By TIMOTHY OWASE

Governments all over the world use incentives to foster economic growth, create jobs and build infrastructure.In the film industry, they the offer production incentives inform of cash rebates, tax credits, and or back-end or up-front production project funding. Besides these, local governments also consider jurisdictional offers in sales, use, excise, hotel accommodation, receipts tax relief by way of waivers, credits, exemptions and deductions. Incentives are used to attract industries that are viewed as important to the country.

Film entertainment is amenable to incentives given that it is highly mobile, labour intensive and effective in promoting a country. In addition to the financial support provided through the new rebate incentives, a number of other measures are implemented as part of the broader sector development strategy. These include capacity development for emerging production companies, the development of writers and editors, enterprise development programme, the establishment of pilot programmes in different locations to address distribution infrastructure, local content and audience expansion among others.

The provision of the incentives encourages production companies to advance industry transformation through adherence to the requirements of broad-based economic empowerment. Moreover, incentives are structured in such a way that, they would provide necessary impetus to the growth of the Kenyan film and television production industries thus creating an environment conducive for producers to attract investment and develop stable output and sustainable production businesses.

• Cash Rebates

Refers to the sum of money paid to a qualifying production entity based on the amount of qualifying expenditures or jobs created in the location on the qualifying project. In most countries, they are administered by departments of trade and industry

• Tax Credits

This can be refundable or non-refundable, and transferable or non- transferable

1. Refundable Tax Credits – It operates the same way as production rebates, but usually administered by the local tax collecting authority, and claiming by filing a tax return. Sometimes banks or other lenders can monetize refundable tax credits so that the production company can get the money earlier.

2. Transferable Tax Credits – Is one that may be sold or assigned to a local taxpayer. The transfer is handled directly by the production company or indirectly through the use of brokers. The company does discount the credit from its face value to entice local taxpayers to purchase them. Its regulation differs from country to country. Some allow multiple transfers while others allow single credit to be divided among multiple transferals.

3. Non – Refundable, Non – Transferable Tax Credits – This can be used to offset a current tax liability of the production company. Excess are generally carried forward and used to reduce taxes in subsequent years. Each country sets forward the period of time within which the tax credit can be carried forward.

• Back – end or up – front funding

Refers to funds made available to qualifying productions from local taxpayers in exchange for advantageous tax treatment from the local jurisdiction.

How other countries have determined eligibility to film incentives

Each country defines the type of projects eligible for the incentive benefits. It is depended on a country’s legal and business structure. The scope is quite wide including film, TV, Video, Digital programming, Games, Advertisement commercials, Animation among others. Most countries consider exclusions i.e. adult programming, reality shows and others as determined by the jurisdiction. Also, a clear project plan and distribution deal has to be in place. Qualifying test project may also be considered based on minimum spend, days, locals employment, revenue base, goals in building film industry in a location. Others base on qualifying expenditure which defines goods and services that constitute expenditures for the purposes of computing the incentive benefit.  Some of the countries that have implemented incentives include the United Kingdom, New Zealand, South Africa, and Netherlands among others. As countries consider introduction of film incentives, they consider various factors that are not limited to the annual cap on the amount to be awarded, the time or period for consideration, annual funding caps, employment issues such as the cast and crew subject to tax in the country and actions for compliance, residency requirements to qualify, financial details and specific dates of operation.

The writer is a chartered marketer and film and media industry professional.

Email: timothy.owase@live.com

Phone: 0722283967

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