Germany: Film & TV-Ticker

The German Minister for the Arts and the Media has now announced the framework for the new federal scheme for the promotion of theatrical films. According to this scheme film producers will be entitled to a rebate of 20 % for that portion of the production cost of theatrical films (feature films, documentaries and animated films) which is spent in Germany. The new scheme will be available for the years 2007 to 2009 with a maximum amount of EUR 60 million per year.

The new regulations, however, are still subject to the approval by the Finance Minister and have to be cleared by the European Commission as a cultural subsidy.

Under the new scheme the funds will in general be available automatically without the need for any jury or board decision as long as the film project meets the requirements of the new regulations:

1.1 The project has to comply with the following general requirements:

• The film project must have a certain minimum budget (feature films: at least EUR 1 million, documentaries: at least EUR 200.000,00 and animated films: at least EUR 3 million);

• The film needs to have a commercial theatrical release (e.g. for feature films with a minimum of thirty prints);

• According to the preliminary regulations such theatrical release, however, does not have to take place in Germany;

• The start of principal photography may not occur before the year 2007 and no later than June 30, 2009;

• The producer applying for the new film aid has to provide funds in the equivalent of at least 15% (Eigenanteil) to the financing of the film;

• 25% of the total production cost of the film have to be spent in Germany (the "German Spend"); for films with a budget exceeding EUR 20 million this percentage is reduced to 20%; films having a German Spend of more than EUR 15 million need not reach a specific percentage of expenditure in Germany;

• The maximum amount of all public subsidies from any source is limited to 50% of the production cost with the exception of small budget or difficult subject films which may receive film aid funds of up to 80%.

1.2 The producer applying for the new production aid has to meet the following conditions:

• The producer must have a domicile or a branch office in Germany;

• The producer has to qualify as a producer within the meaning of the German Copyright Act which will be the case if the producer has a (co-)responsibility for the production of the picture until its completion and is actively involved in the production process;

• The producer or (in case of a single purpose company) the group of companies to which it belongs needs to have produced a theatrical film (at least in the position of a majority co-producer) in the course of the last five years;

• This prior film must have had a commercial theatrical exploitation of some relevance;

• In respect of international co-productions the producer applying for the new aid has to contribute to the financing of the film at least (a) 20% of the total budget or (b) EUR 5 million.

The film project furthermore has to fulfill a number of cultural and other criteria as set out in a "qualifying test". These criteria relate to the following categories:

• Cultural content (e.g. story plays in Germany);

• Contribution of various creative cast and crew members;

• Country of origin and kind of production services (e.g. principal photography takes place in Germany).

The qualifying tests for feature films, documentaries and animated films differ to some extent from each other. In order to qualify for the new scheme the film project has to obtain roughly 50% of the maximum number of points. In any event a minimum number of the cultural criteria has to be met.

3.1 The amount of the rebate to be accorded to a production is dependent on the amount of the "German Spend".

3.2 The following cost will not be accepted as German Spend:

• Development costs;

• Costs for underlying rights and music rights;

• Insurance, financing and legal cost;

• Travelling and transportation costs for actors;

• General overhead;

• Remuneration for actors to the extent exceeding 15% of total production costs.

Costs paid to individuals working on the production will be acknowledged as German Spend if these individuals are taxable in Germany as German tax subjects or because they rendered their services in Germany. Other costs will be deemed to form German Spend if the supplier of the respective goods or services has its domicile or branch office in Germany.

If the shooting of the picture takes place abroad on original location expenditure relating to such shooting will be qualified as German Spend if all other requirements are fulfilled and not more than 30% of the shooting days will take place abroad.

The maximum amount of the new aid for a film is EUR 4 million. In specific circumstances and upon special application, however, the rebate can be increased to EUR 10 million per project.

3.3 The rebate will amount to 20% of the German Spend up to a maximum of 80% of the total production cost. Cost overruns in respect of the German Spend can be recognised up to a maximum of 8% of the budgeted German Spend.

The application procedure and the distribution of the funds available under the new scheme will be handled by the German Film Promotion Agency (Filmförderungsanstalt) in Berlin.

An application can be filed as soon as 75% of the financing of a film is secured provided that the closing of the financing is proven at the latest three months later. Shooting of the film has to commence four months after receipt of the confirmation by the German Film Promotion Authority that the film project is eligible for the new scheme.

The funds will be available upon completion of the picture and audit of the final cost statement. Alternatively a funding in instalments (one third at commencement of principal photography, one third at completion of the rough cut and the remainder upon completion of the audit of the final cost statement) can be chosen. If the production rebate for a project exceeds EUR 2 million the producer has to obtain a completion bond or has to present a bank guaranty in the amount of the production cost rebate if it wants to receive the rebate already during production.

Detailed information to the new scheme (in German) can be downloaded from:
http://www.bundesregierung.de/Webs/Breg/DE/Bundesr egierung/BeauftragterfuerKulturundMedien/beauftragter -fuer-kultur-und-medien.html

The members of our Practice Group Film&TV will be happy to answer any questions you may have about the new scheme.

The new scheme promises to give a much needed support for film production in Germany. It should be easily accessible for European and international coproductions containing a certain amount of expenditure in Germany. The final wording of the new regulations is planned to be ready by the end of October and will then be notified to the European Commission. If clearance can be obtained from the European Commission the new scheme will be in place as of January 1, 2007.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.