Film Financing and Television Programming: A Taxation Guide

Film Financing and Television Programming

Now in its sixth edition, the Film & Television Tax Guide is a valuable reference tool for motion picture and television executives involved with the commercial side of production. It focuses on key topics surrounding cross-border business conditions and financing issues that producers need to consider when establishing a tax-effective finance structures.

Global Chair, Media & Telecommunications

KPMG Australia


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Interview with Tony Castellanos

What are some of the interesting tax trends you're seeing in media and entertainment?

A lot of the work that we do for our motion picture clients or television clients relates to identifying other costs that can be either taken out of the system or to help optimize the position of their particular project. Some of it from a tax perspective may revolve around helping them identify the appropriate accounting methods that they should be putting into place to rapidly amortize or depreciate their assets or expense them if they are in the form of repairs or maintenance. Many of these clients have very large studio operations very large assets that are always essentially being worked on and turning over, so the questions come about as it relates to the proper treatment of those costs and how quickly they can recover them for tax purposes. And given the complexity of those businesses it is hard to capture the data so we help them in capturing the data. Some of it could deal with you know audits and helping them with dealing with either the IRS in the US or tax authorities outside of the US, as it relates to their intercompany charges for the distribution of those motion picture products or television programming or cable networking because at the end of the day, each government is going to want a piece of what they feel is their fair share of that company's revenue and a lot of what we do with our clients is help them determine how best to document their position relative to these jurisdictions.

How does the current economy impact the availability of tax incentives for film and television production?

One of the unique attributes of the television and motion picture business are the incentives part of it. So, governments tend to offer incentives either in the form of credits or grants to motivate production of, you know, motion pictures and television products within their jurisdiction. So it's a very simple incentive to drive economic stimulus within their jurisdiction. That's been around for many many years. Now the landscape around that changes periodically and quite frequently because there is a lot of competition first of all to bring those revenues into particular jurisdictions, but likewise there's also economic conditions that affect how much stimulus a particular jurisdiction is willing to put forth. So in the economy that is facing our world today, in the US and outside of the US there's things that happen that don't necessarily make a lot of sense when it comes to incentive programs like this. So at time where a state in the United States or a foreign government may be looking to bring in more spending within their economy and employment, they might also be reducing the level of benefits just simply out of their own economic constraints in handing out benefits like this. So, by and large the film and television and motion picture industry have counted on these types of benefits for many many years. And they do make very important business decisions as to where they are going to shoot their (product) projects to gain the greatest percentage of their budget in selecting a location.

Looking to the future of the entertainment industry, how will changes in traditional business models impact tax implications?

Looking ahead, I think everything is up for grabs in terms of what may change. What are television content, you know, companies today or you know motion picture companies today, anyone who is developing content today, most of these companies rely on essentially a traditional distribution network that relies on others or parts of their organization to distribute the product that eventually gets out to a third party. So it is essentially a very, you know they're very large B2B businesses. I think the future given the advent of technology where we are today and where I think we will be in the future as to the availability of content either online or on personal devices like cell phones or tablets the opportunity exists for these same content companies to reach out directly to the consumer so I envision a change in business models that could really have a dramatic impact on the business and will also bring about significant implications from a tax perspective. So when you change a business model to be company "A" who is in the content business now contracting directly with me as the end user versus company "A" is contracting with company "B" who is now contracting with me as the end user there is a huge shift in responsibilities among the parities and the relationships among the parties as well as the relationships with the tax authorities.  So looking forward I think there is going to be a lot of change and I think everything we have come to accept as the traditional form of doing business is going to change and so will the tax implications.

How does KPMG's Film & Television Tax Guide fit into the production process for film and television?

The film and television tax guide in the new edition that we have is a part of that structure, that infrastructure that helps our clients seek out where might be the best place to conduct activities that are associated with a motion picture or television product. So that they can gain the most to the bottom line and it is really up to them at the end of the day when they balance where they want to shoot their motion picture where the best resources are from a labor standpoint and where, you know, the money is from a particular incentive program or some legislation that may exist to bring the whole package together and make that motion picture or television product a successful one.

Film & Television Tax Guide

This edition provides a country by country analysis of potential financing and tax implications in established and emerging production centers, and information is drawn from KPMG’s global network of media tax professionals in 35 countries.

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