On 11 December 2018, the Lithuanian Parliament adopted amendment of the Law on Corporate Profit Tax of the Republic of Lithuania which enables the opportunity to save up to 30 percent of a film's production budget spent in Lithuania through the private investment scheme. The new amendment applies to the period of 2019-2023 and replaces the expired 20 percent tax incentive scheme that was in effect from 2014 until the end of 2018.
The previous tax incentive scheme demonstrated positive results - since its introduction in 2014 there has been a rapid growth in the number of foreign film productions; this increase has stimulated the local film industry and fostered private investments in this sector. The new scheme was adopted to maintain these positive developments in the future and ensure Lithuanian film industry's competitiveness in the region.
The newly confirmed tax incentive scheme is regulated by Articles 17-2 and 46-2 of the Law on Corporate Profit Tax of the Republic of Lithuania. These Articles provide the possibility for film producers to attract funding from private business entities ("donors"), who are incentivised to support film productions by the offer of tax benefits. The tax incentive is available for domestic films, co-productions and foreign films (produced under a service agreement with a local production company) where at least EUR 43 000 is spent on production in Lithuania. To be eligible for the scheme, productions must conform to cultural content assessment criteria and production requirements.
Since 2014, 157 productions have benefited from the Lithuanian Film Tax Incentive, bringing the country a total of USD 122.5 million in investment, with USD 83 million of this coming from the international companies and USD 39.3 million from Lithuanian ones. The scheme was used by 41 foreign films, 49 co-productions and 67 national films. Investments for film production were granted by 151 local companies in amounts ranging from USD 1100 to over USD 1.5 million. Lithuanian business companies invested more than USD 26 million through this scheme.
Investments through this measure cannot exceed USD 54.7 million per year.
|Name of partner||Type of entity|
State Tax Inspectorate
The evaluation of the tax incentive was conducted for the period of 2014-2017 in preparation for the adoption of a revisited scheme of 30 percent. The main recommendations:
The tax scheme needs to be adapted to remain competitive and attractive to would-be investors. With a view to reach its full potential as a driver of audio-visual growth, complementary policy measures should be adopted to strengthen local creative ecosystem and for the scheme to impact the entire audio-visual value chain beyond cinema production. Such policy measures include:
1. Increasing the flexibility of the tax scheme and the intensity of the benefit for producers;
2. Increasing the international visibility of the scheme and its usage;
3. Addressing the risk of labour shortage and skill gaps in the sector;
4. Expanding the scope of the tax scheme to include other digital audio-visual productions;
5. Further improving the regulatory ecosystem for the local film industry by implementing the amended AVMS Directive in a way that encourages distributors and broadcasters to invest in production, by lowering the VAT rate in relation to cinema admissions, as well as discouraging online piracy.