Tax Shelter: is it an opportunity?

Philippe Glorieux   |  

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In this BofiFlash, we would like to delve deeper into the Tax Shelter regime for investments in audiovisual works, performing arts and video games. We’ll answer some important questions for you.

What is Tax Shelter?

A Tax Shelter is a tax benefits scheme for Belgian companies in which the company can invest in works intended for cinema, television or gaming in exchange for a tax benefit.

In principle, when setting up a Tax Shelter, there are three parties involved. The investor, the production company and an intermediary. The investor is a for-profit company that wants to obtain a tax benefit on the one hand and can achieve an additional return on the other. The production company is a developer of audiovisual works recognised by the ministry. The intermediary is also recognised by the ministry and takes care of setting up the Tax Shelter.
The government aims to create a win-win situation for the three parties.

Why Tax Shelter?

Most entrepreneurs use the Tax Shelter to avoid corporation tax increases due to insufficient prepayments. However, the Tax Shelter can also yield very attractive returns with very low risk. Therefore, we recommend that you use Tax Shelter not only to avoid increases due to insufficient prepayments but also as a means to create additional returns and added value for entrepreneurs.

How much are these yields?

The yields come in two parts. On the one hand, the company receives a tax return, and on the other hand, the company receives a financial premium.

The company takes advantage of a tax exemption of 421% on the amount invested. Based on a valuation of 25% corporation tax, we see in the table that this corresponds to a net tax return of 5.25%.

In addition to the tax return, the investor also receives a benefit on investment of the average EURIBOR interest rate for 12 months, plus 4.5%. The financial premium paid by the production house thus directly increases the return of the Tax Shelter. This net benefit is, for example, an additional net return of 5.20%.

This accounts for a global return on investment of 10.45%.  

Without Tax ShelterWith Tax Shelter% gross% net
Taxable base€ 1,150,000€ 1,150,000
Tax Shelter-investment€ 100,000
Tax Shelter-exemption 421%€ 421,000
Adjusted taxable base€ 729,000
Taxes due at 25%€287,500€ 182,250
Tax savings at 105.25%€ 105,250
Yield at 18 months (maximum term)
Tax benefit€ 5,2505.25%5.25%
Additional return€ 6,9306.93%5.20%
Total€ 12,18012.18%10.45%

How does the process work?

To begin, the investor and the producer draw up a framework agreement. The producer has 30 days to communicate this framework agreement to the Federal Public Service (FPS) Finance.  
The framework agreement is a contract in which the investor irrevocably commits to finance a sum of the production expenses. The producer commits to use the expenses in such a way that they can obtain a Tax Shelter certificate. The investor can only get a tax exemption by using this certificate. 

After that, the investor deposits the money into the account of the production house and receives a provisional tax exemption for this purpose.

Once production is completed, the producer may apply to the government for a certificate confirming the completion of the production. The government examines whether the costs incurred meet all the terms & conditions.

With all necessary certificates, approvals and budgets, the entrepreneur receives the final Tax Shelter certificate. This will allow them to apply for their final exemption.

Our Bofidi experts are happy to help you further every step in the process of obtaining a Tax Shelter has several obligations. That’s why it’s important to get the right guidance. Don’t wait until the end of the year to set up your investment in Tax Shelter. Our Bofidi experts are ready to provide you with the necessary information. Don’t hesitate to contact us.