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Spain Extends Reduced VAT Rates for COVID-19 and Amends Incentives for Film Production

Spain has published Decree-Law 34/2020 of 17 November 2020 in the Official Gazette, which includes various tax measures. Two of the main measures concern VAT, including:

  • Extension of the 0% VAT rate for intra-community deliveries, imports and acquisitions of goods necessary to combat the effects of COVID-19 effective from 1 November 2020 to 30 April 2021 (eligible goods provided in annex to the Decree-Law; and
  • Application of a 4% VAT rate intra-community deliveries, imports, and acquisitions of disposable surgical masks from the entry into force of the Decree-Law (19 November 2020) to 31 December 2021.

Another important measure concerns the tax deduction (rebate) incentives for film productions with effect for tax periods beginning on 1 January 2020. This includes that producers in Spain in charge of foreign productions of films or audiovisual works are entitled to a deduction for expenses incurred in Spain directly related to the production. The deduction base includes:

  • The expenses of creative personnel, provided they have tax residence in Spain or in a Member State of the European Economic Area, with a limit of 100,000 euros per person; and
  • The expenses incurred from the use of technical and other suppliers.

The deduction amount is equal to 30% with respect to the first million of the deduction base and 25% on the excess, where the expenses incurred in Spain amount to at least EUR 1 million, although for animation productions, the minimum expense amount is EUR 200,000. The maximum deduction allowed is EUR 10 million and the amount of deduction together with other aid received is limited to 50% of the production cost. However, where the producer is in charge of the execution of visual effects services and the expenses incurred in Spain are less than EUR 1 million, a deduction of 30% is provided.

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