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What Key Factors Should be Considered When Evaluating Ex-U.S.A. Production Incentives for Documentary Productions?

1:20 am | Uncategorized

This Q&A was originally published in the Winter 2020 issue of Documentary magazine, a publication of the International Documentary Association, a nonprofit media arts organization based in Los Angeles.

As the international marketplace for documentary films continues to expand, foreign governments are seizing the opportunity to attract international productions in their respective territories. There are a number of key factors for U.S. producers to consider, however, when evaluating such production incentives.

The paramount objective of virtually every production incentive program is to stimulate economic activity through job creation and the purchase of goods and services such as lumber, hardware, costumes, dry cleaning, set constructions, food and lodging. As an additional benefit, film commissions try to leverage their incentive programs to train local hires in production crafts. And through the distribution of these projects, governments aspire to showcase the native beauty of their locations and encourage tourism (and the businesses that cater to it).

Production incentive programs vary significantly, so a careful comparison is essential in selecting the most suitable program and location. Assuming the program under review applies to documentary productions (which is not always the case), the producer should closely examine the specific details of each incentive.

The most common production incentive programs offer cash rebates equal to a percentage of qualifying local expenditures, or else tax incentives in which the production company receives a credit or payments after filing a tax return. Given the competition among countries to attract productions, incentive payment can range from 20% up to 50% of qualifying local expenditures in certain jurisdictions (e.g., Canada, Colombia, Fiji). The production company, however, must satisfy a set of conditions to participate.

Every incentive program requires producers to spend a minimum amount of qualified production expenditures. For example, to qualify for Russia’s new incentive program for documentary films and non-fiction series, a production must spend at least $60,000.00 within the country.

A second common condition is that the qualifying production must hire local workers to the crew. In those instances, producers will need to assess the level of skill and experience of the local crew members. Scarcity of qualified production labor can be a critical problem in territories that are just getting started as production centers as well as locations that are exceptionally busy due to their historical success.

A third common requirement of international incentive programs is “cultural eligibility”. Tests for this vary, but often require a level of local content (actors, director, locations, etc.) or cultural values. Documentaries that are critical of government leaders or practices may have difficulty qualifying for some incentives.

Beyond the specific program mandates, documentary producers may want to consider factors such as the prevailing weather and the current exchange rate, which can either drain a budget or contribute to additional savings. Finally, international producers must carefully evaluate the economic and business components of each program. In almost every instance, the payment of the production incentive is contingent on a detailed audit following production that confirms the extent of local expenditures. These audits take time to process, and delay often requires producers to cash flow their productions through a bank or another financing entity. Those institutions, however, must have complete confidence in the integrity of the sponsoring country and program before loaning vital funds. Can the governing commission be relied on to process the audit and pay the incentive monies on a timely basis? An incentive program that is fraught with political risk is destined to fail, regardless of the amount of the projected rebate.

It can take years to iron out all of the wrinkles in an incentive program. This is why user-friendly, turnkey production programs combined with experienced local production services will attract top-tier productions.

–Steven Beer

© 2016 Steven Beer