Film Makers Take Advantage of South Africa's Tax Incentives

by Robert Lee, Tax-News.com, London

24 September 2003

South Africa's system of tax benefits for film-makers is attracting increasing attention from international producers, according to national media reports.

Local tax experts point out that the many of the tax breaks have been in place for many years, although foreign film-makers were reluctant to take advantage of them in the past due to the controversy surrounding apartheid-era film schemes.

Whilst many of the laws were tightened up in the late 1980s to clamp down on abuse of the tax incentives, Gal Bastri, a partner at Webber Wentzel Bowens Attorneys told Business Day that the Income Tax Act defines many costs that may be written off in the course of a film production, including wages and salaries paid out in the course of a project, the acquisition of story rights and copyrights for example. Bastri also explained that the Act makes provision for certain special allowances, such as the film allowance which includes both production and post-production costs. The allowance may not outstrip the aggregate amount of these costs however.

Furthermore, the act also contains so-called 'risk rules' provisions. A film owner is considered to be at risk with regard to incurred expenditure if payment results in an economic loss and the owner derives no income from the film, according to Doelie Lessing of Werkmans Tax. However, Bastri points out that the risk rules only come into play when an investor has used credit or a loan to finance a project, or has incurred a cost that has not been repaid by the last day in the year of assessment.

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