Philippines to Offer Tax Breaks to Global Film Production Industry

May 4, 2014 Posted by ASEAN Briefing Reading Time: 3 minutes

A bill has been introduced in the Philippine Senate that would grant tax incentives to foreign and local film production companies in an effort to promote the country’s film industry and create a market for “film tourism.”

Senator Juan Edgardo Angara’s “Fostering Investment through Local and International Movies (FILM) Act” would provide incentives to film production companies, including tax credits ranging from 20-40 percent on a point-based incentive system. Companies would be eligible for the tax credit if the final product was mostly filmed in the country, or if at least 50 percent of the filming was completed in a community recovering from a natural disaster.

The FILM Act would additionally provide exemptions from fees for, or associated with, filming permits, and provide free access to public lands, police protection, expedited work visas and a designated liaison team to assist the film production company.

For more than 30 years, the Philippines has been a key outsourcing location for several international production companies including Walt Disney, Warner Brothers, HBO, Marvel Comics and others, with Filipino animators contributing to a number of popular cartoons and animated films such as Scooby Doo, Tom & Jerry, Finding Nemo and The Incredibles.

Senator Angara’s FILM Act would additionally seek to attract live-action films to the Philippines while creating an industry for “film tourism.”

“Film tourism is a growing phenomenon wherein a destination is visited by tourists because it was featured in a movie, television or video,” Senator Angara explained, citing the example of New Zealand’s tourism industry, where tourism arrivals jumped by nearly one million between 2000 and 2006 after filming the “Lord of the Rings” trilogy in the country.

“By boosting the country’s film tourism, the Philippines stands to increase the number of tourist arrivals and stimulate its economy. Money spent by a tourist for accommodation is multiplied 2.1 times for the economy, as it creates jobs and opportunities and spreads its effects to other industries as well. Thus, there is a need to promote the Philippines as a destination for filmmakers,” Senator Angara continued.

The introduction of Senator Angara’s FILM Act comes shortly after the introduction of another bill that would grant a five year tax-holiday to local film production companies and tax exemptions on the rental of equipment, editing fees and marketing fees related to the production and post-production of events related to film promotion.

Submitted by Representative Jose Atienza Jr., the bill, entitled “Philippine Film Industry Tax Holiday Act of 2014,” would attempt to spur local industry recovery and enable Filipino firms to compete internationally. According to Atienza, the country’s film industry currently produces less than 50 films a year – down from an average of 300 at the beginning of the decade.

“The film industry used to be one of the fastest growing industries in the country and in the world as well. We used to be recognized in the world in terms of creativity, originality and talent in our movies. The industry is moribund,” Representative Atienza said.

“We can easily compete with Hollywood-produced films. We just need to help the local film industry right now in retracing its path to profitability and greatness,” he continued.

As the Philippines’ seeks to attract more business from foreign production companies while catalyzing the development of its own film industry, only time will tell whether the picturesque island nation can compete with the likes of New Zealand and foster the creation of a market for “film tourism.”

“In recognizing the potential of international and local motion production to create jobs, grow the economy and raise the nation’s international profile, offering production tax incentives and providing additional benefits are necessary steps we ought to take to seize this new opportunity as levers for growth and development,” concluded Senator Angara.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email philippines@dezshira.com or visit www.dezshira.com.

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