Written by Sébastien Lachaussée
& Elisa Martin Winkel
It is not unusual to see French, Belgian or Luxembourgish co-producers on a movie credits.
Girl with a pearl earring, Days of glory, Billy and Buddy, Tip Top : examples are even extremely various.
Coproductions with Belgium and Luxembourg are an undeniable component of French cinema landscape. For reference, in 2012 we counted 46 French-Belgian co-productions and 15 French-Luxembourgish coproductions. It appears necessary to focus on the circumstances favouring the multiplication of these relationships.
The existing closeness between these countries is obviously primordial, that it is the language, or the geographical localisation. Nonetheless this proximity is not enough to explain such an important volume of French-Belgian and/or French-Luxembourgish coproductions.
We will attempt to highlight the legal frames and benefits from cooperation between France, Belgium and/or Luxembourgish in coproducing movies. For this purpose we will distinguish French-Belgian relationships in the first place (I) and then we will linger on French-Luxembourgish relationships (II) .
I) Belgium : former boundaries and attractive national system
Cinematographic relationships between Belgium and France are old and rather intense. Moreover these ten past years they have known a renewal with the signature of a new coproduction agreement in 2003. Especially, at the same moment, the creation of a new tax incentive, the Tax shelter (TS) in Belgium has rekindled French interest towards co-productions with Belgium.
1) French-Belgian co-production agreement
France and Belgium since the 70's benefit from the enter into force of aa coproduction agreement. It has been replaced in order to bring up to date the applicable measures to French-Belgian coproductions.
Accordingly to this agreement a co-producer share can sway between 10 and 90 per cent. This allows a minority co-producer to enter a coproduction with a very low input. This is very advantageous and allows to heighten the possibility of French-Belgian coproductions to exist.
However to be recognised the co-production must be a real collaboration. It is why the coproduction agreement states that the minority co-producer participation must involve some Belgian authors, executives and actors ( 2 or 3 stakeholders depending on their position)
Above all the agreement excludes financial coproduction and reminds that “a general balance should be established regarding to artistic and technics contributions and financial contributions”
Recognised under these terms co-productions are considered as national cinema works and, as predicted in the Belgian legislation, benefit from the national support for production.
2) National and regional production support in Belgium
Belgian national production supports come either from the Cinema and audio-visual center (CCA) for Wallonia, either from the Flanders audio-visual funds for Flanders, respectively disposing of an annual budget of 10 and 12 million euros.
CCA's support can reach 350 000 euros, in a limit of 50% of the movie budget. This percentage can be higher for first features or difficult features.The allocated amount is to be fully spent in the French community of Belgium.
On the other side FAV's support can reach 750 000 euros in the limit of 50% or 75% of the budget for first and difficult features, for movies with a budget lower than 2.5 Million euros or also for movies with a strong cultural link with Flanders. It has to be entirely spent in the Flanders region, even if this obligation can be reduced in specific cases.
Together these funds support an average of 53 coproductions a year, most of them being Belgian majority coproductions.
Regional supports are also available in Belgium, they emanate from Screen Flanders, Wallimage or Wallimage-Bruxellimage. They rest upon an expenses localization in the region. Their maximum amounts are respectively of 400 000 euros for Wallimage and Screen Flanders and of 300 000 euros for Wallimage-Bruxelles.
As an exemple, French-Belgian movies such as Populaire or Rust and bone have benefited from a Wallimage financial support and Misfortunates or The triplets of Belleville from Screen Flanders' fund.
Nethertheless if these aids are rather substantial the creation in 2003 of the “Tax shelter” became the most attractive feature in Belgium.
3) Belgian Tax Shelter
TS is a tax incentive system in favour of cinematographic production. TS principle is that a society who participates in a movie financing, under legally defined conditions, will be allowed to benefit from a tax exemption.
So the Belgian tax law predicts that, in order to benefit from this mechanism, a framework agreement must be concluded between an investor and a resident audio-visual production society in order to finance a Belgian authorized audio-visual work.
The investor can be every Belgian resident society or every society which pays society taxes in Belgium, excluding production and broadcasting societies. The production society must have its head office in Belgium and must be subjected to Belgian society tax. Finally, the audio-visual work must be earmarked to theatrical exploitation, recognized as an European work and furthermore be subject to production expenses in Belgium up to at least 150% of the total amount allocated by other means than loans, eligible expenses basis being wide. It is understood that the part of TS investment in a movie funding should never be higher than 50% of the global film budget.
If he fulfils these criteria the investor will be able to deduce from his taxable income either 150% of the amount invested in audio-visual work as equity, either 90% of the global amount invested.
Indeed on a financial matter tax shelter system is complex. It implies an investment divided between a loan (40%) and a financial funding to the film as a coproduction share, (60%) understanding that 51% are directly recovered thanks to the tax exemption.
In facts, in order to facilitate the access to TS, some intermediaries coming from the financial sector (Ufund, ScopeInvest) of from the audio-visual one (Corsan, CasaKafka, Inver Invest) propose some financial packages. These financial packages substantially reduce the financial risks inherent in audio-visual productions. An investment through the TS becomes a financial produce with a guaranteed minimum productivity.
This point is capital because the recovering of the part of the TS in participation, even if it is partially guaranteed by the tax exemption, stays risky and depends on the success of the financed movie. In these conditions the intermediaries have permitted to erect the TS as an common practice and therefore to generate some massive investments in favor of cinema. The year it has been created a few more than 10 M euros was invested in movie productions and in 2011 the investments amount reached 150 M euros.
TS has become an usual mechanism in Belgian - or coproduced with Belgium - movies' financing plans. On all closed files since the implementation of the system the proportion of the funding due to the TS is of 18% of the budget for long length interested movies and many French-Belgian co-productions benefit from the TS every year. Movies as different as Blue is the warmest colour of Abdelatif Kechiche, Bye Bye Blondie of Virginie Despentes or Henri of Yolande Moreau have all benefited from a financing via TS mechanism.
It is important to signal that a law came in June 2013to reform the TS system, notably by instituting a minimum level of “structuring expenses” for the sector.
Concretely, the minimum guaranteed return for investors was lowered from 4.52% to about 3.5% and moreover at least 70% of raised funds shall now be effectively injected into the production itself and not in indirect costs. It was then about countering the drifts of the system that could penalize less profitable films such as auteur film.
However, it appears, in view of the current events, that this reform is insufficient. Indeed since the beginning of the year some disturbing revelations occurred about the mechanism of TS: it drastically favours the investors at the expense of producers. Due to fraudulent practices it appears that in fact the producers can only use 30-40% of raised funds.
If these drifts of the TS are unanimously admitted, opinions differ as to the solution to it. Some favour a reform of the mechanism and advocate the establishment of investment certificates, this is the case of the Union of Francophone Film Producers and Wallimage fund. Others propose only tighter controls of TS investments, mainly Belgian Film Producers Association who refuses to consider the drifts as a general practice and notes that "The proposal of certificate is excessive, unconscious or even kamikaze." and would weaken the Belgian production.
On this subject, Fadilaa Laanan Minister of Culture and Audio-visual of Wallonia-Brussels Federation noticed that "The TS is essential," while recognizing the need for a "greater control" in agreement with Koen Geens the Minister of economy. In this sense a bill was tabled by Olivier Destrebecq which provides a drastic strengthening of controls and an upper limit to investments.
One thing is sure: the fundamental mechanism of TS will be maintained. However, its shape remains more uncertain, and a deep reform cannot be ruled out. Especially the scandal of TS’s drifts could come tarnish the image of land of welcome for cinema that Belgium had gained.
If Belgium has a very high potential when it comes to consider a co-production, we should not neglect one of its close neighbors. Indeed Luxembourg also proposed advantageous measures for movie production and Luxembourgish co-producers are likely to work in co-production.
II) Luxembourg : interesting disposals and committed producers
Before enter into details it is convenient to evoke the coproduction agreement concluded between France and Luxembourg in 2003. This later one is pretty classical: co-producers shares are envisaged flexibly and sway between 10 and 90 % while the financial coproduction is put aside to give advantage to artistic and technic collaboration.
On the other hand Luxembourgish aids present an obvious interest for co-producers considering the National Support Fund for Audio-visual Production (FONSPA) or the certification of audio-visual investments (CIAV).
1) Selective financial aids for production
Since 1990 the FONSPA, handled by the Film Fund, supports the cinema industry particularly through a selective financial support for production with a view to contribute to its development. Its budget is sizable: 20 M euros for 2012. To benefit from this selective aid it is only necessary to fulfil cultural test's criteria. In facts it is an easy equation: reach 100 points on the cultural test means obtain a third of a movie production budget.
The amount of the FONSPA contribution is put under a ceiling of 2,5 M euros. This exceptionally high limit is frequently close to be reached. The movie Billy and Buddy has therefore obtain a funding of to 2 M euros or Before Winter from Philippe Claudel a support of 2,2 M euros.
This amount is to be spent in the country but theoretically the aid is not submitted to a criteria of shooting localization. However in facts, to obtain the cultural test points it requires, on average, that 50% of the shooting be located in the Grand Duchy. Moreover lots of boni are planned to favour the shooting localization such as the employment of local technicians. To give an example it is possible to obtain an extra support of 100 000 euros if the proportion of the film shot in Luxembourg is higher than 70% or even 250 000 euros if the project gets more than 150 points in the evaluation grid. The points system mainly considers the shooting location and the local technicians employment this is which partially explains an important relocation of the shootings to Luxembourg but it is a tax disposal who really reinforces its interest.
2) Audio-visual investments certification
At the end of the 80s Luxembourg also brought up CIAV: a tax incentive for investment. CIAV holders obtain a tax exemption which can reach 30% of the beneficiary's taxable revenue in a limit of 2,5 M euros. Speaking of numbers, for 2009 the amount of tax allowances due to the CIAV has exceeded 37M euros with an average of 2,2 M per film. So CIAV is a mechanism who allows a producer to obtain a very important proportion of a movie funding.
Considered expenses must be located in Luxembourg and financed works have to end in. Moreover the project has to be conceived to be principally realized in Luxembourg and contribute to develop the national cinema industry.
However eligible expenses are rather wide, which greatly favour collaboration with Luxembourgish producers and shootings' relocation to Luxembourg. CIAV's system is really in favour of cinematographic creation, indeed both its high maximum and the extent of the eligible expenses contribute to make it attractive for building a funding plan.
The accumulation of the selective aid and of the CIAV can allow a producer to reach 5M euros for a movie financial plan and in only 30 years the extremely high sum of the Luxembourgish aids made the country a prominent partner for coproduction. The president of the Film Fund noticed on this matter that “these past two years, we have registered an increase of 30 to 50 % for the support demands” Jan Thilges, Luxembourgish producer even claims that he receives “ every day a French movie scenario with in view of a coproduction”
3) A system in development
The Luxembourgish system comes with very dynamic producers who have known profiting from the national advantages to develop themselves. They have especially known understand that producing often means coproducing. As an example, Nicols Steil's company, The Iris group, produced five movies in 2012, all of them French, among them Maddened by his absence selected for Critic's week in Cannes 2012. Anyway it's him who is at the origin of Filmland's setting up, a space dedicated to shootings and cinematographic post-production, who might receive up to 4 shootings at the same time. The setting up of such an infrastructure comes consecrating the development of the Luxembourgish cinema industry and promises great days for co-productions which will be finally able to set shootings in Luxembourg without saturate the available shooting places.
Finally, it has to be remarked that it is for France and Belgium that collaborations with Luxembourg are the more interesting, as Lisa Vignoli reminded it : “Same language, same culture, bordering countries : in matter of coproduction the trio France-Belgium-Luxembourg is running on full throttle”A society as Tarantula has even divided itself in two entities, one Belgian the other Luxembourgish, the Iris Group that we were previously evoking is also the owner of the production and distribution French societies Rezo and tripartite coproductions are common lot.
Indeed, the different studied systems are compatible and allow financial plans making intervene aids from the three states and from various regions. It is finally all about preparing the shooting in order to benefit from the widest possible support.
For a French producer the main risk is to lose the benefit from the French Tax credit which the pretty strict legal frame is few adapted to coproduction, but this loss is widely counterbalanced considering the benefits gained from the Belgian and Luxembourgish aids.
As an example of this we can quote the funding of very different film: from Lisa Azuelo's Comme t'y es belle to Catherine Breillat's Abus de faiblesse going through A perdre la raison of Joachim Lafosse or Tip Top of Serge Bozon presented in last Cannes film festival.
This last one, coproduced by Les films Pelleas (fr) and Iris Productions (Lux) therefore benefited from both Belgian Tax Shelter and Luxembourgish FONSPA's support.
Regarding to these examples It seems clearly obvious that the Belgian-Luxembourgish axis is more and more dense and appears to have a great future into European cinematographic production... if the tax shelter system does not collapse of course !