there is an upper limit. The level of payout is determined by the Norwegian producer's level of involvement.

To qualify, films must be classified as Norwegian, as determined by the NFF, and to have received backing from the NFF. In some cases, an international co-production may qualify, even if the Norwegian partner is the minority co-producer. But such co-productions are required to have received public funding from the fund. In these cases, the approved equity funding is limited to the same amount as the one received in public support from the NFF.

Sweden's producers have the tax system to thank for the mere existence of their industry. Every year, the Swedish Film Institute (SFI) allocates $5.39m (skr50m) for box-office-related subsidies and $14.6m for other production subsidies for local feature films. The SFI's funds come from four different sources: government, broadcasters, the Swedish Film Producers Association and screening fees, which come from exhibitors who are required to pay the SFI a fee equivalent of 10% of the gross box office from every film released.

The system is rather simple: a non-commercial film has more chance of getting a significant advance allocation increase from the SFI, but its box-office-related subsidies will be fewer. Producers who do not receive advance allocations for commercial projects have to rely on receiving their share of the SFI's money in accordance with the number of tickets their films manage to sell. Advance allocations range enormously, from $10,000-$1m.

Government subsidies are devoted to films with a Swedish producer and a substantial proportion of Swedish actors. A film with a foreign producer may be regarded as Swedish provided at least 20% of its production costs are financed by Swedish capital and a substantial part of the team is Swedish. Denmark's Zentropa did this when it shot Lars von Trier's Dogville in the Swedish town of Trollhattan. Co-produced by Sweden's Memfis and regional film fund Film i Vast (FiV), the project secured $538,800 in advance allocations from the SFI. Memfis will access the box office related subsidies once the film is released.

The only public subsidy available to Danish producers is $49.6m (dkr375.9m) in government funds administered annually by the Danish Film Institute (DFI). This will drop to $46.6m (dkr352.3m) in 2003.

Most of the 20 or so Danish features made a year are backed by the DFI. If the Danish producer is the lead producer, there are two types of backing open to them: between $660,000-$1.3m (dkr5m-dkr10m) for a project usually at script or treatment stage, or the commercial project scheme whereby a producer approaches the DFI for funding when they already have 60% of the financing secured from elsewhere. For the latter, the project needs to demonstrate the capability of selling 200,000 tickets at the local box office.

The DFI also sets aside a certain amount a year ($1.6m in 2002) for international projects where the Danish producer is the minority partner. If the money is not used it is channelled into local production. It backs approximately six films this way annually.

The only other form of public subsidy in Denmark is the new regional film fund FilmFyn on the island of Fyn, which has a $1m annual budget. It also requires a Danish co-producer and a local production spend of double the amount it receives in subsidy.

Iceland offers a 12% rebate of all costs spent on production in the country by a local or foreign production. Recent productions to take advantage of the handout include Eon Productions' Die Another Day, Mutual Film Company's Lara Croft: Tomb Raider, American Zoetrope's No Such Thing and the Icelandic Film Corporation's Falcons.

Introduced in 2001, and set to run until 2006, the rebate applies to film and television projects. If the Icelandic spend exceeds 80% of the total budget, reimbursement is calculated on the basis of the total production cost incurred in the entire EU. Some productions may qualify for an additional Icelandic business tax incentive if they set up an international trading company based in Iceland which could then be liable for a 5% income tax rebate.

To qualify for the 12% rebate, a foreign production must set up a private limited liability company in Iceland for the duration of the shoot. This costs about $950 and takes only a day. Most productions team up with local production outfits such as Saga Film, Pegasus Film and the Icelandic Film Corporation.