Tax incentives for the audio-visual industry in Cyprus

Committed to boosting this highly promising sector, the government of the Republic of Cyprus introduced a package of incentives encouraging international producers to choose Cyprus as their next film destination.

Qualifying production categories include, amongst others, feature Films (including animation), television Series or mini-series, documentaries for Theatrical or Television release, animation (digital or analogue), television research programs and natural history.

The law is in force from 1 January 2018.

The Scheme consists of a combination of grants and tax incentives as follows:

1. Cash rebate up to 35% of eligible expenditures incurred in Cyprus will be granted, where the amount will depend on the score of the production at the cultural test. The rebate will be given once filming is completed, on receipt of the audit report and its review by the relevant committee.
2. Τax credit,as an alternative to cash rebate, offers a reduction of the corporate tax liability of the company responsible for the implementation of a production, with the same criteria that apply for cash rebate.The sum of the tax credit against the taxable income shall not exceed 50% of the Applicants’ taxable income for the tax year within which the production is made.The tax credit, to the extent that it is not granted due to the above percentage restriction, shall be carried forward and be given within the next five years, subject to the above percentage restriction.
3. Tax Allowance for investment in infrastructure and equipment. Any small and medium-sized enterprise subject to a tax liability in Cyprus investing in cinematographic infrastructure and technological equipment will be entitled to deduct the amount of its investment from its taxable income. The aid may not exceed 20% of the qualifying production expenditures in the case of small enterprises and 10% of the qualifying production expenditures in the case of medium-sized enterprises. Investment in the case of equipment should remain in the territory of Cyprus for a period of at least 5 years.
4. Return of VAT on expenditure. For qualifying production expenditures incurred in Cyprus by natural or legal persons from third countries and which are related to the implementation of productions, the company is entitled to a refund of VAT.

It is noted that, with respect to the cash rebate or the tax credit, the applicant must select which incentive it shall take advantage of, given that they cannot both apply together. The cash rebate can apply together with the tax allowance for investment in infrastructure and equipment as well as together with the VAT return. The tax credit can apply together with the tax allowance for investment in infrastructure and equipment as well as together with the VAT return, by completing the relevant applications.

The incentive shall be strictly restricted to one and only audiovisual production. The integration of more than one production under the same Applicant (slate of films) is expressly prohibited, with an exception for a group production of a documentary for television or cinema under one single general title with a single budget, or a television series of no more than 15 episodes per annum with a single budget.