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Sept. 2, 2024

Italy's Revised Tax Credit for Film Productions and AI Regulations

Italy revises international tax credit, maintaining headline 40% rate and banning relief for AI spend.

Italy - Italy has recently revised its international tax credit for film productions, maintaining the headline 40% relief rate while introducing new regulations concerning the use of artificial intelligence (AI). This update was announced at the Venice Film Festival by Lucia Borgonzoni, undersecretary of state to the Ministry of Culture, and Nicola Borelli, head of the Directorate General for Cinema and Audiovisual at the Italian Ministry of Culture.

The 40% tax credit applies to production expenditures in Italy that meet a minimum threshold of €250,000. However, for specific above-the-line costs related to non-European entities, the rate is reduced to 30%. This move aims to continue attracting international productions to Italy, which has seen significant investment since the tax credit’s inception in 2017, reportedly bringing in around €2 billion.

A notable change in the revised tax credit is the exclusion of costs related to AI, except for those used in special effects. Productions must disclose if AI has been utilized in any work conducted in Italy. Additionally, contracts between Italian production or post-production companies and authors or performers must include clauses allowing them to opt out of having their work, image, or performance exploited by AI systems.

The revised tax credit remains available up to a maximum annual limit of €20 million per company or group of companies, with no maximum limit per individual work. This ensures that larger productions can still benefit significantly from the tax credit without hitting a cap too quickly.

These changes reflect Italy’s commitment to supporting the film industry while addressing the ethical and economic implications of AI in production. The new rules are expected to provide clarity and stability for international producers, who have faced delays and uncertainties regarding the tax credit guidelines for 2024.

Italy’s revised tax credit aims to balance the attraction of international productions with the need to regulate emerging technologies like AI, ensuring a fair and transparent environment for all stakeholders involved.

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