The legal requirements for making movies.
by Afzal Khan
When one chooses to do business in a country one is faced with two important knowledge needs. Firstly, “who should I do business with as my local representative?” and secondly, “what are the legal requirements of this specific country and how can I best benefit from any incentives that this country may offer?” These series of articles attempts to assist you with the second question.
SOUTH AFRICA IS A country with many laws and any foreign investor needs to be aware of these complexities so that one does not fall into any unforeseen dilemmas and secondly there are many benefits in South African legislation designed to attract foreign investment and these should be utilised to the fullest.
This article briefly covers the movie industry which is growing rapidly in South Africa. This country is becoming a sought after location for movie production. The movie studios that have been built around the country provide indoor locations that were never available before. The South African costs are much lower than other countries having similar locations.
Section 24F of the Income Tax Act No. 58 of 1962 (“The Act”) provides investors with a full tax deduction (against South African tax liabilities) of monies invested in movies produced in South Africa. Furthermore movie production attracts useful rebates from the Department of Trade and Industry (“DTI”).
An extract of the legislation refers:
“A film owner shall be deemed to be at risk to the extent that the payment of the production cost or post-production cost actually incurred by the film owner, or the repayment of any loan or credit used by the film owner for the payment or financing of any such production cost or post-production cost would (having regard to any transaction, agreement, arrangement, understanding or scheme entered into before or after such production cost or post-production cost is incurred) result in an economic loss to the film owner were no income to be received by or accrue to the film owner in future years from the exploitation by the film owner of the film: Provided that where the full amount of the loan or credit is not repayable within a period of ten years from the completion date, the film owner is deemed not to be at risk for purposes of this section to the extent the loan or credit is not repayable within a period of ten years from the completion date of the film.”
An investor can, therefore, take a loan to fund a movie and still get a deduction as long has the investor must repay the loan within 10 years. This is very useful as you are given an immediate write-off of a loan which you only need to repay over 10 years.
Furthermore, where one has produced a movie in South Africa, the Department of Trade and Industry (“DTI”) will provide a grant up to a maximum of R10million in relation to that movie. DTI is also willing to provide consultants who assist movie makers in producing their movies, a mentorship of sorts.
These are only two of the benefits on making movies in South Africa. As the industry grows and technology investment expands, one will find more movies being made in this country.
If you require further information about this or any other industry, please contact the writer at firstname.lastname@example.org.