State aid SA (2014/N) Spain Modification of Spanish scheme for tax deductions in cinema and audiovisual productions

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EUROPEAN COMMISSION Brussels, 14.12.2015 C(2015) 9341 final PUBLIC VERSION This dcument is made available fr infrmatin purpses nly. Subject: State aid SA.

SUMMARY (1) The Eurpean Cmmissin has assessed the ntified mdificatins f the Spanish scheme fr tax deductins in cinema and audi-visual prductins and decided t cnsider them t be cmpatible with the

1 EUROPEAN COMMISSION Brussels, C(2015) 9341 final PUBLIC VERSION This dcument is made available fr infrmatin purpses nly. Subject: State aid SA (2014/N) Spain Mdificatin f Spanish scheme fr tax deductins in cinema and audivisual prductins Dear Sir, 1. SUMMARY (1) The Eurpean Cmmissin has assessed the ntified mdificatins f the Spanish scheme fr tax deductins in cinema and audi-visual prductins and decided t cnsider them t be cmpatible with the Treaty n the Functining f the Eurpean Unin ("TFEU"). 2. PROCEDURE (2) On 11 December 2014 the Spanish authrities ntified certain mdificatins f the Spanish scheme fr tax deductins in cinema and audi-visual prductins ("riginal scheme"). Additinal infrmatin was submitted by the Spanish authrities n 18 February 2015, 11 May 2015, 11 August 2015, 21 Octber and 25 Nvember Excm. Sr. D. Jsé Manuel García-Margall y Marfil Ministr de Asunts Exterires y de Cperación Plaza de la Prvincia 1 E MADRID Cmmissin eurpéenne, B-1049 Bruxelles Belgique Eurpese Cmmissie, B-1049 Brussel België Teléfn: (0)

2 The riginal scheme had been apprved until 1 January 2020 by the Cmmissin, by decisin f 12 May 2014 (SA (2013/N)) 1 ("2014 Decisin"). 3. DESCRIPTION OF THE MEASURE (3) The riginal scheme was first adpted by Spain by Law 46/1985 f 27 December, repealed as frm 1 January 2015 (in accrdance with Article 15 f Ryal Decree-Law 8/2011 f 1 July 2011, as rewrded by Law 17/2012 n the general State budget fr the year 2013) and mdified by Law 16/2013 f 29 Octber (which included the previus mdificatins apprved by the Cmmissin with its 2014 Decisin) and Ryal Decree 634/2015 f 10 July (4) The riginal scheme fresees: a) a tax deductin f 18% f prductin csts fr prducers, cvering als pst-prductin csts (fr prmtin, publicity and making cpies) at a maximum f 40% f prductin csts; and b) a tax deductin f 5% f financial cntributins by financial c-prducers. (5) The ntified mdificatins cnsist f: Fr Spanish films 4 : increase f the tax deductin frm 18% t 20% fr the first EUR 1 millin cnstituting the deductin base 5 (the rate remains at 18% fr amunts abve EUR 1 millin); 50% f the deductin base, which is the prductin s ttal cst, has t be incurred in Spain t be eligible fr the scheme; setting f a maximum limit f EUR 3 millin fr the deductin. Fr internatinal films 6 ; a deductin f 15% f the expenditure incurred in Spain; the expenditure incurred in Spain must be at least EUR 1 millin; the film s minimum prductin budget must be EUR 2 millin; the applicatin f the deductin is limited t 80% f the prductin budget; the deductin can be up t EUR 2.5 millin maximum. An extensin f the duratin f the scheme until 1 January ASSESSMENT OF THE MEASURE 1 SA (2013/N) Spain Spanish scheme fr tax deductins in cinema and audi-visual prductins, 2 Published in the Official Jurnal n 30 Octber Published in the Official Jurnal n 17 Nvember Accrding t Article 5 f Law 55/2007, the Spanish natinality f cinematgraphic and audivisual wrks is recgnised under the fllwing requirements: a) at least 75% f the wrk s authrs are natinals f Spain r any ther EU Member State; b) the language f the riginal versin f the wrk is preferably ne f Spain s fficial languages; and c) the wrk s shting (except when required by script), pstprductin in studi and prcess in labratry must be carried ut in Spain r any ther EU Member State. 5 The deductin base cnsists f ttal prductin csts including thse csts fr realising film cpies, prmtin and publicity that are paid fr by the prducer (up t a limit f 40% f prductin csts). 6 Wrks which d nt fall under the requirements presented in ftnte 4. 2

3 4.1. Existence f State aid (6) Accrding t Article 107 (1) TFEU: "Save as therwise prvided in the Treaties, any aid granted by a Member State r thrugh State resurces in any frm whatsever which distrts r threatens t distrt cmpetitin by favuring certain undertakings r the prductin f certain gds shall, in s far as it affects trade between Member States, be incmpatible with the internal market." (7) In rder t be classified as a State aid, the measure must thus fulfil the fllwing cumulative cnditins: a) the measure must be granted thrugh State resurces; b) it has t cnfer an ecnmic advantage t undertakings; c) this advantage must be selective; and d) the measure must distrt r threaten t distrt cmpetitin and affect trade between Member States State resurces (8) The Cmmissin ntes that the Spanish authrities grant a tax relief t taxpayers wh prduce r cntribute financially t cinema and audi-visual prductins. Thus, the Spanish authrities freg tax revenues, which cnstitute resurces fr the State Advantage (9) The measure awards its beneficiaries with a reductin f part f their financial bligatins. Therefre it results in a financial advantage fr its beneficiaries Selectivity (10) As the measure favurs ne particular branch f activity, the prductin f cinema and audi-visual wrks, it can be cnsidered as favuring certain kinds f undertakings within the meaning f Article 107(1) TFEU Distrtin f cmpetitin and affectatin f trade between Member States (11) As stated in recital (8) abve, the measure grants an advantage t prducers and financial c-prducers f cinema and audi-visual prductins in Spain. At the same time, cinema and audi-visual prductins are subject t trade between Member States. Accrding t established case law 7, when State aid strengthens the psitin f an undertaking cmpared with ther undertakings cmpeting in trade between Member States, thse ther undertakings must be regarded as affected by that aid. Thus, the criterin f distrtin f cmpetitin and affectatin f trade between Member States is indeed fulfilled Cnclusin n the existence f State aid (12) It fllws frm the abve that the measure cnstitutes State aid within the meaning f Article 107 (1) TFEU Cmpatibility f the aid 7 Judgement f the Curt f 17 September 1980 in case 730/79, Philip Mrris v Cmmissin, para 11, 1980 ECR

4 (13) In the preceding decisins f the Cmmissin n this scheme, the measure was apprved n the basis f the 2013 Cinema Cmmunicatin 8 published n 15 Nvember The aid can be justified if the aid scheme cmplies: a) with the general legality principle; and b) with the specific cmpatibility criteria set ut in the 2013 Cinema Cmmunicatin. (14) With regard t the general legality principle, the Cinema Cmmunicatin (in its Article 50) sets limits t the territrial spending bligatins f film supprt schemes. Film supprt schemes may: require that up t 50% f the verall prductin budget is spent in the territry in rder t qualify fr aid; either require that up t 160% f the aid amunt awarded is spent in the territry granting the aid, r calculate the aid amunt awarded as a percentage f lcal expenditure n film prductin activities. never link mre than 80% f the verall prductin budget t territrial spending bligatins. (15) In the Spanish natinal film supprt scheme, we can distinguish between: The tax deductin fr Spanish films, which is calculated n the ttal prductin budget. Fr these films, the main territrial spending criterin (see paragraph 5 abve) is an eligibility criterin set at 50% f the prductin budget in line with the 2013 Cinema Cmmunicatin. As the aid is calculated n the ttal prductin budget and nt as a percentage f lcal expenditure, the maximum allwable lcal spending requirement wuld amunt t 20*160/100 = 32%. As this is belw the 50% allwable eligibility criterin, this prvisin remains withut practical applicatin in this case. Taking this int accunt, the Cmmissin cnsiders that the territrial cnditins are in line with the 2013 Cinema Cmmunicatin. The tax deductin fr internatinal films, which is calculated as a percentage f expenditure in Spain. The minimum spending requirement t be eligible fr supprt is EUR 1 millin, but given that eligible prductins shall have a minimum budget f EUR 2 millin, this is in line with the 50% limit. Mrever, the deductin base is limited t 80% f the prductin budget. The territrial cnditins fr internatinal films are therefre in line with the 2013 Cinema Cmmunicatin. (16) Cmpared t the assessment dne in the 2014 Decisin, the mdified measure des nt cntain ther prvisins that wuld raise issues with respect t the general legality principle, and is therefre cmpliant with the 2013 Cinema Cmmunicatin. (17) Regarding the specific cmpatibility criteria, the mdificatins f the Spanish scheme fr tax deductins in cinema and audi-visual prductins d nt affect its prvisins with regard t the cultural character f the aid, its aid intensity levels r the absence f aid fr specific prductin activities. The assessment dne with regard t these cmpatibility criteria in the 2014 Decisin is therefre nt affected. The scheme is in ther wrds in line with the 2013 Cinema Cmmunicatin's prvisins n these criteria. 8 Cmmunicatin frm the Cmmissin n state aid fr films and ther audivisual wrks, OJ C 332, , p. 1. 4

5 (18) Under the apprval f the riginal scheme by the Cmmissin Decisin f 12 May 2014, the Spanish authrities had cmmitted that they will adapt natinal legislatin in rder t cmply with the transparency requirement f the Cinema Cmmunicatin. Spain has submitted that its law 34/2015 f 21 September , mdifying Law 58/2003 f 17 December 2003 fresees that the publicatin f cnfidential infrmatin fllws EU regulatin. Accrding t the Spanish authrities, this means that Spanish natinal law already cvers the requirements f the Cmmunicatin frm the Cmmissin amending the Cmmunicatins frm the Cmmissin n EU Guidelines fr the applicatin f State aid rules in relatin t the rapid deplyment f bradband netwrks, n Guidelines n reginal State aid fr , n State aid fr films and ther audivisual wrks, n Guidelines n State aid t prmte risk finance investments and n Guidelines n State aid t airprts and airlines 10. Accrding t thse requirements, Member States shall ensure the publicatin f the fllwing infrmatin n a cmprehensive State aid website, at natinal r reginal level:: the full text f the apprved aid scheme r the individual aid granting decisin and its implementing prvisins, r a link t it, the identity f the granting authrity/(ies), the identity f the individual beneficiaries, the frm and amunt f aid granted t each beneficiary, the date f granting, the type f undertaking (SME/large cmpany), the regin in which the beneficiary is lcated (at NUTS level II) and the principal ecnmic sectr in which the beneficiary has its activities (at NACE grup level). Such a requirement can be waived with respect t individual aid awards belw EUR Fr schemes in the frm f tax advantage, the infrmatin n individual aid amunts can be prvided in the fllwing ranges (in EUR millin): [0.5-1]; [1-2]; [2-5]; [5-10]; [10-30]; [30 and mre]. Such infrmatin must be published after the decisin t grant the aid has been taken, must be kept fr at least 10 years and must be available t the general public withut restrictins. Member State will nt be required t publish the abvementined infrmatin befre 1 July (19) The Cmmissin therefre cncludes that the ntified mdificatins t the riginal scheme cnstitute State aid within the meaning f Article 107 (1) TFEU, which can be cnsidered cmpatible with the internal market pursuant t Article 107(3)(d) TFEU. 5. CONCLUSION (20) The Cmmissin has accrdingly decided nt t raise bjectins t the ntified mdificatins f the riginal aid scheme n the grunds that they are cmpatible with the internal market pursuant t Article 107 paragraph 3 d) f the Treaty n the Functining f the Eurpean Unin. The amended scheme has been apprved until 1 January (21) The Cmmissin reminds the Spanish authrities t submit annual reprts n the implementatin f the aid scheme. (22) The Cmmissin mrever reminds the Spanish authrities t infrm the Cmmissin accrding t Article 108 paragraph 3 f the TFEU n all plans t mdify the scheme r t intrduce a new scheme. 9 Published in the Official Jurnal n 22 September OJ C 198, , p

6 If this letter cntains cnfidential infrmatin which shuld nt be disclsed t third parties, please infrm the Cmmissin within fifteen wrking days f the date f receipt. If the Cmmissin des nt receive a reasned request by that deadline, yu will be deemed t agree t the disclsure t third parties and t the publicatin f the full text f the letter in the authentic language n the Internet site: Yur request shuld be sent by encrypted t stateaidgreffe@ec.eurpa.eu, by registered letter r by fax t: Eurpean Cmmissin Directrate-General fr Cmpetitin State Aid Greffe 1049 Brussels Belgium Fax N: Yurs faithfully, Fr the Cmmissin Margrethe VESTAGER Member f the Cmmissin 6

De minimis aid declaration

De minimis aid declaration De minimis aid declaratin Declaratin within the scpe f the prvisin f aid as referred t in the de minimis aid Regulatin (OJ 2006, L379). It is recmmended that yu read the explanatry ntes in the annex t