New incentives to support the Audiovisual Industry
The significant increase in the consumption of content on OTT (over the top) platforms such as Netflix and Amazon Prime, which has reached rates of more than 200%, as well as the increase in consumption of national content, have recently benefited the audiovisual sector.
However, the closure of movie theaters in Colombia has affected companies and future cinematographic productions. This is due to the fact that Law 814 of 2003 (Cinema Law) established that for every movie ticket bought in Colombia, a percentage of the sale goes to the Fund for Cinematographic Development (FDC).
In addition to this, applications to FDC 2020 automatic stimuli and competition-based incentives were suspended, as a result of the country’s strict quarantine.
Different measures were taken in order to mitigate the financial impact on the sector. The following stand out:
- Decree 697 of 2020: In this decree incentives for Orange Development Areas (ADN) and the income tax deductions for donations and investments of 165% in creative or cultural economy projects were regulated. In this way it was defined that the tax incentive of investment deductions and donations for creative projects will be applied to income tax declarations that correspond to the fiscal year of the investment or donation in question. Projects that have a duration of more than one (1) year and no more than three (3) years, must be endorsed year after year according to the rules of the call. For the second year onwards, it is not necessary to compete but instead it must be demostrated that the project is being properly executed.
- Egeda Colombia: this institution, that serves audiovisual producers, created a “Special COVID-19 Fund”, aimed at mitigating the impact that the situation will have on Egeda Colombia's partners, audiovisual producers, and natural or legal persons. Consequently, each of the partners received a sum of money between April 15th and May 31th, through a bank transfer.
- Decree 475 of March 25th, 2020: this regulation aims to allocate more than $120 billion pesos to help the cultural sector, with a strategy which can be summarized in three points:
- Social Security for cultural managers. Through city halls and regional governments, this initiative aims to benefit more than 3,000 elderly cultural creators and managers.
- Extension of the deadline for the payment of parafiscal contributions that includes the extension of deadlines for the payment of the Quota for Cinematographic Development until September 30th as well as a decrease in the quota for exhibitors.
- Extension of the dates for holding events supported by the National Stimuli and Cultural Agreement Program. Within the same program, in the first phase of 2020, the lines of research, creation, and entrepreneurship were prioritized with funds of $9 billion pesos and 96 calls for cultural managers.
- Legislative Decree 561 of April 15th, 2020 Ministry of Culture: Article 512-2 of the Tax Statute established the consumption tax for social investment in sports and culture, distributing 30% of taxes collected to culture. With the decree, resources from the 2019 tax period that are not committed or executed, and those resources that are transferred in 2020, must be temporarily allocated by the Ministry of Culture to Colombia’s departments and Bogotá so that funds can be transferred until December 31st, 2020 to artists, creators, and cultural managers who demonstrate their vulnerability. Beneficiaries may not be part of the Familias en Acción (Families in Action), Protección al Adulto Mayor (Protection of the Elderly), BEPS (Period Economic Benefits) for cultural creators and managers, Jóvenes en Acción (Youth in Action), Ingreso Solidario (Solidarity Income), or VAT compensation programs. Three percent of the compensation will go to disabled artists.
- Legislative Decree 818 of June 4th, 2020: This decree establishes that from June 4th, 2020 to June 30th, 2021, cultural public incentives granted in development of article 18 of Law 397 of 1997 by the Ministry of Culture and the territorial entities responsible for culture, as well as those incentives granted by the FDC, are not subject to withholding at source as a form of income tax or to complementary taxes, on the payment or crediting of the account. Similarly, some artistic services provided for audiovisual productions of public shows are exempt from sales tax. Permanent and occasional producers responsible for the tax returns in question and payment of parafiscal contributions, of said shows, may pay parafiscal contributions corresponding to box office sales and delivery of attendance rights with a cut-off date of December 31st, 2020, until March 30th, 2021. In any event, they must provide monthly ticket sale and delivery of attendance rights reports to the Ministry of Culture.
In addition to these decrees, it is important to mention that Colombia is one of the countries in the region that counts with a favorable regulatory framework for the audiovisual sector. Laws 814 of 2003, 1556 of 2012, and 1955 of 2019, together with the free trade zone incentive, are some examples of the efforts that have been made to provide producers and directors with significant advantages when carrying out a project in the country.
Likewise, Colombia has a great diversity of landscapes, structures, and climates that make its locations stand out in the region. Some examples are Cartagena, Mompox, Santa Fé de Antioquia, Barichara, and Villa de Leyva, where the colonial architecture of the 17th, 18th and 19th centuries takes center stage.
Additionally, the country is recognized for its wide range of specialized professionals such as stuntmen, producers, creative teams, makeup artists, cameramen, as well as recording sets and production houses. It should also be noted that the industry costs are competitive in Colombia compared to other countries in the region, particularly in areas such as labor, equipment rental, leasing, and public services.
More than 30 foreign films have been shot by the Colombian audiovisual industry in the last five years, reaching 67 million dollars in exports in 2019, and receiving international awards such as the Palme d'Or and the Silver Bear, as well as being nominated for the Oscars. Because of these, among many other reasons, this Colombian sector is ideal for foreign investment, and is an important part of the country's economic reactivation.