South African Film Rebates and Incentives
It can seem like navigating a spaghetti highway, but with the right advice and a full understanding of the requirements, rebates and incentives provided by South Africa can be the tipping point for producers.
This article was first featured in Callsheet Issue 3.
The world of film incentives and rebate systems is understandably complex. Film and television production can cost in the hundreds of millions, and South Africa’s government entities realise the economic and societal benefits of bringing these productions to our country. It is for this reason that film incentives and the rebate system exists, and the relevant departments are constantly refining these offerings to maximise benefits for all.
The South African Film and Television Production Incentive Programme
The incentive programme, offered by the Department of Trade and Industry (the dti) is aimed at strengthening and promoting the country’s film and television industry as well as contributing towards the creation of employment opportunities in South Africa.
The objectives of the Foreign Film and Television Production and Post-Production Incentive, a sub-programme of the South African Film and Television Production Incentive Programme, is to attract large-budget foreign-based films and television productions and post-productions that will contribute towards employment creation, and enhance the international profile of the South African film and television industry while increasing the country’s creative and technical skills base.
The Foreign Film and Television Production and Post-Production Incentive is available to foreign-owned qualifying productions and post-productions as follows:
- The Qualifying South African Production Expenditure (QSAPE) should be at least R15 million for shooting on location in South Africa,
- The Qualifying South African Production Expenditure (QSAPE) should be at least R12 million for level one Broad Based Black Economic Empowerment (B-BBEE) contributor status service companies for shooting on location in South Africa;
- The Qualifying South African Post-Production Expenditure (QSAPPE) should be at least R1.5-million for conducting post-production activities in South Africa.
The Foreign Film and Television Production and Post-Production Incentive provides an incentive of twenty-five percent (25%) of the Qualifying South African Production Expenditure (QSAPE).
The Foreign Film and Television Production and Post-Production Incentive provides an incentive of twenty percent (20%) of the Qualifying South African Post-Production Expenditure (QSAPPE) of at least R1.5 million. An additional incentive of 2.5% of QSAPPE is provided for spending at least R10 million of the post-production budget in South Africa; or an additional incentive of five percent (5%) of QSAPPE is provided for spending at least R15 million of the post-production budget in South Africa. The incentive programme offers a reimbursable grant to the maximum of R50 million per qualifying project.
A Closer Look
Clarification of certain sections of the incentive programme became available on the 1st of January 2019, courtesy of the dti. The key highlights are detailed below:
- Under the Foreign Incentive Guideline, the incentive programme offers a reimbursable grant to the maximum of R50-million per qualifying project. The term ‘reimbursable grant’ refers to the incentive which is calculated on the actual qualifying amount spent and it is non-repayable by the applicant upon successful application/claim.
- The applicant must complete and submit an application not earlier than 45 calendar days prior to the commencement of principal photography. Calendar days include weekends, and applicants must be certain of the start date for principal photography. Applicants are encouraged to apply at least three months prior, where possible.
- The applicant must procure with regard to the QSAPE a minimum of 20% of qualifying goods and services from entities that are 51% black-owned by South African citizens. Goods and services procured from these entities must exclude cast, extras, producers, directors and writers. The requirement for spend to qualify as part of your 51% black-owned procurement is that the entity must have actively traded for a calendar year as a 51% black-owned entity.
The following evidence must be provided at claim stage:
- CIPC Registration Certificate
- BEE Certificate/BEE Affidavit
- Shareholders Certificates/Audit Confirmation Letter
- Invoices and/or contracts from Black Suppliers (Additional reasonable information may be required at claim stage for verification)
South African producer fees, limited to two working producers and inclusive of all their travel, accommodation and living expenses, are excluded from QSAPE to the extent that they exceed the lesser of:
- 10% of the total of the company’s TPE on the film production, or
- R1 million in total.
This limitation is only applicable to all qualifying producer fees which appear above the line and including all their travel, accommodation and living expenses.
- Regarding the Foreign Film and Television Production and Post-Production Incentive, an additional incentive of 5% of QSAPE is provided for productions conducting post-production in South Africa and utilizing the services of a black-owned service company. The minimum required expenditure for post-production is R1.5-million.
Real Life Experience
Uga Carlini is a multi-award-winning filmmaker and founding member of Towerkop Creations, a production company that’s been specialising in female-driven heroine stories since 2010. She gives her insights into the rebate system:
Do production companies take full advantage of the rebate system?
I cannot speak for every production company in SA, BUT they’d be fools if they didn’t, after all, it’s 1) free money to 2) grow the industry. Double bonus. It’s a no brainer.
Is it too complex?
No, it’s really not. And quite frankly, for free money, up to 40%, it’s worth figuring it out. I found the DTI themselves were very helpful when I got stuck, and of great assistance. When it comes to the more complex stuff, like the audit, the professionals who do this for a living come in.
How did you get it right?
By simply doing it. When I was unsure or got stuck, I used a ‘life line‘ and ‘phoned a friend’ – either a producer who has done it before, my always helpful bond guarantor (Film Finances) or the DTI themselves. I always got an answer, always found a solution and always learned as I was going along. So, if I can do it, any other filmmaker can too – that’s the good news.
The Film Tax Incentive/Allowance
The South African Revenue Service introduced Section 120 of the Income Tax Act in 2012, which provides for an incentive in the form of a tax allowance to stimulate film production. In order to qualify for the tax allowance, taxpayers must meet the following criteria:
- Income must be derived from a film
- The film must be approved as a local film or co-production
- Income must be allocable to the initial investors
- Income must be derived from the exploitation of rights
- Income must fall within a 10 year period
Department of Trade and Industry Contacts
+27 (12) 394 1462
+27 (12) 394 1805
+27 (12) 394 1640